SYMBIOSIS INSTITUTE OF BUSINESS

MANAGEMENT
HYDERABAD – 509 217

“WAC on Kone”

Academic Year: 2018-20

For the course of ‘B2B Marketing’

Submitted to: Dr. Ramkrishna Dikkatwar

Submitted by: Mihir Labh

PRN-18021141121
MARKETING
MBA II Year
1) Put yourself into Hatala's shoes and prepare marketing plan. (Pricing, positioning,
marketing efforts, sales efforts). Justify your recommendations and spend with anticipated
sales and contributions.
MARKETING OBJECTIVES
• Successfully enter the German market.
• Develop an integrated marketing approach by using the right pricing strategy, modernised
design of the product and strategic differentiation strategies.
FINANCIAL OBJECTIVES
• Increase revenues of the V1 business of KONE
• Assure the steady growth of the V2 business of KONE
2.3 TARGET MARKETS

POSITIONING AND STRATEGY

KONE MonoSpace will be positioned to demonstrate the key benefits of the EcoDisc, which
include energy efficiency, small modernized motor, smaller fuse, oil-free, ultra lightweight,
fast speed, and no more need for a machine room. With no more machine room required,
space is freed to property owners and developers which enables an increase in revenue
generating space in buildings. It will also be positioned as a low-priced elevator with modern
designs that come up with reliable high-performance services.
We will position the product and service mix to steal the market share of the mid-market
players and the small local companies.
STRATEGIC DIFFERENTIATION SERVICE STRATEGY

Redesign processes and redefine customer roles to simplify service encounters. Servicing
elevators for clients is a very substantial part of KONE’s business. It serves as the lifeblood of
its revenues and still remains as their most profitable business segment. In this strategy, we
encourage the company to adopt a service program that will incorporate the suggestions and
recommendations of clients in enhancing the service quality of the firm. Customer
empowerment or increased customer participation is they key to consumer satisfaction.
Moreover, consumers in the elevator business rely heavily on word of mouth than advertising
which diminishes the risk of purchase for new customers.
Set a better match in supply and demand through
On the demand side:
1. Differential Pricing - Price the products low enough to break the barriers to entry and
steal market share from mid-market players and small companies.
2. Complementary Service - Provide an outstanding service to clients with highly trained
employees to exceed customer expectation.
On the supply side:
1. Part-time employees - Hire part-time employees to do sales to steal market share from
mid-market players and small companies.
2. Increase consumer participation - Create a service mix to empower customers in
customising and managing services.
Service Marketing Excellence
1. External Marketing - KONE should describe the normal work of preparing, pricing,
distributing, and promoting the service to customers.
2. Internal Marketing - KONE should invest in training and motivating employees to serve
customers well.
3. Interactive Marketing - KONE should market the employees’ skills in serving the client.
MARKETING MIX
Product
The MonoSpace is a new, beautifully designed and revolutionary elevator system employing
the KONE developed elevator machine EcoDisc. It is a thin, lightweight magnet which
eliminates the need for bulky and expensive components. It has a controlled speed commonly
used by modern high-speed elevators, providing a more comfortable ride than hydraulic and
geared elevators. The EcoDisc fits between elevator guide rails and the elevator shaft wall. By
placing the lift system entirely in the elevator shaft, the need for a machine room is
eliminated.
Key Benefits
- No machine room needed, due to EcoDisc technology
- Modernized design
- Extremely energy-efficient product, consuming half of the energy consumed by
geared traction elevators and one-third of the energy consumed by hydraulic elevators
- Savings in wiring and fuses, less wiring and fuses needs
- No need for oil, eliminating fire hazard and environmental hazards
- 190-hour installation period, 60 hours less than traditional elevators- Low-rise
elevator, 8-13-person elevator

