CASE: (KONE: The MonoSpace Launch in Germany) Problem: KONE Aufzug is a new elevator business which is in the middle of planning the launch of their new product, “MonoSpace”, into Germany. KONE is challenged with the problem of how they should price and market the MonoSpace elevator without dismantling and destroying their existing product line. KONE knows that they can only market to low & mid-rise buildings of 12 floors or less due to its cabin requirements and operating speed; however the underlying problem of how to do a successful launch is a question Raimo Hatala wishes to answer. Alternative Solutions: Alternative 1:
The marketing of the MonoSpace product is highly vital to the overall success of KONE. Currently 48% of sales in 1995 resulted in residential sales and of the 48%, 92% where PH (Hydraulic). Sales by types also show that nearly 90% of all elevators sold are either geared traction or hydraulic, and that 75% of all equipment sales comes from low-rise elevators. Therefore, KONE should market their product near the geared traction and above the hydraulic system, by doing this they would still keep all the benefits that the hydraulic product has to offer and slightly match the benefits of the geared traction minus its speed.
Marketing the MonoSpace product at this position gives individuals the options of upgrading to the ecodisc from their current hydraulic system, while gaining the best value and investing themselves into new technology. Pros: Nearly 90% of all sales are generated from PU and PH systems, which is where we would market the new product. Gives customers the option of upgrading to from Hydraulic system without much cost and eliminates potential fires and environmental hazards. Cons: Many may only look for best value and not new technology; they just want the cheapest substitute.
The German market consist of 60% hydraulic systems, so what will make them change to ecodisc if 50% of the decisions are made by general contractors who possess little technical knowledge? Marketing the product between two other well established products could be a bad thing, as most customers are either looking for the cheapest product or new top notch technology. This could possible eliminate or kills sales of another product. Alternative 2: In regards to the benefits & pricing, KONE would be able to see the greatest benefits by both installing and managing the new MosoSpace system.
Pricing the MonoSpace elevator just above the geared traction system would give KONE the possible advantage of 90% of the market, while also focusing on V1 and V2 sales. KNOE should also focus on showing the overall benefits of the system and not just the upfront cost. By presenting overall cost benefits KONE could win the sales of many edged buyers debating on the purchase of their product. Pros: Show construction companies the possible savings by not building a machine room to their buildings. It could give architects more freedom in the design of their buildings.
It could add value and savings which could be passed on to potential investors or buyers looking at purchasing the building. Cons: If KONE only did installs of new equipment they would only see a possible 38% of overall potential in sales, and only 62% in sales for service. Not educating customers in overall cost savings of the product could kill the MonoSpace when customers may only look at the high upfront cost. Recommendations: It would be my recommendation to promote and introduce the MonoSpace system in the low-rise residential market within Germany.
It is vital that KONE price the product that is very competitive to the rest of in the industry while focusing and emphasizing on the advanced technology and overall cost benefits of the ecodisc machinery. While it is not KNOE’s goal to scare the competition in dominating market share, it should be a high focus as they currently only control 8. 5%. Therefore, it would behoove them to focus more on overall profits, by generating a high up front cost then possibly discounting it in future to gain more of the market.
Having tested the product already in the Netherlands, UK, and France it has been apparent that KONE should price the MonoSpace system just marginally higher than the present PH, PT and PU systems. However, knowing the sales data in Germany, PH elevators account for 60% of the low-rise market sales due to their economical pricing structure because builders are really mindful of cost. Given the said data, we could set a low discount price point of around DM72,000, just slightly undercutting the PT system.
This would insure that we gain sales from PH markets without killing the PT and PU markets which compels 40% of the sales. Knowing that Germany holds the largest possible sales in the EU KONE can anticipate a large number of transactions. KONE should take on a large marketing event to promote the product, and help gain recognition for their new technology. It will be important to KONE to invite general contractors and architects to the event as they are the main purchasers of elevators.
During this time KONE must point out all benefits and how they out weight the upfront cost while showing how the system will out performers their competitors. In Conclusion, KONE should sell their product around DM85000 when introducing the new system to Germany. This would be consistent with the price levels already set throughout Netherlands, France, and the UK. KONE should also realize that they may have to sell at the discount price to hopefully gain more of the market share of the PU units and staying competitive with their competitors.