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Case: Commercializing the Kunst 1600 Dry Piston Vacuum Pump

Case Analysis Note

Key Notes/Findings

Kunst 1600 Overview

1. Germany based Atler GmbH acquired the Kunst in order to penetrate new market segments within Dry Piston Vacuum Pump U.S market. Kunst would be selling it as a derivative product in untapped applications segments e.g. AC & Refrigerator reapir.

2. Evan Stone was appointed to head up a team charged with finding new segment & then commercializing Kunst 1600.

3. Kunst is a fractions horsepower, injection modeled aluminum pump with pumping speed of 1.6 CFM, pump weight – 16.5 pounds. Because of reconfigured compressor it can run longer and cooler than conventional pumps at lower pressure & due to injection modeling it has fewer working parts than traditional one’s

4. Most importantly Kunst 1600 is oil free and planned to sell it to wholesalers at $400 with suggested resale of $500.

5. Kunst 1600 lifetime was about 6 years.

Market Insight

1. Kunst has high brand regard in Scientific, Engineering & Healthcare sectors with 60% market share in those sectors.

2. Home & Light commercial refrigerator repair – (1-1.6 CFM), For residential AC’s – (3-4 CFM)

3. Annual demand for these segments

a. Home refrigerator repair – 60,000 units.

b. Light commercial repair – 40,000 units.

c. Residential AC – 125,000 units.

4. Competitors in 1-6 CFM bracket: Air Master, Pump Wizard, Toledo & Valve.

5. Market was growing at 15% per year.

Economic Benefit

1. Oil charge $ 8 per qurt and it takes 30 min to change oil from 3 CFM pump.

2. Typical AC repair technician paid at rate of $30 / hour. So $15 savings in each service.

3. $.50 for solvent charges + $.15 for fiber cloth = $.65 / repair.

4. Disposal charge = $5 / gallon.

Total Savings = $ (8+15+.65+5) = $ 28.65 per repair.

5. Less in weight ( 5-10 pounds lighter as compared to other competing products)

Answers to Case Questions

Q1 What are the major, quantifiable value and price elements associated with the Kunst 1600?

• Technicians need not have to change oil as Kunst 1600 is an oil free pump. This will ensure they save time which is wasted on cleaning the mess which happens immediately after changinh the oil. • The product is known for higher productivity and performance in low pressure settings. Higher revenues and profits can be generated onlyin the light commercial refrigerator repair segments as in this segments technicians can complete more jobs with faster pump like Kunst 1600 than others. • As Kunst 1600 is made with aluminum, it weighs 5-10 pounds less than the other pumps. The technicians would like this as it will be easier to carry. • Kunst 1600 is an injection-molded pump having few working parts which results in lesser wear & tear • It could evacuate chambers down to almost a perfect vacuum • Kunst 1600 is made from injection-molded aluminum. It won’t rust likevacuum pumps made of steel. • With Kunst’s expected life being six years, it will be 2-3 times longer than other traditional vacuum pumps. This would have a big impact on the money spent on vacuum pumps by companies buying other vacuum pumps.

Q2 What additional value placeholders, elements not presently quantified, merit consideration in your value model?

• Weight: Lighter weight ensures ease of use as they have to be handled and transported to job locations. • Reliability and precision of pumps. • Durability: As moulded aluminium is used, its parts are subjected to less corrosion • Ecological benefits of no oil change

Q3 Construct a customer value model for the Kunst 1600 in the residential AC, home refrigerator, and light commercial refrigerator repair market segments.

Residential AC repair segment:
Cost saving per oil change = Oil price+labor cost+clean up supplies+oil disposal cost
= $8+ ($12*0.5) + (0.15+0.50) + ($5*0.25) = $15.90cost savings per year = $15.90*20 = $318

Light commercial refrigerator:
=$4+ ($24*0.5) + (0.50+0.15) + ($5*0.125) = $17.275cost saving per year = $17.275*12 = $207.30

Home refrigerator repair segment:
= $4 + ($15*0.5) + (0.50+0.15) + ($5*0.125) = $12.775cost saving per year = $12.775*12 = $153.30

Incremental profit per year =no. of extra jobs per week* avrg. profit per job* weeks per session light commercial refrigerator = (2 jobs/wk*$30)*12 wk = $60*12 = $720

Differential price per year= pump price/exp. life (in years)

Kunst 1600 price/exp. life (in years)
Residential AC = ($250/2.5)-($500/6) = $16.66
Light comm. ref. = ($200/2)–($500/6) = $16.66
Home ref. = ($150/3)–($500/6) = (-$33.33)

Q4 Using your value model, select a target market segment(s) for commercialization efforts. Justify your choice.

|Factors |Res. AC Repair |Light Comm. Repair |Home Refig. Repair |
| | | | |
|Oil Change |318 |207.30 |153.30 |
|Incremental Profit |0 |720 |0 |
|Differential Profit |16.66 |16.66 |-33.33 |
|Total |$334.67 |$943.96 |$119.97 |

So we need to target the Light Commercial Segment since there we have more value to the customer offered.

Q5 Write a value proposition for the Kunst 1600 for the target market(s).

The unique performance oriented Kunst 1600 will speed up jobs enabling you to earn more while keeping at bay the conventional oil mess and related hassles

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