Price
MonoSpace will be priced at an attractive price slightly below the more expensive geared
traction (PS and PU) elevators currently offered. This will allow the product to be within reach
of the budget of property developers and contractors. This strategy keeps in mind the cost
sensitivity of the contractors in the bidding process with property developers, placing an
elevator with less space requirements, modern technology, and shorter installation time
requirements at a slightly higher price to be easily integrated into successful contractor bids.
Construction in the rapidly growing in German low-rise construction market is key to an
attractively priced product relative to KONE substitutes. To keep the KONE at a stable sales
price and to maintain the product image in this market, MonoSpace will not be priced
differently depending on market share acquired. If a higher price point was used in the
market, including the MonoSpace on contractor bids could increase the price of those bids
enough to make them no longer competitive. This could lead to contractors dropping the
MonoSpace from bids and including a cheaper elevator in order to become competitive again.
Place/People
The German residential construction market will be the primary focus of MonoSpace
marketing efforts, as it is the main source of revenue for KONE and the growing segment in
the German construction market. Purchase decision-makers in this market are contractors,
architects, and property developers. Low-rise construction is Germany’s fastest growing
construction market. Being a low-rise (12 floors or less), the benefits of the MonoSpace in
low-rise residential buildings market
Promotion
MonoSpace will be promoted to the three main customer segments (contractors separated
into small and large contractors) and promotional material will be as follows:
Launch events will be held providing breakfast and a presentation of the MonoSpace to
provide key the key benefits and information of the product to small contractors, who
dominate the elevator purchase decision. This will create a pull effect of the product for a
major decision maker in elevator purchases.
Direct mail advertisements highlighting the key benefits of the MonoSpace and the
revolutionary EcoDisc.

Press Kits designed by KONE will be supplied with MonoSpace specs disks to enable
integration in the contractor and architect design process, along with high value information
on cost comparisons, specs, building and planning guides, press releases, and a product
presentation and technical presentation.
Invitational mailings for one-on-one meetings will be marketed to to demonstrate the
benefits of the MonoSpace and the differences compared to hydraulic and geared traction
lifts. Trade Press and Journals in construction and architectural publications once a month will
be employed to create a pull of demand from key decision makers in the elevator purchasing
process. Learning from the success of the MonoSpace promotional strategy in the
Netherlands, the MonoSpace will be promoted using a very similar method. Targeting the
influential decision makers directly through large launch events, direct mail, press kits,
invitational mailings.

Customer Launch Event Direct Mail Press Kits Invitational Trade Press
Segment Advertisement Mailings and Journals

Architects X X X X X

Small X X X X
Contractors

Big Four X X X X
Contractors

Property X
Developers
2) How important is this launch for company? What are the implications of success / failure
of MonoSpace to company?
This launch will more or less decide their future and set their precedent in the market brand
wise. Whereas if we look at financial front this a very important opportunity to improve the
declining financial situation of the company. A successful launch will validate their research
and development efforts and may lead them to make them market leaders as their new
product solves almost all the existing problems with elevators pertaining to regulations.
Certainly, it would not be possible for competitors to come up with machine-room-less or
similar technologies in few quarters, i do believe by this time KONE Aufzug would receive
substantial market share in German market. As KONE engineers are working on further
development & enhancement of EcoDisk technologies, it would add extra edge in KONE’s
product line and revenue.

3) What can be learned from test markets & launches in other three countries? How does
German markets differ from other market? What are the implications of transferring
experiences from other markets to German market?
Regulations are very different and are driving the demand to a large extent. There was initial
success Netherlands, France and the United Kingdom.
Netherlands regulatory authorities being, relatively progressive.
For Italy is was most difficult as it was part of the constitution that what codes had been
written for elevator.
The long rapid constant growth of German construction industry gave a boost in the elevator
market yielded the growth rate in elevator sales from 8000 units to 15000 units from 1988 to
1995. However, the growth rate is ended up in 1995 with a projected shrink of elevator
market by 15% by the year of 2000. Furthermore, the price of new elevator fell between 5%
and 7% in 1994 and 1995. The German elevator market is dominated by residential
construction with 74% market share which is expected not to change significantly in following
five years. The low-rise residential elevator is mainly occupied by the hydraulic drives’
elevator with approximately 60% market share and rest of the market is captured by gearless
or geared traction elevators including expensive PU types.
The German elevators market is captured by six major companies including Schindler, Otis,
Thyssen, KONE, Haushahn, Schmit & Sohn and others and their market share of new
equipment sales in 1995 were 17.7%, 13.8%, 15.4%, 8.5%, 6.5%,5.4% & 32.4% respectively. It
is obvious that KONE is not the market leader in Germany, Schindler, Otis & Thysseen are top
three performers with highest market share in Germany. However, Otis and Schindler
reported loses in 1995, further Schindler alternative growth plan helped them to climb the
top position.
With 8.5% market share KONE is way behind from the top three companies who had double
figure market share. Furthermore, the mid-size players and the cowboys (small local
companies) wiped out the market share from KONE and others. By considering the entire
situation it seems German elevator market is not favourable for the elevators manufacture in
terms of profitability as well as market growth. However, I do believe KONE’s MonoSpace
machine-room less elevator could shake up the German elevator industry with its features,
and would help KONE Aufzug to swipe the market share from its competitors.

