1. Why is Soren Chemical struggling to sell Coracle? In particular, please discuss how the channel structure affects the sales of Coracle. Soren Chemical is new to developing a consumer brand (it partners with formulators to use private-label branding for its Kailan MW line). Therefore, they are relatively inexperienced with marketing consumer-oriented brands whereby they have to handle directly with wholesalers and also market to retailers, pool service professionals and consumers.
This inexperience might have caused miscommunication between channels as seen when pool service professionals and specialty retailers had made inquires about Coracle but only 30% recalled receiving the Coracle material. Also 70% of them stated that Coracle had not been offered by their distributors. Also, Soren is new to the residential pool market and might not fully understand the consumer and thus unsure how to communicate Coracle’s benefits to the consumer. Furthermore, the extensive channel structure that Soren has to go through might have hindered Soren’s efforts to communicate Coracle’s actual value to the consumers.
We see that Coracle’s unit cost is more expensive than its competitors, but its annual cost is much cheaper, still Coracle’s consumers do not realize the value of Coracle relative to other clarifiers (only 25% of the consumers understand clarifiers). Soren has to go through a distributor and retailer who demand a 30% and 15% gross margin, and this exacerbates Soren’s price from $14. 88 to a retail price of $25 which consumers finds expensive. There is vertical channel conflict because of goal incompatibility. Soren want to increase market share through a low-price policy but distributors and retailers prefer to work with high margins.
They understand the low annual cost of Coracle (compared to consumers who look at the unit price) and might not want to stock up on Coracle given the low gross margin. 2. What is Coracle really worth to end-users? To answer this question, calculate the annual EVC of Coracle using ClearBlu’s Annual cost as the reference value. To calculate the annual EVC, we need to take reference value plus differentiation value. The reference value is the cost of substitute, which is ClearBlu’s annual cost of $56. 25. The differentiation value includes Coracle’s increase in chemical savings.
Coracle reduces the need for additional chlorine, shock treatments and enzymes, thus reducing pool owners’ annual chemical cost by 20% to 30% (average of 25%). ClearBlu reduces annual chemical cost by 15%, thus the increase in savings by Coracle is 10% (25%- 15%). The annual chemical cost (excluding clarifiers) is $300. Calculation of Coracle’s annual EVC: $56. 25+ 0. 1x $300= $86. 25. 3. Should Soren Chemical adopt a “push” or a “pull” strategy? Why? Coracle, being a new brand should first adopt a push strategy since there is low brand loyalty and low brand awareness.
This will generate exposure and encourage distributors to stock up on Coracle. Only 25% of consumers understand and use clarifiers regularly. This shows that there is low involvement in purchasing decision and perhaps an impulse item as a residential clarifier. And thus a push strategy is a good way to promote the product. However, since product benefits are not well understood by consumers, Soren can also adopt a pull strategy in communicating the actual value of Coracle, and let consumers know about the annual EVC rather than unit cost.
It is hard to promote Coracle to the distributors since they understand that low annual cost of Coracle comes with low profit margin. Furthermore, since Soren Chemical wants to build some recognition with the Coracle name to introduce more product lines, it is important for Soren to use a pull strategy through advertisements to raise brand awareness and build on brand loyalty in the long run. Therefore, Soren should adopt a balance of both push and pull strategies.