Augat Electronics Inc.
A Case Analysis
Canadian market for Cable TV connectors is expected to grow substantially in the coming years. Given the current product quality and the maturity in Value Added Services provided by the Cable TV companies, the basis for purchasing decisions seems to be changing. Given the current market share that Augat has and situation, it will be of at most importance to penetrate one or more of the multiple service operators (MSOs) that dominate the Canadian market. Augat believes that Snap-N-Seal might be the product that would help Augat reach mainstream status The most significant problems in this case as far as Augat goes is their decision(s) pertaining to a.
Pricing Strategy in Canada – Augat executives has considerable issues on pricing, positioning Snap-N-Seal. b.
Sales and Distribution strategy – decisions regarding what channels to use, partnerships to pursue, penetration strategies to use etc. If Augat had introduced the product in 1988 when the LRC division first conceived it – they would have been a market leader by now (in 1990). But in early 1989, an innovative new company, Raychem became a surprising market leader in the new connector business that was promised to have very good insulation properties for external connectors. So Raychem benefited from a first-mover advantage. Therefore, it was able to gain clout and its sales and market share soared. By launching Snap-N-Seal in Canada the company needs to overcome several problems. Moreover, those MSOs that are already using the EZF connector must be convinced to switch over to the Snap-N-Seal connector and tools. This would involve a considerable Capital Expenditure for the MSOs, the value proposition for end-users (MSOs) should be substantially high for them to replace the existing Raychem tools/connectors (or any other competitors) for Augat’s Snap-N-Seal connector/tool.
Currently for the existing connectors/tools, Augat seem to be playing an under-dog trying to undercut the competition on price i.
Product – connectors, tools used in cable TV service technician portfolio ii.
Price – currently based only on under-cutting the competition iii.
Place – Canadian cable TV operators (MSOs)
Promotion – deals with White Radio
I believe that by tweaking/changing these parameters, Augat executives can come up with a compelling marketing mix – especially pricing and promotion. One other important aspect of the approach should include
Positioning – how well or better could the value proposition be proven or explained to end-users. In other words – how does Augat ‘Frame The Comparison’ for MSOs to make the switch.
Customer Needs – end-users (MSOs) are looking for connectors that would protect the cable against external electrical noise, reduce corrosion/moisture, necessity to replace connectors often and more importantly, reduced service call cost ii.
Competitors – Raychem (primary competitor in the new high-quality connector market) iii.
Company Skills – high-quality product, good relationship with White Radio who in turn understands the approval process of MSOs, perceived pricing advantage compared to the primary competitor in this market iv.
Context – revolutionary connector to be sold to Canadian cable MSOs with restrictions on customers’ CapEx, import duty, high cost of inside sales reps and primarily huge market share of the competition v.
Collaborators – manufacturer (of tools), White Radio
At this point I believe that Augat has to make a lot of decisions in terms of pricing and distribution strategy to get the product to be mainstream.
From a pricing strategy perspective, the natural instinct would be to offer the Snap-N-Seal to be a considerably lower price to MSOs undercutting Raychem’s per connector price of CDN $0.80. By being able to demonstrate the company’s ability to offer higher quality products at a lower...
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