What is the addressable market size for Coracle? Is your first year goal reasonable?

* Average Price including competitors * 2,25 Million 26,4$ Market size Number of swimming pools (taking into account that just 25% of consumers use clarifiers Millions (9 regularly Exhibit 3) 2,25 0,25) Average retail Price * Retailer gross margin Retailer gross profit Distributor price Distributor gross margin Distributor gross profit Soren Chemical price
2 1

44,30$ 15% 6,6$ 37,7$ 30% 11,3$ 26,4$

Total Market * 59,4 Million $ First Year Goal 1,5 Million $ First Year Market Share Goal 2,5 % The addressable market is 59,4M$. The first year goal for Coracle is 1,5M$, which represents a 2,5% of market share. This is reasonable considering that competitors have between 10%-20% market share. 2.- Why is Soren Chemical struggling to sell Coracle? How would you describe the selling process for Kaylan MW vs. Coracle? Retailers might not be interested in selling Coracle as they loss profits due to the benefits that Coracle produces to the end consumer (20%-30% reduction on other chemical costs). Previous profits for retailers: Cost Clarifiers (average) Other Chemicals TOTAL With Coracle: Cost Coracle Other Chemicals*
1

Margin 15% 20%

Profit 6,64 $ 60,00 $ 66,64 $

44,30 $ 300,00 $ 344,30 $

Margin 15% 20%

Profit 5,86 $ 45,00 $

39,06 $ 225,00 $

TOTAL 264,06 $ 50,86 $ 1 * (25% reduction on chemicals). For each client retailers lose revenues of about 16$ a year if they sell Coracle, due to reduced consumption of other products. The channel is discouraged to sell our product. Different situation for the product Kaylan MW. In this case, formulators use the clarifier in large recreational water parks and buy directly to the chemical manufacturer thus savings on products increase their (formulators) profits. 3.) What price should Soren Chemical set for Coracle? The price should be lower than the customers willingness to pay, but must be over costSoren needs to determine the optimal price (at perceived value) Things to remember about PRICE: -The market sets the price -Does it capture value? -What signal do you want to send to your competitors? -What are the barriers of entry? -What are the incentives for the distribution channels? -Can be used as a tool for positioning OPT 1 Begin @ cost = $9.67 Add in Sorens margin = $14.88 (35%) NOTE: Competitors enter @ $15.00ClearBlu & Purity Add in retailer/service professional margin (15%) = $17.11- consider going up to $17.99 (gives retailers 20%-- incentive to stock Coracle over its competitors) - also puts it in closer proximity to competitors on the shelf IS IT POSSIBLE TO BYPASS THE WHOLESALERS? If no, consider reducing Sorens margin: OPT 2 Begin @ cost = $9.67 Add in Sorens margin (reduce to 30%) = $12.57 NOTE: Competitors enter @ $15.00ClearBlu & Purity Add in distributors margin (30%) = $16.34 Add in retailer/service professional margin (15%) = $18.79- consider increasing to $19.99 (again, consider giving retailers the additional incentive for better shelf space) 4.) What action plan do you recommend for Coracle? The main issue is that Coracles end-consumers may not see the additional value of purchasing the product. As 80% of pool owners clean their own pools, Coracle should be sold primarily in mass retailers and pool specialty retailers. Perhaps for the rest of the high sales season, Soren should consider a promotional booth in some of the largest mass retail stores and outdoor superstore trade shows in the country, educating consumers on the product. They could even perform demonstrations. This would at least to create some buzz about Coracle. Ideally, express the benefits of avoiding shock treatments to the pool- customers shouldnt have to wait at least an hour to use their pool after cleaning it. If financially possible, promotions should be offered to pool service professionals and specialty retailers- send them free samples to try out when they provide pool-cleaning services. Build up lead-use customers.

Soren Chemicals What is the addressable market size for Coracle? Is the first year goal of $1.5 million sales reasonable? (10 points) Why is Soren struggling to sell Coracle? (10 points) What is the highest price Soren can set for Coracle? (7 points) What action plan do you recommend for Coracle? (13 points) Q1. Coracle is one of the clarifiers developed and produced by Soren Chemicals targeting residential pools which have of the case in page 7, the frequency of usage of residential pools and residential pool chemicals will be largely increased from May. Also as introduced by the Table A in the page 5, the average months of pool usage are 5 months, which makes great sense because normally people will swim in summer time from May to September, and less people will swim in cold whether from October to April. According to the Exhibit 3 shown in the case, there is only 25% of consumers who understand and use clarifiers regularly, so there are around 2,250,000 (=9,000,000*25%) residential pools which use clarifiers regularly every year. Thus the maximum reasonable marketing revenue for residential pools is $52,309,152 (=39.06*2,250,000*25%*14.88/25) if we calculate based on the manufacturer price of Coracle. Currently, Coracle has three leading competitors for residential pool-use clarifiers: Keystone Chemical, Kymera, and Jacson Laboratories, and each of the competitors has a 15% to 20% share of the residential pool clarifier market. So, the remained reasonable and addressable market share for Coracle is 40% to 55% maximumly if we do not consider the competition and market share of other smaller competitors. Considering the facts like distributors typically carried tens of the thousands of products from many suppliers, including the regional formulators that sold Kailan MW, at least two of the formulators sold Kailan MW with a diluted version as a private label clarifier, and the competition from leading competitors and small competitors, we suggest that 15% should be market share of residential pools market for which Coracle needs to struggle and address. Therefore the addressable market size for Coracle should be $7,846,373 based on the 15% of market share. Based on the above analysis, although it seems that the first year goal of $1.5 million sales is quite reasonable if we decide the addressable market size $7,846,373 by 5 (it means Soren Chemical generates their sales revenue mainly in 5 months from May to September for Coracle), which is around $1.57 million and higher than the target, but it is not the case, and it is not reasonable if the marketing team study it carefully. The $1.5 million sales goal is too aggressive for the first year for Coracle. Soren Chemical launched Coracle only in September 2006 which is the last busy and most suitable month for swimming. The sales team for Coracle did not consider following effects which will impact the sales revenue extremely for the first year: 1. Consumers, wholesale distributors, pool service professionals, pool specialty retailers, mass retailers need to take time to know the new Coracle brand and the value they can get from Coracle if they buy it.. 2. The stocks in the consumers sides, pool service professionals sides, pool specialty retailers sides, and mass retailers sides will also impact the sales of Coracle, especially in the last busy maintenance month of a year. Especially till the end of September, if the consumers decide not to use the pool until next May, they may not maintain the pools because in the beginning of next May, they need to clean again for the pools for swimming after a long time of non-use. 3. Soren Chemical did not position the good product Coracle in the most appropriate position to its customers. Consumer market of residential pools emphasized more on aesthetics and perceived cleanliness. This is a risk for Soren Chemical to bring Coracle to the market without a suitable emphasis focusing on what the consumers concern more. 4. As indicated in the case, 30% of the respondents recalled receiving the Coracle materials that Soren Chemical had sent in response to their inquiries. Furthermore, 70% of the respondents stated that Coracle had not been offered by their distributors. All these suggest that Coracles sales team did not do sufficient work before they bring the Coracle clarifier to the market and this also weakened their sales revenue. 5. There is unclear gap between Kailan MW and Coracle even though Kailan MW targets at the segment of commercial pool and water parks, while Coracle targets at the segment of residential pools. There are still at least two formulators who dilute Kailan MW with a private label and sell to distributors for consumer market and this will compete with Coracle clarifier.