Soren Chemical:Why is the New Swimming Pool Product Sinking?

Grade id: 41311Idaho state university

MBA 6623

NOVEMBER 3, 2015

Overview

With a target sales of $1.5 million dollars in the first year, and missing its mark by 92.6%

Soren Chemical has a tough road to encourage distributors and consumers to use their new water

clarifier, Coracle. The first challenge that Soren Chemical faces when marketing their new

product is to convince distributors to push Coracle and get retailers to create desired shelf space

for it.

Additionally, they need to look at it from an end-user perspective and try and educate

their consumers about the benefits of Coracle by investing in a marketing campaign. With this

analysis, we’ll take a look at why Coracle isn’t meeting the initial volume and sales target, and

make recommendations for a marketing strategy that best suits Coracles demands.

Analysis

The advantage of Coracle to consumers is the promise to reduce the need for additional

chemicals on average of 25%. However, this advantage is also a disadvantage for distributors.

According to the specialty retailer survey, the annual chemical costs at retail price is $300. If the

distributors push Coracle, then they’d be missing out on approximately $75 in other chemical

sales. With a gross margin of 30%, distributors are not as inclined to push Coracle because

they’d be losing money by doing so. By promoting Coracle, distributors would lose out on 20%

which comes out to be approximately -$8.63, while retailers would miss out on 15% or -$7.50

(see Exhibit 1).

In analyzing the consumer end the market potential for residential pool clarifiers could be

immense, with up to 9 million households boasting swimming pools just in the United States

alone. In Exhibit 2, it emphasizes the point that nearly 75% of the 7.2 million people who

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maintain their own pools do not understand how to use clarifiers or how effective they are. This

is almost a $270 million untapped market. As well as the 9 million households with swimming

pools, Coracle can also be marketed to approximately 45,000 pool service specialists. With the

price reduction (see Exhibit 3) they will be able to use less chemicals and their profit margin

will increase by at least 5%.

Since Coracles selling season is September to May, viewing the company’s sales report

half way through the season might give a biased number and might not account for the largest

part of the buying season. In addition to this, a threat of Coracle would be the diluted version of

Kailan MW, so some of the sales that could have been for Coracle might be observed in the

Commercial clarifiers sales report. The option of private label for Coracle could be used as an

advantage or disadvantage, by building the brand it could introduce other opportunities to launch

a new product, however, on the other hand it could lead to more sales as a private label with an

established customer base.

Competitors

All competition for the residential pool clarifier market has similar market share at

approximately 17.5%. The main competitor of Coracle is ClearBlu, formulated by Jackson Labs

it is considered to be the most effective chemical flocculant on the market. ClearBlu reduces the

need for other chemicals by 15%, however they do not emphasize on this aspect. Coracle is a

superior product because it is an all inclusive product that reduces the need for other chemicals

by at least 25%. The monthly dosage of Coracle is only 2 times per month as opposed to

ClearBlu’s 4 times per month.

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Recommendations

To compensate for any loss distributors might face. Soren Chemical needs to convince

them that even though they’re seeing a decrease in revenue, they will see an overall increase in

revenue in the long run if they promote Coracle and give it desired shelf space. Soren Chemical

can either offer a rebate program depending on the volume of Coracle they sell, or offer them a

higher margin if the bundle their products together and sell to retailers.

By allowing a $600,000 marketing campaign, Soren Chemical can start to strategically

brand Coracle by highlighting its advantages. Right now consumers see the retail price as being

the most expensive. However, the perceived high price can be explained by showing that the

overall cost per year is less, and on average a consumer could save $85 by using Coracle

(Exhibit 4). Coracle also reduces pool treatments to two times per month as opposed to it’s

competitor ClearBlu’s four times per month. Additionally, one of the most important things

Soren Chemical can do in it’s marketing campaign is educate consumers on the use of different

chemicals. Right now, consumers main concern is a clear pool, however there are many products

that give clear water but does not decontaminate the water. Coracle is capable of both. It is

recommended that Soren Chemical strategically brand Coracle to lead to more opportunities in

the future. They also need to start an intensive marketing campaign in order to educate

consumers on the effectiveness of their product. However, they should utilize online marketing

tools as opposed to traditional mailing campaigns due to it being more cost effective.

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Exhibit 1: Soren Chemical Net Benefit to Distributors & Retailers

Annual Chemical Costs at retail price (no clarifiers) $300.00

Coracles reduction of other chemical use 25%

Reduction of price distributors and retailers $75.00

Reduction to distributors margin (20%) $15.00

Reduction to retailers margin (15%) $11.25

Retail Price of Coracle $25.00

Distributors Margin (30%) $6.38

Retailers Margin (15%) $3.75

Net Benefit to distributors -$8.63

Net Benefit to retailers -$7.50

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Exhibit 2: Market Share Opportunity in Millions $

Residential Swimming Pools in US 9

Consumers who maintain their own pools (%) 80%

Consumers who maintain their own pool (#) 7.2

Customers who understand and use clarifiers regularly (%) 25%

Customers who do not understand and use clarifiers regularly (%) 75%

Customers who understand and use clarifiers regularly (#) 1.80

Customers who do not understand and use clarifiers regularly (#) 5.40

Average annual cost (according to survey) $50.00

Tapped Market Opportunity $90

Untapped Market Potential $270

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Exhibit 3: Pool Service Specialists Cost Chemical and Clarifier cost $350.00 Total Visits per year 10

Assumed average cost per visit (2 visits) $175.00 Yearly Revenue $1,750.00

Profit Margin 80%Chemical and Coracles Cost $264.06 Total Visits per year 10

Assumed average cost per visit (2 visits) $175.00 Yearly Revenue $1,750.00

Profit Margin 85%

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Exhibit 4: Average Cost per year

Average chemical and Clarifier cost $350.00

Average chemical* and Coracles cost $264.06

Total savings per year $85.94

Total savings per treatment (10 treatments) $8.59

*based on average % of chemical reduction

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