KONE MONOSPACE

Group 8

DEVELOP A DETAILED MARKETING PLAN FOR LAUNCHING THE MONOSPACE IN GERMANY. SET A PRICE FOR THE MONOSPACE (TO FACILITATE COMPARISON WITH PRICES OF EXISTING PRODUCTS AS GIVEN AT THE BOTTOM OF CASE PAGE 4, PRICE A LOWRISE,4-FLOOR ELEVATOR) AND SPECIFY CLEARLY HOW IT IS TO BE POSITIONED RELATIVE TO THE CURRENT PRODUCT LINE (PH, PT, PU, OR PS).

BASED ON THE PRICING AND POSITIONING DECISIONS, PROPOSE A MARKETING AND SALES EFFORT. JUSTIFY YOUR DECISIONS AND INVESTMENTS WITH ANTICIPATED SALES AND THE ASSOCIATED CONTRIBUTION RELATIVE TO THE AMOUNT YOU PLAN TO SPEND.

PRICING STRATEGY

Factors for deciding pricing

• legal approval for MonoSpace to be installed in every state throughout the country, • the company’s objectives for differentiation and brand building, • the fact that the government does not subsidize the elevator industry, • as well as the headquarters suggestion to price the MonoSpace above existing prices if KONE’s market share was less than 15 percent,

These indicate that KONE should implement a skimming pricing strategy.

Results from similar markets, such as the Netherlands and France, signify this to be a successful strategy.

However, it didn’t work in UK given the price sensitive nature of Consumers.

Situation in Germany is similar where consumers are also extremely price-sensitive due to market saturation

POSITIONING IN GERMANYEnergy efficient, not requiring oil • price sensitive, • Want quality & efficiency• Customer service oriented.

Eliminating fire and environmental hazards,

Lower installation time.

Quality & Service

Nature of German Consumers

Marketing Kit Monospace Concept Brochure

Two powerpoint Sales Presentations, one directed at builders, architects & owners & a technical one for consultants & training purposes

Trade Press Releases

Building & Planning Guides with a front line CAD rendering

Monospace architectural Specifications

Marketing Resources• Direct Mail: To architects, investors & general

contractors• Launch Events: Road Shows used by large

players• Customer Visits (most tried & tested)• PR Activities around national & local presses

Annual Costs

Direct Mail for 150000 customers 209790.21Sales Visits double the Salesforce 5202797.2Road Shows - 4 839160.84Press 12 weekly & 12 monthly 47832.168Total 6299580.4

PRICING

Price of $45000 Price of $40000

Price of $30000

Price of $35000

Price of $32000

Price of $31500

Price of $31000

Kone Share 2424.2

PH+PT 2375.716

Revenue10690722

09502864

0712714808315006

07602291

27483505

47364719

6Excess available for Marketing Spend 39143304

27264724

3507563.9

15386144 8258996 7071138 5883280

Marketing Costs6299580.

4

Excess Revenues 328437232096514

3 -2792017 9086563 1959415771557.5 -416301

Price between $31000 & $31500 would break even the assumed Sales Effort / Marketing Costs

HOW IMPORTANT IS THIS PRODUCT LAUNCH FOR KONE?

WHAT ARE THE IMPLICATIONS OF THE SUCCESS OR FAILURE OF THE MONOSPACE LAUNCH?

Importance of Monospace for Kone

Germany was a key market and Monospace was the 4th largest provider in the market

Kone’s operating income was drastically falling

Early test Markets had mixed reactions, only Netherlands was a success.

Germany was a key market for KONE where it was the fourth largest player

Product positioning could make or break the game for KONE.

Since it was a first of its kind innovation, references of successful installations were needed for KONE to market it to other countries.

Implications for Success

Price 1. Capability to charge a premium2. At the same time give some value/ savings to the Customers3. Ability to maintain some margin in a market showing negative growth rate

Positioning 1. Positioned as High Tech Provider2. Position itself as a true Global Player3. High product differentiation, no competitor to the product4. Being a new technology, more Service Contracts

Reach1. Reach out to Construction companies

which were hard to convince with their space utilization proposal

2. Energy suppliers, an important influencer group recommended Monospace

Implications

Failure

• Financial Condition would worsen further• Reputation would be lost which could affect

other European markets• No chance of improving or operating in

other markets also

WHAT CAN BE LEARNED FROM THE TEST MARKET AND MARKET LAUNCHES IN THE OTHER THREE COUNTRIES?

