Subject:marketing

Case study.

Aqua Guard

Introduction

Aqua Guard is a pioneer company in domestic, commercial and industrial water treatment products. It mainly deals in domestic and commercial water purification systems but other product lines include; mineral water plants, water softener, ultra violet sterilizer systems, deionizers, swimming pool equipments, water dispensers and purified boatel water. Since afterinception of business in 1987 from Lahore, it expanded operations to nearly all major cities of Pakistan such as Karachi, Rawalpinid, Multan, Quetta, Faisalabad, Hyderabad, Mir Pur (AJK) etc. The company has long record of success by targeting the renowned organizations of Pakistan. Presently, serving Pakistan Army, Pakistan Atomic Energy, Pakistan Air Force, Pakistan State Oil, Pakistan Telecommunication Authority etc. Furthermore schools, hospitals, foreign missions and embassies are also customers of the company.

Company background

Aqua Guard was established in 1987 with the vision to provide filtered and purified water to the community on economical and priority basis. The company started relying on the single product of domestic water purifier but soon it added new products to its product mix and also extended existing product lines. Starting operations from Lahore, soon it entered the major cities of Pakistan. Mr. Amjad Rana, Managing Director of the company, was highly qualified and experienced in the field of sales and marketing, who took full advantage of this innovative product by introducing it in the developing country, Pakistan. The problem of contaminated water was high and was growing day by day. By spending a huge budget on promotion, people

were given awareness about the importance of filtered, purified and sterilized water. The organization infact created the need of the product through print media by communicating the message about the importance of clean and purified water. Such as the theme of the message advertised by the Aqua Guard was;

"Fresh water may be contaminated by sewage, septic, tanks, industrial and other wastes. The clearest looking,

best tasting water can be unsafe for human consumption and may cause infectious hepatitis, jaundice, typhoid fever and

a host of other diseases".

As the awareness spread out, it positively affected sale. Mr. Wajid who was Marketing Manager of the firm, brought new ideas to penetrate into the market. He hired highly skilled and committed sales force on salary and also on commission basis. Promotional budget was also kept

high, electronic media was used to supplement and facilitate print advertising to inform and persuade prospects about the benefits lye in fresh and uncontaminated water. Novelties and giveaways were also treated as a tool to retain customers and generate loyalty. Such tactics helped to increase sale in the early part of the product life cycle.

Analysis

The company kept giving gift packs till 1998, but later it was stopped without any reason. The profit was not only earned from the sale of the products, but also from the after sale services and the sale of cartridges1 That is the reason Mr. Amjad always accentuated the retention of old customers further to search more.

Till 1998, the organization enjoyed the time of monopoly or monopolistic competition as some rivals were present in the market, targeting their own segments on the basis of competitive advantages. But Aqua Guard was reaping healthy profit on investment comparing rivals. Later the time came when new entrants increased competition. The company decided to shift its focus

on big commercial units (business products) and launched commercial / industrial water treatment plants that are used to purify water at mass level. Such organizational shift required due consideration from all senior executives as well as middle and lower level employees because the organization had to invest a lot on purchasing raw material for the production. A single plant costs 0.2 to 0.3 million rupees from production to sales point. As the profit margin on per unit sale was high, therefore the company deemed better to focus on commercial plants.

This drift caused a big set back to the sale of domestic water purifier. Total units sold in the year 1997 were 788, which were 17.1 % more than the sale of year 1996 (653 units). However, total domestic purifiers sold in the year 1998 were 852, showing only 7.5 percent increase in the sale of domestic products from the base year 1997. During 1987 to 1997, Aqua Guard conceded steady increase in the percent sale growth of the products. In 1999, data showed only 5.1 percent increase in the sale from the previous year (see figures 1 &2). Although the company was still profitable on service charges and cartridge installation of domestic (consumer) products but Mr. Wajid was highly concerned with the situation. The company was recognized due to domestic water purifier; therefore they should not forget its base product. That's the reason the matter was taken into deep consideration by the MD and the executive board.

A meeting was scheduled to discuss the matter with all managers especially Marketing Manager, Sales Manager, Finance Manager and Manager Customer Services. Sales Manager Mr. Waqar suggested to look for new markets. "The product has never been properly marketed in northern areas where pent up demand of the product exists, we should enter in the market where competition is not yet stiff" he said. Manager Customer Service was of the view to cut the price of all products as competition has risen gradually. Our rivals are selling the same product on 18% less price. We can decrease the price upto 24 % and in the long run mass selling would give

us more profit. However, these arguments couldn't satisfy Mr. Amjad (MD). Mr. Wajid said, "we have been facing competition since the last 2-3 years, but Aqua Guard is a well recognized brand with its distinctive characteristics. About the reason behind sudden decrease in sale, I would say that our experienced sale force is more tempted towards the sale of commercial/industrial plants because per unit commission is 75 % higher than the domestic units. Secondly, commercial products are new and extensive demand exist in the market, therefore sale of commercial/industrial plant is increasing at increasing rate, while the sale of domestic plant is increasing at decreasing rate. We should redefine the sales targets of sales force". The statement of Marketing Manager was highly appreciated in the meeting. Mr. Salman Ali, Finance Manager added further, "we are not promoting domestic products as we did before. Deliveries of novelties and giveaways have been stopped and in the last two commerce exhibitions we were unable to display products. We should focus on promotional efforts in the same way we did before".

