Analysis of the UK Shower Industry

This document analyses the UK shower industry, value proposition of Quartz-Aqualisa's revolutionary shower, marketing strategies employed by Aqualisa and suggests ways to make them more effective.

The UK Shower Market - Product Offers and the Customer Behaviour

The current market size of all different kinds of showers offered in UK was more than 1.8 million units valuing more than �5 Billion.

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1 Only 60% of the bathrooms in UK had a shower whereas all bathrooms had a bathtub.

Prevalent problems in plumbing systems and showers

The plumbing in UK was predominantly of the Victorian era. These systems were gravity fed which resulted in non uniform pressure and flow resulting in temperature fluctuations. The flow rates were around 3-4 litres per minute against the standard flow rates of 18 litres per minute in the USA. Also the showers broke down frequently and were difficult to repair as the seals used to get jammed and needed replacement. The replacement of the broken/worn down showers accounted for nearly 50% market.

2The users were having poor knowledge about the showers, available brands and options. These problems influenced the UK shower market and therefore shaped the consumer behaviour and the products available in the market.

Market Segments

The shower market can be broadly segmented in two categories - User and Non-Users. Refer Appendix Exhibit 1.

USERS

Premium users looked for style, performance, service and life.

Standard users looked for performance, life and service of the shower.

Value users looked for price, convenience and models that did not require major excavation and modifications in their bathrooms.

NON-USERS

Plumbers: Plumbers interacted through variety of ways with the end users- directly or indirectly. They maintained strong relationships with the manufacturers of the showers. They played a key role in the sale of the showers.3

Developers : They were the property developers in the UK. They preferred reliable showers which could work under multiple settings. They were price sensitive. They had direct contacts with the manufacturers or depended on the independent plumbers.

DIY: These are large retail outlets which targeted customers who are primarily looking for ease of installation and inexpensive models. There were substantial sales taking place through this channel.4

Different Models and the Product Offers

Based on the problems that existed, the market segmentation and the factors influencing decision making, three main types of showers were available in the market - Electric Showers, Mixer Showers and the Power Showers. They were targeted at different market segments under different brand names by manufactures.

Quartz Value Proposition

There will be two Value Propositions Statements5 based on the market segmentation - one for Users and the other one for Non Users. Refer Appendix Exhibit 3

It is considered that the Quartz Showers will be chosen over the competitive Mixer and the Power Showers. This is because of-

Superior Design: Quartz range was designed to overcome the limitations of the Mixer and Power Showers, therefore in long term they will replace them completely.

Current market share:6 Aqualisa has only 20 % and 16.7% of the current market share in the mixer showers and the power showers category. It is ranked 2nd and 5th respectively in these two categories. These two sectors offer the maximum growth potential and possibility of capturing new market share.

Total costs:7 The initial cost of the Quartz showers are higher than both the Mixer Shower and the Power Showers, however installation of Mixer Showers require additional expenditure. It needs 2 man-days of the plumber which costs atleast 640� (considering �40 per hour and 8 hours per day). Additionally, the plumbers charge the cost of excavation- labour and materials extra. Therefore the total costs of ownership of Quartz Standard showers turn out to be cheaper.

Multiple Brand Strategy: Gainsborough, Aqualisa and ShowerMax

Based on the market segmentation shown above, Aqualisa uses three different brands to position and serve its target markets optimally.

The use of different brands is a positioning policy so that Aqualisa can determine its Marketing Mix8 for each target market segment in order to occupy a clear, distinctive and attractive position in the minds of the consumers relative to the competing brands and products.9 It is made clear from the figure below that the three different brands (shown by different colours) have three different products, price range, promotional channels and distribution channels.

The Marketing Framework10 - Positioning Strategy and 4Ps

Quartz : Mainstream or Niche

Aqualisa spent nearly �5.8 Million over a period of 3 years to develop Quartz. This is close to 10% of the total revenue generated by the firm in the year 2000.11 Additional modules could be built upon the existing Quartz installations to provide sophisticated features with customised benefits e.g. horizontal Body Jet. The heavy expense, scalable plug-ins and the lower total costs of ownership suggest that Quartz was designed to be a mainstream product.