Test Markets

France•Two & Three Star Buildings•80% low rise hydraulic, 20% geared traction•Sales focus on Newspaper Ads, TV Programs & Breakfast meetings•Individual presentations for large clients•Only 40 units sold in first 3 months

UK•One star & Five Star buildings•90% Hydraulic Elevators, only 10% low rise Sales•Marketing Focus on “technology” through presentations at the London Science Museum•No units sold even one month after the launch

Netherlands•Two & Three Star Buildings•60-70% Geared Traction•Marketed through Individual Customer meetings, publishing articles & CD ROMs•Won market share in 10 months

LearningsSavings were not valued in Netherlands but were sought after in France & UK. These could be as much as 5% of the total construction & installation costs

Energy Suppliers were a big influencer in Netherlands who had not been considered by KONE

The Warning label : There was need for a an Upfront communication about where Monospace could be used & could not be used

Cost Savings from Monospace were not a USP in France & Netherlands as it was passed to the developers. Could be used in UK as there was price sensitivity. Thus Positioning & Pricing needs to be changed in different countries.

Single Supplier Worries: Monospace was the only product that didn’t require a machine room. So bargaining power of KONE was very high. It needed to convince Clients with emphasis on Relationships & long term partnerships

Netherlands installation was doing well. Such a model should be followed everywhere as it’s a proof of concept

HOW DO YOU EXPECT COMPETITORS TO REACT TO YOUR LAUNCH PLAN?

HOW DO YOU PLAN TO MANAGE COMPETITORS’ REACTIONS?

Give negative feedback to customers emphasizing on flaws.

Awed by product since has comfort as geared and price as hydraulic. Also, half the energy consumption as geared.

Competitors(Otis, Schlinder) might get into price wars.

Otis : Tried the product in past but could not succeed so might re launch the product with better technology

Kone should not reduce prices since benefits derived can be easily overcome by deep pockets of competitors.

Kone still needs Government to pass regulation for its architecture. Competitors can reduce cost and customers may not see any added benefits in such a case.

OTIS can improve on its replica of MonoSpace and come up with a better offering. A relatively less premium will ensure that Kone enjoys a market capitiliztion for a longer duration.

Most of the revenue is derived through Services; hence it should focus more on Services revenue.

Reactions & Management

HOW DOES THE GERMAN MARKET (AND KONE’S POSITION IN AND APPROACH TO IT) DIFFER FROM THE OTHER MARKETS?

WHAT ARE THE IMPLICATIONS OF THESE DIFFERENCES FOR TRANSFERRING EXPERIENCE GAINED IN THE OTHER MARKETS?

German Market Vis-à-vis other MarketsMarket is already saturated due to overcapacity. So price sensitive consumers & Demand is expected to decrease by 15% by 2000

• 60% Hydraulic & 40% Geared Traction. • Implies a good market potential for EcoDisc

20% Market dominated by 4 construction companies & rest among 20,000 small contractors. Tremendous opportunity to make a mark

• Quality & Relevance of Information• Level of Service• Design of Bid document • Customer’s impression of the Salesperson also affected Purchase decisions

Dominated by Residential Construction

KONE was reactive rather than being proactive

Market was Quality conscious

The Construction Company Manager was the POC & Purchase decisions were influenced by

After the deal was signed, the Purchasing Manager became the POC

Implications for KONE’s ApproachFirstly, KONE needs to change its positioning based on Germany’s affiliation towards “Quality, Service & Technology”

Type of Salespeople have to be different before the deal is signed & later on as the POC changes in the Client organizations

Proactively approaching clients may help in building market share

Demonstrations as followed in the Netherlands office might be a good idea

The Proposition should clearly communicate the emphasis on Long term Partnerships & Collaboration

Any other influence group if involved in Decision making needs to be checked out like Energy Suppliers

WHERE DOES THE MONOSPACE FIT PRICE- AND PERFORMANCE-WISE RELATIVE TO KONE’S AND ITS COMPETITORS’ CURRENT PRODUCT LINES?

OR, DOES IT POTENTIALLY CHANGE ANYTHING? IF YES, HOW?

WHAT ARE THE SHORT-TERM AND LONG-TERM IMPLICATIONS OF YOUR APPROACH?

A COMPARATIVE

Does it change anything?

Disruptive Innovation

• Financial muscle• Scale

Competitors will leverage advantages they enjoy

Price War?

Increased expenditure on R&D

A Lot of Attention on KONE

WHAT KEY WEAKNESSES IN KONE’S CURRENT CAPABILITIES WILL NEED TO BE MANAGED TO ENSURE THE SUCCESS OF THE PRODUCT LAUNCH?

KONE’s Weaknesses

Sales force limitations

• Smaller sale force than major competitors• Proactive Selling Approach• Sales force effort aligned with clients’ DMU

Limitations of the Product ‘Ecodisc’

• The Mono Space can’t be used in building with penthouses because of the temperature (it means less opportunities) • It was also unsuitable for Outdoor Use• This has to be taken care of in the positioning & communication mix

Weaknesses can be taken care of through a better Sales Strategy including Sales force organization & Communication mix