4) How do you expect competitors to react to your launch plan (Answer to Q. 1)? How you
will manage competitor's retaliation?
There are five other major players in the German elevator market, approximately 30 mid-size
players and the so-called cowboys. KONE is the world’s third largest elevator company behind
Otis and Schindler. (with a market share of 8.2% (units) 8.5% (value)).
With the abrupt construction boom in Germany competition has become more aggressive.
Due to the fall in prices, many of the mid-size players have now moved their focus from new
elevator equipment towards service. Schindler is now focusing on gaining share and become
a clear market leader in hydraulic elevators and Otis has lost market share in the elevator
business.
Reacting to our Launch plan it is likely, that Schindler will use an aggressive marketing strategy
as they have used it before when entering the Asia and Eastern Europe. Otis will most likely
focus on a growth strategy in order to gain its lost market share back.
KONE should not go into a price war with these major market leaders, but should focus on
differentiating the MonoSpace as an environment-friendly and modernised product. They
should use a low-priced strategy in order to keep up with the competition, but without going
into a price war.
5) Where does Monospace fit in terms of price and performance wise in relation to Kone's
products and competitor’s product? or Does potentially change anything? Do you foresee
any long run as well as short term implication to your proposal?
Pricing for the MonoSpace in German would be tricky by considering the acute competition,
fell down of price of existing product from 5% to 7% in recent years as well as the possible
cannibalization rate of existing low-rise elevators sales. Although KONE’s managers from
Brussels headquarters suggested that the MonoSpace be priced above existing price if KONE
held less than 15% market share and in line with the existing price level if KONE.
As the target customers are low-rise elevators buyers who mainly buy the hydraulic elevators,
furthermore, most of the case the purchase decision makers are contractors and Architects
who are more concerned about the upfront cost rather than long term cost benefits or savings
from fuel as well as maintenance, therefore I would recommend to keep the price as close as
hydraulic elevator price. However, I would recommend to add 10% more on the hydraulic
price. Customers will be willing to pay additional 10% for the MonoSpace as they would save
money directly from the machine room construction cost. This pricing would be appealing to
contractors, architects as well as property developers. Generally, the total elevator cost
includes, half of the new equipment cost and half constructions of the shaft and machine
room and installation cost. Approximately, machine room cost for hydraulic drive elevator is
accounted for 25% or less of the total elevator cost. So, the machine-room cost might be 10%
to15% of the total new equipment cost. From this permutation, I would recommend added
10% more on hydraulic elevator price to come up with MonoSpace pricing.

6) What key weaknesses in Kone's current capabilities need to be managed to increase

chances of MonoSpace success?

 Each hydraulic elevator needed 200+ litres of oil that some elevator consultants
considered to be potential fire or environmental hazard.

 The appendage-like shape of machine rooms, an inevitable component of elevator

construction, made them difficult and costly to integrate into many buildings.

Additionally, on financial front

 KONE’S operating income for the first eight months of 1996 was 6.0% of turnover,
which compared with 6.7% for the same period in 1995.
Report also projected that, absent significant changes, after-tax income for 1996 would be
zero and worsen in future.