A four hours long meeting was ended with the decision to increase promotional budget and redirecting the sales force efforts. The company announced to give a gift-pack to the customer consisting of a wall clock, calendar, pen and key chain, on account of each domestic unit purchased. At the other hand, each sale person was supposed to sell minimum of 30 domestic purifier units. They were also required to meet the 30 units target regardless of how many commercial plants they sell. These strategies worked extremely well. Aggregate sale showed positive trend and increased from 898 units to 1013 units in the year 2000, showing 11.5 percent increase in the sale (see figures 1 &2). It was a big landmark that sale teams achieved. From 2000 to 2001, 20.2 % increase in the sale was recorded. The whole work showed team effort and sincerity of each executive towards the company. Now the sales of both domestic and commercial plants were on track.

At the end of fiscal year 2001, Mr. Amjad announced a bonus and 25 % salary increase for each employee, irrespective of their department or length of service. These measures were taken to sustain positive sales trends of all products. From 2000 to 2004, company enjoyed four consecutive years of high profit. During these years, the organization introduced some other products, like hot & cold dispenser, boatel water, water softener plant, D-scaling and deionizers. Further to that it opened an advisory cell that was responsible to analyze the problems and finding solutions on free of cost basis.

Status Report

The period of high financial turnover came to an end in the last quarter of 2004, when the sale of the domestic purifier started fluctuating. This fluctuation remained for six months and later sale went on declining. Initially, the management thought of it as a seasonal drift but sale target were not being achieved despite several efforts made to boost sale again.

When the problem got worse, the MD called a meeting again to discuss the issues. During the meeting following comments were made by different professionals; 1. Marketing Manager recommended to offer rebate on the price of the products.

Sales Manager suggested to launch new low priced model (line extension) to cater the need of lower middle class.

Manager HR stressed the formulation of a new sales team by replacing low performers with new hiring.

Manager customer services emphasized to enhance promotion by more advertisement on TV, newspapers and cable TV.

Manager advisory cell was in favor of old techniques that worked well last time during the depression faced in 1998, such as promotion through giveaways & novelties and dependence on exhibition & tradeshows. He also wanted the increase of commission; however sales persons were already given 25% of the price of unit sold.

A newly hired promotion manager viewed the problem differently. He explained, "As the \ macro environmental conditions have changed significantly, therefore we should go further to general measures as normally companies take and we took previously. Our company should refresh all existing products by changing color, logo, design and style of the products. So that it could bring fresh image in the customer's mind. Secondly, more emphasis should be given to telemarketing personnel. In present scenario, nearly all progressive organizations have separate telemarketing department which provides a ackup to sales people. We should organize full fledge telemarketing department. Lastly, Aqua Guard largely depends on the efforts of sales force but their training anddevelopment never been taken seriously. Neither the company nor the sale force waswilling to acquire new skills. We are now in a dynamic world where training isimperative for the success of every marketing oriented organization. A complete training program is mandatory keeping in view the training need with respect to changed environment.

The long recommendations of promotional manager was not taken very seriously by fellow members, however MD and Marketing Manager took deep contemplation over the opinion.

Case Problem

The Managing Director is highly concerned with the current decline in sale. All the six options are available to him. He is uncertain whether to consider old course of action taken in 1998 that worked well previously or go for the new options that newly hired promotional managersuggested in view of current environmental trend or to look for any other alternative. The situation is getting worse therefore right decision has to be taken in a short period of time. He calls you as an expert to assess the situation and recommend a realistic and effective course of action. You are required to make a two page comprehensive report comprising brief summary of the issues, available alternatives and recommendations based on logical justification. Think over the situation and makean annotated plan of how you would approach advising the Managing Director. You are required to understand the key factors impeding sale. Outline the main problems and reasons behind. Recommend the course of action in detail that

you think is most feasible.

Questions

What is the significance of environmental monitoring process in the perspective of Aqua Guard?

Do you think more promotional efforts would be worth given to Aqua Guard?

What do you think the recommendations of HR Manager would have to coup with situation?

Being an expert, what solution you think are affective in the current situation and why?

Do you favor the strengths of promotional manager?