Commercializing the Kunst 1600 Dry Piston Vacuum Pump

Evan Stone, a senior product manager at Kunst Vacuum Pumps, was excited as he lifted the prototype of a dry
piston vacuum pump out of its shipping carton. The Kunst 1600 Dry Piston Vacuum Pump is a fractional
horsepower, injection-molded aluminum pump, with a pumping speed of 1.6 cubic feet per minute (CFM). Because
it is a compressor, the Kunst 1600 can run longer and cooler than conventional vacuum pumps. In contrast to
conventional pumps, the Kunst 1600 is oil-free. Evan planned to sell the Kunst 1600 for $400 to the wholesalers,
with a suggested resale price of $500. Evan had high hopes for this pump; yet due to the tight financial situation of
the company, his marketing budget was very limited, and he needed a quick success story.
Evan had made a list of benefits associated with the Kunst 1600:
The most important benefit that the Kunst 1600 provides is that technicians will not have to change the oil! All
vacuum pump manuals recommend that technicians change the oil after each repair job. Yet, repair technicians
saw changing the oil as a dirty little job and claimed that changing oil that frequently is not necessary. Each
oil change typically takes a quarter of a gallon. At $8 per quarter of a gallon 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 technician is paid a rate of $30 per hour, the labor 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 aluminum. It wont rust like vacuum pumps made of steel.
Furthermore, the Kunst 1600 has far fewer internal parts than competitive models. It will therefore take more
physical abuse (e.g., being tossed into trucks and getting rained on) and be far more durable than traditional
vacuum pumps. Our research engineers tell me that it should last at least 6 years in the field.
Because it is constructed from aluminum, the Kunst 1600 will weigh 5 to 10 pounds less than competing
products.
Evan had also investigated two high potential market segments in a market research study and through focus
groups: residential AC (air-conditioning) repair and light commercial refrigerator repair. In both segments,
technicians used vacuum pumps to dehydrate a refrigerant system during repairs.
Potential market segment #1: Residential AC Repair
The size of the AC repair firms participating in the research study ranged from single owner-operators who worked
out of the backs of their pick-up or panel trucks to operations that employed 25 technicians and maintain 15 trucks
in the field. All residential repair contractors owned vacuum pumps between 3 and 6 CFM in capacity. They
reported that 3 CFM vacuum pumps sell for around $250 while 6 CFM pumps cost about $320. Participants
estimated that a pump typically lasts 5 years. Participants report that AC repair work is highly seasonal, lasting for
about 20 weeks between late April and early September. The average technician changed the oil once a week during
that season. The typical repair technician completes 10 jobs a day, 5 days a week, for an average of 1000 jobs per
season. The average revenue per job is $350 with a net profit before taxes of $70. The typical job takes about an
hour to complete. Because technicians had to carry the pumps to unusual locations at job sites, they felt that the
lighter the pump the better. They thought it was great that the aluminum body of the Kunst 1600 made it lighter than
competitive models, however, they wondered if the aluminum would make it more vulnerable to breakage. Focus
group interviews confirmed that a vacuum pump is used for around 30 minutes in the typical repair job. Technicians

indicated that reducing vacuuming time will not reduce total job time, since they perform other job-related task
during vacuuming time.
Importantly, the fact that the Kunst 1600 did not require oil and oil changes caught and sustained both owner and
technician interest. That is, until either the focus group moderator or Evan informed them that the Kunst 1600 had a
1.6 CFM rating. Every participant stated that the Kunst 1600 was too small to handle residential AC repair jobs.
The typical technician commented, It would take me several hours to complete a job with a 1.6 CFM pump.
When informed that the quarter inch nozzle on most AC systems would create resistance and equate the time it took
a 1.6 CFM and a 6 CFM pump to evacuate a system, none of the focus group participants were convinced. In the
words of one contractor, This runs counter to my 25 years of experience.
Potential market segment #2: Light Commercial Refrigerator Repair
Light commercial work might entail fixing a refrigerated dessert carousel at a restaurant or a refrigerated display
case at a bakery or ice cream shop. Each job brings in an average of $200 in revenue, with a net profit before taxes
of $30. Light commercial work occurs throughout the year and technicians do about 5 jobs per day; however,
emergency repairs skyrocket during the summer and there are often more jobs available than a given repair firm can
handle. A light commercial refrigerator-repair technician typically uses a 1.5 CFM vacuum pump for 30 minutes.
Repair firm owners consider this to be idle time as there are fewer tasks to perform in refrigerator repairs and
technicians must complete them sequentially. In this application, Evans side-by-side tests revealed an unexpected
finding. The Kunst 1600s ability to work more efficiently at lower pressure levels enabled technicians to reduce
vacuuming time by 10 minutes on the typical job. During the 12 hectic weeks of summer, technicians would be able
to convert the time saved into revenue by completing at least two more jobs per week. Light commercial
refrigerator-repair technicians change the oil on their vacuum pumps typically once a month. As most of these firms
are owner-operated out of the back of a pick-up or panel truck, they find changing oil to be an annoyance.
Respondents named AirMaster as the number one brand of 1 to 1.5 CFM pumps. An AirMaster 1.5 CFM pump
costs $200 and owners estimated an average lifetime of 5 years.
Resolving an Inconsistency in the Findings
Evan was perplexed by one major inconsistency in market research findings. If respondent predictions of vacuum
pump lifetimes were correct, annual sales of vacuum pumps would never be so high. To resolve this discrepancy,
Evan interviewed 9 managers from HVAC and AR wholesalers that market vacuum pumps. According to
wholesaler managers, most repair firms do not keep track of their vacuum pump purchases and overestimate pump
lifetime. On the other hand, wholesaler managers claimed that they meticulously tracked customer firm purchases
via their electronic point-of-sale systems. They stated that with reasonable care and frequent oil changes a 3-6
CFM vacuum pump used in residential AC repair work might last an average of 2.5 years. A 1.5 CFM vacuum
pump employed in light commercial refrigerator repairs lasts about 2 years. However, as one wholesaler manager
sagely observed, Many repair technicians do not take good care of their pumps and change the oil as often as they
should. But hey, thats fine with me I get to sell more pumps!
1. Construct a customer value model for the Kunst 1600 in the residential AC and light commercial refrigerator
repair market segments (please construct a separate value model for each segment). Please use word equations
to illustrate your calculations and clarify the assumptions you are making. According to Evans experience, the
two target market segments did not like complicated calculations. Therefore, calculating NPV is not necessary,
you can calculate with average costs per year. Please assume that technicians are paid by hour, so labor time
savings directly translate into cost savings.
2. Using your value model, select a target market segment(s) for commercialization efforts. Justify your choice.
3. Write a value proposition for the Kunst 1600 for the chosen target market(s). Please justify your choice!