Kunst 1600 Case

Topics: Scroll compressor, Petroleum, Rotary vane pump Pages: 9 (2406 words) Published: May 8, 2012
Question 1: What are the major, quantifiable value and price elements associated with the Kunst 1600 ?

1. Value elements

* Cost savings from not having to change oil because the Kunst 1600 is an oil-free vacuum pump.

* Higher revenues, and hence profits, due to higher productivity of the Kunst 1600 in lower pressure settings. These higher profits are only generated in the light commercial refrigerator repair segments since in these segments, the technicians can complete more jobs with a faster pump (the Kunst 1600) in comparison to the more traditional pumps.

2. Price elements

According to the respondents in the focus groups, the expected lifetime of their current vacuum pumps is around five years. However, wholesale managers stipulate that most repair firms do not keep track of their vacuum pump purchases and overestimate pump lifetime. They also claimed that they tracked customer firm purchases via their electronic point-of-sale systems leading them to conclude that, with reasonable care, the pumps can be used for between two and three years in either setting.

With an expected lifetime of about six years, the Kunst 1600 can be used 2 to 3 times longer than the traditional vacuum pumps. This has a reasonable impact on the average price companies spend on the vacuum pumps since these companies need to buy a traditional vacuum pump 2 to 3 times more frequently than the Kunst 1600.

Question 2: What additional value placeholders, elements not presently quantified, merit consideration in your value model ?

Value placeholders are value elements that we believe are worth something to customers but either are too difficult to obtain data for or are social elements. Also it is important to be as inclusive as possible in these elements since leaving out any, particularly those that make the Kunst 1600 seem less favorable than other (more traditional) vacuum pumps, would render a value model with little credibility.

* The Kunst 1600 is injection-molded which means that there are less working parts in the design. Moreover, the Kunst 1600 is made out of aluminum which makes it more durable since aluminum does not corrode as easily as other metals.

* Concerning the weight, the Kunst 1600 is heavier than the more traditional models used in the Home and Light commercial refrigerators repair segments but this is primarily due to the higher pumping speed of the Kunst 1600. Moreover, the Kunst 1600 is lighter than all the traditional pumps used in the Residential AC repair segments. These differences in the weight of the vacuum pumps may affect the preferences of the technicians working with these pumps.

* Fines from dumping the oil illegally can be high. These are quite difficult to quantify since it is not easy to predict how often the companies would dump their used oil illegally. If this information was available as an average we could calculate the expected cost of dumping the oil illegally with the following formula:

(Individual fine + company fine) * probability of getting caught * amount of oil dumped illegally per year (in gallons)

* Evan expects that the customers are willing to pay a premium for a product with the Kunst brand name on it but in reality, Kunst actually has little to no brand awareness among the potential customers. This could be a serious problem since a brand name can constitute a potential competitive advantage.

Question 3: Construct a customer value model for the Kunst 1600 in the residential AC, home refrigerator and light commercial refrigerator repair market segments.

In building a customer value model for the Kunst 1600 for these segments, it is imperative that we first build the different word equations to reflect the different value and price elements in the model.

1. Cost savings from not having to change oil

We will start with the description of the savings made due to not having to change the oil in the pump. The cost savings are...
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