In a Bind
Peak Sealing Technologies
Product Line Extension Dilemma

Table of Contents

Introduction 3
Customer Analysis 3 Who are the customers? 3 Buying Processes 5 Relationships 6
Company Analysis 7 Networks 8
Recommendations 9
Conclusion 9
References 10

Peak Sealing Technologies
Product Line Extension Dilemma

Introduction

Peak Sealing Technologies are a Texas based, leading manufacturer of high quality and innovative adhesive products. Their lines are heavily focused on premium industrial strength tapes, carton sealant and other packaging products. PST are steadily expanding their net sales and have experienced huge growth over the past 5 years. One of their product lines is known as K-2 tape, a pressure sealing tape of which there are nine variations. Recently Tensile, a competitor in the industry, released a new economy line tape of which PST believe may quickly become a threat to them. Now, PST are debating the consequences and outcomes of releasing an economy line tape to reduce the likelihood that Tensile’s cheaper Ecoslim and Ecoslim-wide will replace two variations of K2 tape in consumer minds. However, as this contradicts their established reputation as a premium brand, careful analysis of the industry, end customer and distributor forces, and company relationships and needs is required. PST must use this analysis to address two key challenges – retaining their current customer base, and ensuring their premium reputation remains untarnished.

Customer Analysis

Who are the customers?

Currently, PST’s customer base largely revolves around the commercial organizational market, specifically users and distributors. The majority of end users are known to be within packaging, retail and manufacturing segments. The table below details the criteria and situation of the distributors. As they are loyal and long term customers their purchases will generally involve straight rebuy (Beckham & Dolan, 2014). However, as products change and new items are released, their rebuy may become modified. Beckham & Dolan note that they value PST as suppliers of high standards, including service support (joint phone calls), high quality products, and at a good price for bulk purchases (2014). It is essential to keep in mind that some distributors previously requested an economy line, while others complained there are already too many options (Beckham & Dolan, 2014).

Distributor Purchasing Situations | Overview | Buying Criteria | Buying Situation | Distributors | * Commercial customers * PST are highly selective * 55 of 125 PST distributors handle 80% of sales * Larger orders | * Service support * Consistent delivery * Creating value * Price (discount) * Relationships | * Modified rebuy * Straight rebuy |

In opposition to this, current end users of K2 tape provide a reasonably different customer base. As they are involved with both the distributors and PST itself, they provide a more definitive answer to what PST need to ultimately produce, create and sell. Additionally, potential large-scale entrants into K2 tape may soon come from the construction and general usage segments.

End User Purchasing Situations | Overview | Buying Criteria | Buying Situation | Manufacturers(Include specialty customers in military and hazardous materials) | * Both commercial and governmental * Medium to large orders | * Quality * Price * Product mix * Technical Know-how | * Straight rebuy * Modified rebuy * Potential new task | General Consumers | * Purchase for home crafts, repairs and miscellaneous uses * Differ from OEM’s and user organizations * Small orders | * Price * Prefer minimal choices * Service | * New task | Packaging | * Engineers drive 40% of decisions * Packing Engineers understand savings from choosing K2 tape * Medium to large orders | * Quality * Price * Product mix * Technical Know-how | * Straight rebuy * Modified rebuy * Potential new task | Retailers | * Commercial * Sell to general customers and buy from distributors * Less concerned by high quality | * Price * Product Mix | * Modified rebuy | Construction | * Low level of current adhesive purchase * Could be a customer to find and solve problems for before the need arises | * Quality * Price * Product Mix (opportunity for new products) | * Modified rebuy |
Beckham & Dolan, 2014
Tesa Automotive History, 2015

The small segment of home users tend to lack need for technical know how, and will purchase based purely on price. PST’s GP–48 general-purpose tape offers these customers a solution when they have no interest in the more expensive higher quality tapes. The large range of qualities however, is a big positive for packaging engineers who use a variety of K2 tapes for different projects and benefit from understanding the quality versus cost savings (Beckham & Dolan, 2014).
Buying Processes

The buying processes of distributor organizations ultimately come from B2C processes. Cova and Salle mention that the Consumer Culture Theory highlights how B2B and B2C processes are becoming increasingly blurred (Ellis, N., 2011, p37). We can see this in the similarity of buying processes.

Comparing Similar Processes Distributor Process | End User Process | Awareness: Low in stockResearch: Determine if last supply was accurate, on time, and as specified. Determine if next order will be as previous.Evaluation: Change supplier? Change order?Commitment: Make order
Low complexity as generally a straight rebuy. | Awareness: Need an adhesiveResearch: Dispensable money, company purpose (carton sealing versus manufacturing). How essential using tape is to the company’s success will determine the variation of tape they choose to buy.Evaluation: Use last supplier? Found a more appropriate product?Commitment: Make orderHigher complexity as can be modified rebuy or new task. |
Beckham & Dolan, 2014

While this is true, a B2B organizational process typically involves more than one person in what is known as the decision-making unit (DMU) (Ellis, N. 2011). A factor influencing the DMU’s decision includes the extent of personal influence (how power is shared across the DMU).
Members of the DMU – Extent of Personal Influence Initiators | Initiators of PST’s distributor purchases are heavily based on user needs and wants (eg. Have run out, need to buy more). | Influencers | Their influences come from specific customers, such as those in packaging and EMO who need particular kinds of tape | Users | Their users encompass both prior segments, ultimately becoming the greatest consumer PST (and their distributors) rely on. |
Beckham & Dolan, 2014
From this, we can infer that for the distributors to make these buying decisions, their processes are heavily reliant on end user input.
As risks of tape failure in manufacturing and packaging can be substantial, more information is required. The higher risk, the higher the involvement. These users need to be guaranteed they are receiving high quality products early in the purchase stages (Beckham & Dolan, 2014).

