Question 3

In the business of recycling diapers

With diapers being produced at a rate of roughly 1,000 a minute in a typical factory, there are inevitably some that don't meet the quality-control standard to be packaged and sold. The industry's average rate of these sub-par products is at around 2 to 2.5 per cent, which means that 20 to 25 diapers are being scrapped every minute in the factory.

There are about 1,200 diaper-making machines in operation across the world, therefore up to 30,000 diapers are being discarded every minute - with most of it going into landfills. These numbers bothered Martin Scaife, chairman and chief technology officer of Diaper Recycling Technology, a company that builds machines that promise to alleviate some of that massive waste by recovering the materials that can be recycled, in the process, saving these manufacturers costs.

Currently, there are some existing recycling systems sold in the market that were developed about 30 years ago and are very expensive to operate. These existing machines consume large amount of energy as well as manpower. In contrast, the machine sold by Diaper Recycling Technology can process up to 400 kg of scrap diapers an hour and promises to be more cost efficient. Out of this process comes plastic, which is later pelletised so it can be sold to the plastics industry. The machine also churns out cotton wool, fibre and sap.

Mr Scaife estimates that the machine, which is able to recoup anywhere between US$500 and US$700 per tonne, will cost about US$1.8 million. But its low operating cost means a quick return on investment. Diaper-making factories which use it can expect a return in 12 to 15 months, he said.

Mr Scaife is confident that it is the answer to the waste in the diaper-making industry. The company's initial goal was to sell about 40 to 50 of these machines, but he now thinks it can easily sell as many as 500 to 600 around the world. The company has already sold the latest version of its machine to Japan's Unicharm, a manufacturer of disposable hygiene products that will test the system at one of its research and development facilities in Hanoi.

(Adapted for academic purposes. In the business of recycling diapers, by Bryan Quek, The Business Times, 14 September 2018, page 10)

(a) Evaluate the potential customer's perception of the costs (acquisition and operational ONLY) and the benefits (functional and financial ONLY) of the diaper recycling machine marketed by Diaper Recycling Technology. (16 marks)

(b) Diaper Recycling Technology plans to build brand awareness for its new diaper recycling machine.

(i) Proposetwo (2)appropriate marketing communications tools that the company could use to reach out to more prospective customers and give reasons for your choice. (10 marks)

(ii) Discuss why the company should incorporate personal selling in its marketing communications effort. (4 marks)