Evan’s initial beliefs were that the residential AC repair market offers the greatest opportunity for the Kunst 1600 and that AC contractors stand to gain the greatest value from the Kunst 1600.
Furthermore, he believes that they can make a convincing argument for the Kunst 1600 even though, most residential AC contractors use from 3 to 6 CFM vacuum pumps for repairs.
Most AC system nozzles and vacuum pump hoses are one-quarter inch in diameter. At that diameter, “resistance” retards the vacuuming process to the point where a 1.6 CFM pump takes about the same length of time to evacuate a system as does a 6 CFM pump.
The most important benefit that the Kunst 1600 provides in all potential market segments is that technicians will not have to change the oil! All vacuum pump manuals recommend that technicians change the oil after each repair job. Each oil change typically takes a quart. At $8 per quart for specialty oil, that can be quite costly on an annual basis. Furthermore, it takes a technician around 30 minutes to change the oil on a 3 CFM pump. Given that the typical AC repair technician is paid a rate of $30 per hour, the labour costs associated with changing oil must be staggering. Changing oil is a messy nuisance for every technician. Each time a repair technician has to clean up this oily mess, he or she uses $.50 worth of a solvent-based scouring soap and $.15 of a specialized cloth-fiber based towel. To protect the environment, most U.S. cities require proper disposal and recycling of all oil-based liquids. The average charge for recycling used oil is around $5 per gallon. The Kunst 1600 is made from injection-molded aluminium. It will not trust like vacuum pumps made of steel. Furthermore, the Kunst 1600 has far fewer internal parts than competitive models. He predicts that the Kunst 1600 will take more physical abuse (e.g., being tossed into trucks and getting rained on) and be far more durable than traditional vacuum pumps. Because it is constructed from aluminium, the Kunst 1600 will weigh 5 to 10 pounds less than competing products. Technicians will appreciate the weight savings. Potential customers will be willing to pay a price premium to obtain a vacuum pump with the Kunst brand name on it.
When the research had been completed, the most important thing that they discovered was that AC and refrigerator repair is an art that technicians practice rather than a science that engineers meticulously execute. Many repair technicians have never completed rigorous training programs and few states certify technicians. Personal opinions, preferences, and „rules of thumb‟ dictate how repair work is completed. The market research certainly hasn’t supported Evan’s initial beliefs, yet there still may be an opportunity for the Kunst 1600.
The Kunst 1600 does not require oil changes as opposed to traditional pumps, which require an oil change after each use, or once a month, thus saving time and money. It takes 1 hour for a Kunst pump to complete a job for Ac repair firms, thus it is not profitable. For light commercial and home repair firms, a Kunst vacuum pump will bring 2 more jobs per week, because by working at lower pressure levels it reduces vacuuming time by 10 minutes. The price of Kunst vacuum pump is 400$, which is twice the price of Air Master competitor, and 150$ more than the price of the pumps made by Pumps Wizard. The resale price for Kunst is 500$.
Value and price elements of Kunst 1600 are:
- The pump doesn’t require oil
- It has the ability to work more efficiently at lower pressure levels, which can reduce vacuuming time
Additional value placeholders that merit consideration:
- Projected lifetime of 6 years
- Has fewer internal parts, thus it takes more physical abuse
- It weights less than other pumps
Customer value model for residential AC:
Residential AC repair has a potential market of 125 000 units per year. The main threat for Kunst on this market is the pumping speed, which is 3 to 6 CFM.
Strengths of Kunst for Ac:
- Doesn’t require oil change
- It weights less
- 6 years lifetime
Weaknesses:
- Pumping speed of 1.6 CFM, compared to 3 CFM (or 6 CFM) that they use
- It is more expensive (400$) than Pump Wizard’s pumps (250$)
Value in use model: The price of the product that would equalize the overall costs and benefits to the user of utilizing the product (rather than the incumbent or other alternative) in the user’s specific circumstances.
125 000 units*250$*5 years = 125 000 units*VIU*6 years
VIU = 208$
For making the job of 125 000 Pump Wizard, AC will need to buy 500 000 Kunst; there is no such market. If we consider that in the value in use analyse we will see that the AC repair firms won’t be willing to pay more than 52$ for a Kunst pump.
Even though Kunst can reduce the operating cost due to its lack of oil, it has a very low pumping speed (1.6), thus residential AC repairs would need 4 Kunst pumps to finish the job in the same time. Buying a Kunst pump would decrease the number of jobs per season and also their profit.
Customer value model for Home Refrigerator repairs:
Home Refrigerator repairs have a market potential of 60 000 units per year. The main threat of Kunst on this market is that nobody has ever heard of Kunst brand.
Strengths:
- Doesn’t require oil
- Lifetime of 6 years
- 1.6 CFM pumping speed
Weaknesses:
- It is heavier than AirMaster pumps (16.5 pounds compared to 10 pounds)
- It is more expensive than AirMaster pumps (400$ compared to 150$)
Value in use model: The price of the product that would equalize the overall costs and benefits to the user of utilizing the product (rather than the incumbent or other alternative) in the user’s specific circumstances.
60 000 units*150$*5 years = 60 000 units*VIU*6 years
VIU = 125$
In order to sell this pump to home refrigerator repairs firms, Kunst will have to sell the pump with 125$. Because the pump doesn’t require oil, firms will reduce some of their costs.
Working with a Kunst pump may reduce the vacuuming time, but the participants were not interested to reducing it.
Customer value model for Light Commercial Refrigerator repairs:
Light commercial refrigerator repairs has a market potential of 40 000 units. The main threat of Kunst on this market is that nobody has ever heard of Kunst brand.
Strengths:
- Doesn’t require oil
- It can work more efficiently than other pumps at lower pressure levels
- Lifetime of 6 years
Weaknesses:
- It is more expensive than AirMaster pumps (400$ compared to 200$)
- It weights more than AirMaster pumps (16.5 compared to 15 pounds)
Value in use model: The price of the product that would equalize the overall costs and benefits to the user of utilizing the product (rather than the incumbent or other alternative) in the user’s specific circumstances.
40 000 units*200$*5 years = 40 000 units*VIU*6 years
VIU = 166$
Kunst ability to work more efficiently at lower pressure levels can reduce light commercial refrigerator firms’ vacuuming time by 10 minutes and thus bring 2 more jobs per week. This will increase the average revenue. Because Kunst doesn’t require oil, light commercial refrigerator firms can also reduce their costs. They won’t have to pay 4$/oil + 0.5$/scouring soap + 0.15$/towels = 4.65$/oil change. Technicians change oil once a month during working hours between jobs and it takes 30 minutes.
Without having to use oil, firms will increase their number of jobs and reduce their costs.
Considering the customer value models for all three market segments, Kunst should put their commercialization efforts in light commercial refrigerator repair segment.
To breakeven with the capability of the main competitor (AirMaster), Kunst will have to decrease their selling price to about 170$. In this market segment Kunst will have to compete a vacuuming speed class very close to their. AirMaster has a vacuuming speed of 1.5 CFM and Kunst has a 1.6 CFM speed.
What makes them special is their ability to work more efficiently at lower pressure levels. With this ability Kunst can increase the number of jobs per week for the light commercial refrigerator firms. Because the Kunst pumps don’t require oil, firms can also reduce their costs and have bigger average revenue.
Furthermore, Kunst will have to have an aggressive and long sustained marketing effort for entering the market segment.
Kunst value preposition, as stated in the conclusion paragraph, is to reduce the firm’s costs and to increase the number of jobs. Hence, this is the most suitable market for them.
