Aqualisa Quartz Case - This is my writeup for a Harvard Business School case. I got an A. PDF

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This is my writeup for a Harvard Business School case. I got an A. ...

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Analytical Process Outline: How will the problem be solved? What analytical methods will be used? Is there a framework that could be used? Why approach the problem this way? WHAT DATA AND INSIGHTS IN THE CASE ARE MOST RELEVANT IN THIS SITUATION? (200 word limit)  The problem of the Aqualisa Quartz failing to meet sales expectations can be solved by looking at Rogers’ 5 factors: relative advantage, compatibility, simplicity, trialability, and observability. The forces show us that the Quartz’s main problems are that, while it’s technologically far superior to its competitors, when customers and plumbers can’t try it out and observe how it works, they are intimidated by the technology and will choose another option. This is important because plumbers influence 73% of shower purchasing decisions, so it makes sense to figure out a way to target the plumbers to make them realize that the Quartz is a good option for both their customers and themselves. In this case, it’s also important to look at cannibalization and figure out if the Quartz will steal market share or cannibalize Aqualisa’s own sales, and whether that’s a good or bad thing for revenue: looking at margin and cost will help us understand whether this is a good financial decision. Lastly, it’s key to understand that the Quartz is a big market disruption and, if marketed right, could create a huge generational change in the way showers are technologically created, used, and thought of.  Analysis and Interpretation of the analysis: (800 word limit) The Aqualisa Quartz is a market disruption. It solves the typical complaints of low water pressure by providing consistent high pressure, and inconsistent temperature, which it not only solves but adds huge convenience and ease to with the temperature control: you push to start and the light will tell you when the water is ready. The safety and ease of use of this control is revolutionary for those with children or the elderly. It also solves plumbing problems because, with the remote control, wall excavation or unsightly boxes in the bathroom are unnecessary. Furthermore, it takes significantly less time to install than regular showers. This breakthrough innovation gives the customer more function and utility (the remote electronic controls can be used to carry out many new functions) for their money. Although competitors will eventually be able to copy it, developing the technology will take about two years, enough time for Aqualisa to become the brand associated with this technology. Despite the new function and value the Quartz offers, it isn’t selling as well as it was expected to. The Quartz has a relative advantage, because there are no similar products competing, and it’s vastly superior to the technology it’s replacing. That mean, however, that the technology is fairly unknown: they will have to do aggressive marketing to get the message out. The price is higher than what the customer is used to, but Aqualisa is a premium brand. Furthermore, most customers are unsure of the breakdown between shower cost and plumber labor, showing that people don’t seem to be making decisions based solely on equipment cost. The Quartz is also compatible with the functions people expect of a shower, with extra added features for convenience and safety made

possible by technology. The Quartz is also simple to use and install. The design and technology have won awards. It has a simple one touch automatic control that prevents users from having to fiddle around with stiff valves to find the right temperature. Furthermore, it’s easy for plumbers (even apprentices) to install: it takes them half a day, whereas other showers take 2 days. However, the Quartz doesn’t fare well in trialability: customers don’t want to buy a product they haven’t seen before, because they don’t know how it works. In showrooms, when customers get the chance to see how the Quartz works, it becomes the top seller. The lack of trialability makes it harder for awareness of and desire for the product to spread. Similarly, the plumbers, who distrust innovation, and especially electrical showers, are suspicious of this product, because if it fails, they will have to come back and repair it. Once the plumber installs one Quartz, he loves the simplicity of the installation process, but he first needs to be convinced to install his first one The improved benefit of the Quartz isn’t necessarily obvious or observable. Although for some customers, reading or hearing about the water pressure and temperature control will be proof of benefit, others won’t understand that this product is a big improvement over old showers until they see it in action. Denny worries that the Quartz will cannibalize Aqualisa’s other products, a fair concern: why wouldn’t a customer want to buy a technologically superior shower with more value than anything else in the market? However, he was wrong to think of this cannibalization as a bad thing. Because the Quartz has higher margins than any other product they currently offer, it’s beneficial to Aqualisa if all customers choose to buy the Quartz rather than a different Aqualisa product, because it will increase their margins. A customer will get a new shower to replace an old shower, new penetration, new build, second shower, or commercial reasons. There’s three main channels of purchase. First, there’s tradeshops (Aqualisa is sold in 40%), where plumbers buy the shower they install for someone. Most plumbers prefer to install one brand. Tradeshops will carry whatever there is demand for, so getting showers into the tradeshops is about plumber preferences and tastes. There are also showrooms (Aqualisa is in 25%) where the customer can see high-end showers, including how they look installed and how they function, which is important to the high end customers. These showrooms contract independent plumbers for installation. Lastly, there’s DIY sheds, where discount showers are available: Aqualisa doesn’t sell here, but their lower-quality Gainsborough brand does. 53% of the time with new mixer showers being installed, the type and brand suggested by the plumber is chosen, and another 20% of the time, the customer takes the plumber’s advice on what type of shower to install. Plumbers have a lot of influence in this market in deciding which brands succeed, so it’s very important that plumbers respect the Aqualisa brand and like installing their showers.     