Relationships

Relationships between PST, their distributors and end users must be strong, as these customers have the most definitive needs.
The distributors of PST are positive in most areas of inter-organizational relationship components.

Diagram Outlining PST’s IOR component strength with their Distributors

Beckham & Dolan, 2014

Ultimately, their continued loyalty and face to face encounters with the end user indicates that distributors they certainly collaborate at a level of high interaction, and moreover are advocates of PST K2 tapes. This is important to maintain, as the distributors are ultimately the face of PST to the consumers.

Diagram Outlining PST’s IOR component strength with their End Users

Beckham & Dolan, 2014

On the ladder of inter-organizational relationships, end users would appear in the value added section, and more specifically as clients. This type of relationship is evident from the meetings and joint phone calls with potential clients, assessing their needs and adding value to the product in a personal manner. Currently, all of their IOR components are positive. Fulfilling and maintaining these IOR components is vitally important to PST to guarantee strong customer loyalty, repeat purchase and little to no dissatisfaction.

Company Analysis

Channel and Supply Chain

Using the supply chain model and examining PST’s network relationships, this section reviews PST’s current performance, and compares and contrasts how it reflects on their relationships, networks and delivery outcomes with their suppliers, distributors and end users.

To determine the strength and efficiency of PST’s relationships, the diagram below details the channel tasks PST undergo with each of their business partners.

PST Supply Chain Tasks

Beckham & Dolan, 2014

PST’s selective relationship with their distributors reflects previous efficiency in relationship building. However, since 2009, a 20% lower satisfaction rating has been released by the distributors, suggesting something has changed (Beckham & Dolan, 2014). This can be associated with the fact that their sales force are focusing on K2 tapes only 35% of the time, opposed to a previous 85% in 2009 (Beckham & Dolan, 2014). This lack of time, whilst not yet reflected in their increasing sales, may deter potential customers in the future from purchasing K2, particularly considering the rapid success of Tensile’s “Eco” line. A lack of education to the customers by the trained sales force about K2’s unique superior designs may give the customers no choice but to decide on price alone, instead purchasing the cheaper Tensile brand. Currently PST have somewhat weak relationships with their end users.

Networks

The network style that PST operate under is a distributor network. Their distributors add value both upstream (Providing loyalty which increases sales, which in turn keeps the suppliers in business) and downstream (customer service, initiating joint phone calls).
PST Networking Image

Beckham & Dolan, 2014

Many of these relationships are strong, yet some exchanges between sections of the network could be improved. Whilst information between the sales force and end users is being effectively transferred, there is a lack of time and effort being exhibited. Furthermore, this is affecting PST’s relationship with the end users themselves, restricting the necessary proper information flow for customers to learn about K2’s advantages. PST’s material suppliers do not have evident strong links either, a potential issue that could delay production at the initial stages. If these relationships are not brought up to a high standard, PST’s reputation will disparage regardless of their high quality products.

Recommendations

From the analysis, two main points have become clear. * The end users ultimately are the ones who require the adhesives and thus provide the biggest insight into what product lines should contain. * Most of these operations state they require high quality tape, and therefore a strong network and supply chain to deliver it.

* PST’s biggest weakness arises from a lack of after-sales service, both to the distributors and end users.

It is therefore recommended that PST divide their sales force into groups that service single products. Therefore 100% of the team dedicated to K2 can spend 100% of their time educating current and potential customers about the features of K2 tapes. This will endeavour to sustain their relationships strong with both distributors and customers.

Furthermore, to retain their leading position in high quality products, PST is advised not to release an economy tape line. This has been established by the lack of customers needing an economy tape. Customers swayed by price will be encouraged by the dedicated sales to learn about K2’s unique advantages and cost efficiency versus quality.

Finally, to maintain the high quality of products needed to influence customers, all suppliers and PST must form and sustain strong bonds. This could be achieved by inviting suppliers to education seminars on how their materials are used together to create one very high quality, reputable product.

Conclusion

Peak Sealing Technologies experienced two challenged throughout their product line extension dilemma. Asserting and maintaining their customer base, and sustaining their reputation as leaders in high quality adhesives. To maintain their customer base they were advised to do the following; * Divide their sales force into dedicated teams * Provide higher quality time and effort into educating current and potential customers
To ensure that their reputation also remained at a respectable level, they were advised to * Not release an economy tape * Create even stronger relationships with their suppliers, and their suppliers with each other
These four recommendations will endeavour to ensure a consistent and constantly growing loyal customer base return for straight rebuys of a top quality product.

References

Beckham, H., & Dolan, J. (2014), In a Bind: Peak Sealing Technologies’ Product Line Extension Dilemma, 9-914-533, Boston, MA: Harvard Business School Publishing.

Ellis, N. (2011), Business-to-Business Marketing, Oxford University Press Inc., United States.

Tesa Tape, 2015, Automotive History, http://www.tesatape.com/industry/automotive/about_us/history, [Accessed 04 August 15].