Soren Chemical Case Study

Soren Chemical Case Study

Soren Chemical Company is a large manufacturer of bulk industrial chemicals designed for water treatment and fuels and lubricants. In 2006 the company's product line included over 350 products with annual revenues of $450 million (Exhibit 1). Product placement is traditionally business to business sales with very little emphasis placed on consumer awareness or product use. The exception to this was water treatment products where the company selectively developed branded products for water treatment in the commercial market. The product Kailan MW is a commercial grade flocculent designed to treat large water systems in conjunction with other chemicals to clarify and purify the water. This is valuable in commercial pool applications due to the products ability to trap waterborne pathogens that normal chlorine will not kill. Because of the formulation and strength of the Kailan MW one gallon treats 500,000 gallons of water and is effective for two weeks. Competing products cannot match Kailan MW for price and application. Sales of Kailan MW for commercial applications were through a channel structure of seven formulators that in turn supplied to wholesalers who supplied pool specialty retailers and pool service professionals (Figure A). The market was estimated at $30 million for 300,000 commercial pool applications in 2007 growing at 7% per year. The formulators and wholesalers create the market for Kailan MW through custom blending and packaged services tailored to specific customers and geographic regions.

Industry reports estimates of 9 million residential pools in the US as a potential market moved Soren to develop a residential flocculent called Coracle. Soren marketing personnel identified three competitors in the marketplace with each one having about 20% market share. Product pricing put Coracle highest in cost per container, cost per treatment and in the middle on an annual treatment cost (Table A). Soren used its current channel strategy for product placement with formulators, wholesalers and service professionals. Sales goals for year one were $1.5 million. Results were less than $112,000.

Facts:

* Residential pool product sales are a very large market compared to commercial chemical sales.

* Soren has little experience in marketing residential pool products.

* The value and proper use of Coracle had not been communicated correctly with the current marketing channels that sell the product.

* Soren does not understand direct consumer demand and how to influence it correctly.

* Market size for residential pools is: 9 million pools X $50/year annual Coracle treatment= $112 million dollars retail (Exhibit 3).

* 80% of residential pool owners maintain their own pool.

* Only 25% of consumers understand the value and use clarifiers regularly. (Exhibit 3)

* Annual residential pool chemical budget is $300. (Exhibit 3)

* Soren research indicates use of Coracle will reduce the annual chemical cost for pool treatment roughly 25%. ($300 X .75=$225). If customers use Coracle at $50 plus the $225 for regular chemicals they still save $25 annually by using Coracle. This indicates that the price for Coracle should be higher than the current $25 per bottle to allow for increased margins to distributors and manufacturing. (Exhibit 3)

* Current market strategy