Recommendation and rationale for recommendation: (800 word limit) Before the development of the Quartz, there was declining quality differentiation in the market, so Quartz could help Aqualisa re-establish itself as a premium brand with superior showers. Their innovation offers Aqualisa a huge competitive advantage. However, their competitors will be able to copy the technology within two years, so they need to established themselves as a dominant and reliable brand among both customers and plumbers. I therefore recommend that Aqualisa aggressively market the Quartz, using push marketing and the plumber and showroom channels. The Quartz needs to be push marketed so that the customer can be educated about the technology and how the shower works. Passively taking the product onto the market won’t create as much of a disruption as active marketing. Pull marketing won’t work because the message they need to impart is too complicated for an advertisement. Furthermore, because the market is so fragmented (homeowners, plumbers, developers), it would be difficult to form a cohesive marketing campaign appealing to all the segments. Thus, push marketing is more appropriate, because the salesperson can explain the technology and the advantages of the product and can figure out which features are important to different groups of people. Because salespeople make sales for commission and to succeed at their job, they will have incentive to push the Quartz. Aqualisa should prioritize getting the Quartz into showrooms. Aqualisa is currently in only 25% of showrooms, but fis very successful in that channel: it accounts for 20% of mixer shower sales. The Quartz is observable there, letting the customer see its technologically superiority. Marketing directly to the owners of showrooms to convince them to display the Quartz is a win- win, because it will lead to increased sales and high margins for Aqualisa and the showroom owners will sell high volume volume because of the proven popularity of the Quartz in showrooms. The luxurious design/appearance, brand new technology, reliability, and customer benefits are worth the cost and will ensure that the premium segment customers make a purchase. The DIY sheds are not an appropriate sales channel for the Quartz: it would tarnish the brand, give away margin necessarily due to the discounts expected, and because customers would be intimidated by the electric technology and there would be no employee incentivize to actively sell the Quartz. Although showrooms are important, they only account for 20% of current mixer shower sales for Aqualisa. The biggest category of sales by far, where Aqualisa should focus the bulk of their efforts, is through independent plumbers (who purchase from tradeshops): 54%. Plumbers  influence or choose the brand of 73% of mixer showers put in. The  lifetime value of converting a plumber to now recommend a Quartz is huge: in just one year, if all the showers they install (about 50) are  Quartz, Aqualisa will make about £15,000 profits, varying on if the Standard or Pumped is purchased. The message to plumbers needs to be that the Quartz is quick and easy to install and reliable, meaning they won’t need to come back for repairs. Because they don’t typically need to excavate, installation is only ¼ the time of a typical shower. Plumbers can even send their apprentices to do the job. Although the shorter installation time means they bill less hours, there’s so much pent up

demand for plumbers that they will be able to do other jobs in the 1.5 days of new free time and thus make much more money than they previously did. Once a plumber installs one Quartz, they realize the huge benefits of recommending Quartz to their clients, but the hard part is to get the plumber to hear about the Quartz and want to install it. Plumbers are hard to target with ads, because they aren’t typically a demographic who will be reading magazines. One possible strategy is to offer one free Quartz per plumber, so they get hooked. Although this would create a small loss, the value of the plumber would very quickly make up for it. However, Aqualisa would need to carefully track to ensure that there aren’t free riders taking advantage of the deal or tricking the company. To grow the market in direct to consumer marketing, Aqualisa  should focus on new shower users, because only 25% of installations are for people just getting their first shower, and this is a huge area of potential growth. They could also directly market the features of the water temperature safety to people with children and the easy press button to the elderly. However, these customers’ desire to purchase a shower will become known when they look up a plumber or enter a showroom, so marketing campaigns that get Aqualisa products in those channels will also be effective for getting the shower into the hands of those customers....