KONE The MonoSpace Launch in Germany Case Solution

2. KONE has targeted MonoSpace directly at Europe’s largest new-equipment market segment: low-rise residential elevators. Put yourself in Hätalä’s shoes and develop a detailed marketing plan for launching the MonoSpace in Germany. Set a price for the MonoSpace (to facilitate comparison with prices of existing products as given at the bottom of case page 4, price a low-rise, 4-floor elevator) and specify clearly how it is to be positioned relative to the current product line (PH, PT, PU, or PS). Based on the pricing and positioning decisions, propose a marketing and sales effort.

The pricing should be greater than the hydraulic and less than the geared traction. The pricing should be 10% greater than the hydraulic. The customers would be convinced to pay more money for additional technology. The marketing should emphasize the costs saved on the elimination of the machine room. This would balance the higher price charged for the monospace compared to the hydraulic. It is stated that the machine rooms cost about 25% of the cost of the elevator. The increase in 10% and no expense on the machine rooms is an offering that should be promoted. This pricing would cannibalize the sales of the other product lines offered. However, the difference in the profits lost in the other product’s sales can be covered by the sales of Monospace.

Also, if the pricing is such that it does not cannibalize the other offerings, the demand for these would decline eventually. The reason is that the safety hazards and the maintenance costs would be greater for older technology, making its demand less. The servicing should be a part of positioning. Therefore, marketing the servicing offering would be a value-addition to the company. The sales approach should be outbound rather than inbound. Both passive and active sale effort should be coupled with effective marketing campaigns to create a pull factor for monospace as well as a further push to increase the sales, therefore, profitability for the company.

3. How important is this product launch for KONE? What are the implications of the success or failure of the Monospace launch?

The Monospace launch is very crucial for KONE. Monospace will act as a differentiated product in the market. It will add value to the company’s offerings. The competition is not on price but innovation. This new product consumes only half the space compared to a regular elevator, and the mandatory of a machine room is removed. Also, it does not require hydraulic oils.

Furthermore, the profits for the company had declined in the previous periods from 6.5% to 6%. After-tax, the remaining profits had come down to 0%. These figures show that the company needed technological advancements in its offerings to increase profits. Other than that, to grow, the company requires capturing market share. With monospace, KONE aims to cater to a new segment.

The implications of success are that the product would give KONE an advantage of an early mover in the market for energy-saving elevators. Also, the product has a greater margin that would allow KONE to profit more from each unit sold. It will enable KONE to capture a significant share of the market.

If the product fails, the capital invested will account for a huge loss. The reliability for KONE would decrease if the product fails and the brand image will be distorted. The negative perception if the product fails would have to be compensated.

4. What can be learned from the test market and market launches in the other three countries (Netherlands, France, and the UK)? How does the German market (and KONE’s position in and approach to it) differ from the other markets? How do you expect competitors to react to your launch plan? Does it depend upon the price you set for the Monospace? In what way? How do you plan to respond to competitor reactions?

The test market and market launches’ results show that the major influential group is the energy suppliers who should be targeted. Other target audiences would be architects and construction and general contractors. The communication is most effective in print and electronic media. Personal meetings can also be a communications strategy. Other than that, focusing on competitor strategies is crucial for success.

In Germany, the market for elevators is saturated. Also, the decline in the construction industry has reduced the demand for elevator gear by 15%. Also, market saturation has caused the customers to be price sensitive. The customers also demand services, efficiency, and quality in the products. The skimming strategy will not be successful in the German market. Also, property builders use the bidding mechanism to ensure that they get the best price. Finally, the government does not support the elevator industry through subsidization.

The competitor reaction depends on the pricing that KONE sets for monospace. The reason is that the market is price competitive as well as quality competitive. The other competitors might react by offering lower prices than that currently offered. So, in order to counter that reaction, Monospace should be marketed on its benefits since the German market also places the decision on quality and efficiency apart from pricing. The pricing strategy should not be skimming pricing but should match the competitor’s pricing since Germany is a competitive market.

5. Where does the MonoSpace fit price- and performance-wise relative to KONE’s and its competitors’ current product lines? What are the short-term and long-term implications of your approach?

The first approach to pricing is that monospace priced about the competitors because of the market’s price sensitivity. The second approach to pricing is to keep the prices at a slightly higher level and not focus on capturing market shares. However, this approach would not be sustainable for the long term because the other competitors might launch similar versions of monospace offering low prices. Therefore, gaining market share should be the strategy for long-term benefits.

The new product offering would be priced at a level slightly lower to the geared traction elevators that are classified as expensive. The savings from cost saving on not building a machine room would be a motivation for the construction companies to purchase Monospace. Other factors for the contractors to opt for monospace are modern technology and lower installation time compared to other elevators. Also, the pricing would not be based on the market share acquired by the company. Since the market is price-sensitive, increasing the price would lead to the monospace losing its competitiveness.

Monospace would be advertised as a new system whereas the features will be that of low-rise elevators. The advantages of the machine room elimination would be emphasized along with reliability and feasibility. The new technology should be marketed because the market is saturated and places emphasis on quality. The savings should also be emphasized which would further encourage buying behavior.