1. What are the major, quantifiable value and price elements associated with the Kunst 1600?
Value Elements - The total cost involved in oil changing and messiness is reduced
Price Element - Increased pump durability -- The Kunst 1600 lasts 2 to 3 times longer than the incumbents in most segments. This means that repair firms will have to buy more conventional pumps than Kunst 1600s. This impacts the price a repair firm has to pay for conventional pumps (i.e., 2 to 3 times greater) and not the number of jobs it can complete.
2. What additional value placeholders merit consideration in your value model?
• Weight differential – The Kunst 1600 is lighter than pumps currently used ...view middle of the document...
Word equations benefit customer managers by building up in an easily understandable way exactly how an estimate for each value element was obtained.
Exhibit 2 presents the summary results for the customer value models for the residential air conditioning (AC), home refrigerator repair, and light commercial refrigeration repair market segments. In order to equate the different life times of the competing pumps, the model is presented on a per-pump, per-year basis. Finally, Exhibit 2 contains value placeholders, which are value elements that are not presently expressed in monetary terms. Inclusion of value placeholders conveys that those elements are worth something to the customer, and leaves open the possibility that some specific amount might be ascertained in the future.
Deriving it from “fundamental value equation”,
Fundamental Value Equation: Vk - Pk Vi - Pi
where k = Kunst 1600 and i = incumbent brand
Total Value-in-Useki = (Vk - Vi ) - (Pk - Pi )
4. Using your value model, select a target market segment(s) for commercialization efforts. Justify your choice.
Of the four segments, the one offering the greatest potential is a light commercial refrigerator repair. This is the only segment where all three value/price elements (incremental profit, cost savings from oil changes, and durability) come into play for the Kunst 1600. The fact that the Kunst 1600 enables firms to do more jobs per week is the pivotal factor in that owners and technicians trivialize changing the oil and overestimate the lifetimes of conventional pumps.
The value-in-use per year (i.e., $943.97) and value created per year ($927.30) are significant and far greater than that created in the other three segments.
The incentive to buy the Kunst 1600 in this segment is significant (i.e., around $844 per year).
The Kunst 1600 reduces repair job time by 10 minutes and increases the number of job possible by 2 per week during the summer months.
The Kunst 1600 eliminates the hassle of oil changes for these largely independent operators.
There is no likelihood of fines due to illegal dumping of oil.
The competition will probably not be as strong in this segment as it will in other segments, namely residential AC repairs.
5. Write a value proposition for the Kunst 1600 for the target market(s).
“The faster draw-down performance of the Kunst 1600 enables your firm to complete more jobs in the busy season and earn more, while eliminating the oil change mess and hassle.”
Word Equations for Kunst 1600 Value Elements
Cost savings per oil change = Oil price + Labor cost + Clean-up supplies + Oil disposal cost
Labor cost = Hourly rate of individual changing oil x Hours of time required per change
Clean-up supplies = monetary amount of scouring soap used + price of cloth towel
Oil disposal cost = recycling charge per gallon of oil x number of gallons recycled
For Residential AC...