Quartz - Why are they not selling?

The sales of Quartz are not picking up for number of reasons:

1. Rogers Five Factors12 determine the rate of acceptance of an innovation in a market place. These Five Factors are relative advantage, compatibility, complexity, trialability and observability. Quartz scored low on the compatibility because the plumbers who were selling and influencing the buying decisions of the consumers, were vary of use of electronics in the showers. Also, Aqualisa was not effectively offering trials/demonstrations to its users (except through showrooms) and plumbers in its marketing strategy and therefore loosing sales. Whenever, the plumber or the consumer was getting a demonstration it was resulting in a sale.
2. Associated Cost Savings: The lower total costs of ownerships were not clearly communicated to the plumbers and the end users to mitigate reluctance due to the higher initial price of Quartz
3. Plumber mindset and long adoption times: No explicit efforts were taken to educate the plumbers. They were only communicated verbally about the additional benefits of the Quartz, however no workshops or trainings were carried out to overcome the reluctance of the plumbers.
4. Lack of clarity in the sales team and conflicting brands resulting in lower sales. The sales team lacked clarity on which product it had to promote- Quartz or the mainstream products-Aquavalve and Aquastream. Infact, Rawlinson and the national sales manager Tim Pestell had different views on Quartz' mainstream or niche nature. This resulted in lower push from sales team.
5. Only 10% of their time was devoted by Sales team on new prospects. This meant that they were limiting themselves to a smaller group of potential buyers.
6. Awareness: There were little actions taken to spread the benefits and the wow factor of the Quartz shower to the end consumers apart from a weekly advertisement in The Mail.

What should Rawlinson do?

To increase sales, it is necessary to understand the Decision Making Process (DMP)13 of the target market segments. The DMP of the users and the plumbers are different. For DIY and Developers, we would need to establish a separate strategy.

Based on the DMP, our Marketing and Communications Strategy should be to increase awareness and trial/demonstrations. Further, the strategy should be based on the 6Ms model14 to consider all the aspects and maximize the output.

6Ms Model

1. Market: We have not targeting the user-value segment since it is not suitable for Quartz.
2. Mission: To achieve a sale of at least 100 units per day in the next 3-4 months to bring Quartz in the mainstream segment. The maximum time available till another competitor catches up with the innovation is estimated to be 2 years.
3. Message: The message has to be different for the Plumbers and the Users. The different messages will be the statement of benefits that are spelled out in the Value Proposition of Quartz. Refer Appendix Exhibit 2.
4. Media:

•  Advertising:

Full fledged advertisement campaign have high costs15. Therefore advertisement expenditure will be limited. However, a new and cost effective media can be the back of the Shower Gel Bottles. This way Aqualisa will be able to reach the users and even the non-user market very effectively. A small pilot test can be carried out immediately to determine its possible impact and its cost. Internet advertisement is also an effective and a cheaper way to reach the end users. The Pay per click concept will help keep the advertising costs down.

• Sales Team:

A change in the marketing structure of Aqualisa is needed so that greater focus can be given on each channel. The suggested marketing structure is shown in Appendix Exhibit 4.

• Channel Management & Sales Promotion:

This is based on giving incentives and forming stronger commercial relationships with the channel partners to push16 the Quartz through different channels available.

Plumbers:

> Launch Event: Organise a launch cum training event for one full day where plumbers from different locations can be brought together and explained about the product. This should include a hands on training program so that they realise the ease and get rid of any misconceptions. This can be repeated if required.

> Plumber Loyalty Program & Commissions: Plumbers association with Aqualisa can be made official. Plumbers can be given commission for every sale of Quartz. This will immediately get their attention and help eliminate any doubts. While advertising Quartz directly to the users, their names can appear as the list of authorised plumbers to fit/sell Quartz in the specific territory. In return, a small fee can be charged to them for their official partnership.

> References: Aqualisa can use references from respected plumbers to endorse the credibility of Quartz.

> Going beyond the existing associated plumbers: To look and expand beyond the already known plumbers.

Trade Shops:

• Videos showing the entire installation process in a step wise manner and the associated cost savings to plumbers.
• Early discounts: In-order to keep their commitment towards Quartz, certain Early Discounts schemes may be offered.
• Training the Trade Shop staff to sell on Associated Cost Savings for the plumbers. The trade shop staff should be able to explain Quartz' benefits and how it is different from the earlier failed showers which used electronics.
• Expand to other Trade Shops: Increase coverage to newer trade shops and territories.

Showrooms & Distributors:

• Expand to untapped Showrooms & Distributors in new geographies without conflicting the existing ones.
• Early discounts

Integrated Marketing:

Aqualisa's direct communication with end user should not result in direct business. The sales to the end users must be routed through authorised channels of showrooms and plumbers. Also the retail pricing for the plumbers and the showrooms will have to be same and fixed to avoid under-cutting. The idea is to create customer awareness and to use the Pull Strategy through either of the two channels. This will keep the current relationship with the channel partners intact.

Money:

The entire Marketing communication and promotion strategy has been designed such that the initial cash outflow is less. Refer Appendix Exhibit 5

Measurement:

It is extremely important to monitor closely how sales are picking up after taking all the initiatives. The restructuring of the marketing department suggested will help. Daily reports with key facts and figures will be made available to the Rawlinson who can then take suitable actions.

Stripped down version for the Developers & DIY

Aqualisa should develop a stripped down version of the Quartz for the DIY and Developers market(brand it under their existing Gainsborough & ShowerMax brands). Branding it under a different name will keep their Aqualisa brand intact. The fact that Quartz will become a platform on for subsequent hi-end solutions, it is recommended to concentrate on higher volumes than margins initially.

Conclusion

Close monitoring and implementations of the suggested schemes will help Aqualisa increase sales of Quartz to achieve its mainstream status.

Appendix

• Exhibit 1 : Market Segment
• Exhibit 2: Various shower categories, Aqualisa's Offerings and the Channels used by them.
• Exhibit 3: Value Proposition of Quartz.
• Exhibit 4 : New Sales & Marketing Department Structure.
• Exhibit 5 : Marketing Communication and Promotion Expenditure.
• Exhibit 6: Market Segment

UK Shower Market Segment

• Exhibit 1: Value Proposition of Quartz

Value Proposition Statement17 for USERS

Premium and Standard category Users who need bathroom showers will buy Quartz Standard Shower and Quartz Pumped Shower because it delivers water at good and stable pressures and temperatures, it is easy to use, it does not break down and has stunning looks. They will choose this over the Mixer and the Power Showers of other players such as Mira, Masco, Ideal Standard and Triton because we can uniquely offer remotely located water mixing mechanism that is electronically controlled and superior design from our focus on innovation, state art of testing facilities and engineering development team.

Value Proposition Statement for NON USERS

Plumbers who sell and influence buying decisions of bathroom showers will buy and recommend Quartz Standard Shower and Quartz Pumped Shower because it is easy to install, can be installed four times faster, does not need any excavation, offer a 5 year parts warranty, does not go wrong and need a second free visit. They will choose this over the

Mixer and the Power Showers of other players such as Mira, Masco, Ideal Standard and Triton because we can uniquely offer remotely located water mixing mechanism that is electronically controlled and superior design from our focus on innovation, state art of testing facilities and engineering development team.

• Exhibit 4 : New Sales & Marketing Department Structure.
• Exhibit 5 : Marketing Communication and Promotion Expenditure.

Less focus is given on advertisement and more focus is given on the push strategies. This way the maximum proportion of the marketing promotion expenditure occurs after the actual sales occur.

Marketing Communications Media Expenditure type - Before / After Sale

1.  Advertising on Shower Gels Before
2. Advertising on Internet (pay per click) Before the sale, but charged only on click not for placements
3. Advertising in Newspapers Before
4. Sales Restructuring - Extra Mktg. executives Before, however they will be used for closer monitoring of the implementation schemes and to push other products also.
5. Channels -

• Plumbers Commission After
• Plumber Loyalty Program Before
• Launch Event Before
• Trade Shops Early Discounts After
• Trade shops - staff training costs Before
• Showrooms - Early Discounts After

Only in cases of Launch event and training programs there can be a substantial outflow earlier, however this is absolutely necessary to increase awareness in the Plumbers.

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