Soren Chemical: Why Is the New Swimming Pool Product Sinking?

Soren Chemical: Why is the New Swimming pool product sinking?

Solutions by: Elvin Abdullayev

The case presents us with a company, Soren Chemicals, that has been in the cleaning industry since 1942 and that has been successful at producing and selling Kailan MW, a clarifier used for high-capacity water park facilities. Seeing the promising market for water cleaners for residential small-body pools, the company introduces its new product, Coracle, which offers a very competitive advantage of 25% cost reduction compared to other similar products offered by competitors. However, the actual sales figures do not match the projected ones; in fact, the figures are so below than the expected as to call the company managers to review the marketing strategy and find the solution to the problem.

The first problem in achieving the desired sales volume seems to be related to the pricing, which is the most important factor for buyers. The 25$ price is not attractive for both the end-user consumers and the wholesalers. The range of similar products from competitors is between 3.5$ and 15$ in the consumer market. Unless Coracle delivers a clear and well-defined message about the product’s benefits, consumer will not be willing to change their favorite brand to a more expensive alternative. Apparently, Soren Chemicals must initiate a very aggressive strategy to attract the customers and gain market share. I would suggest the Soren Chemicals to focus more on the branding and product awareness at the initial quarters, rather than expecting gross profit.  

 The second problem, from the wholesalers’ perspective, is again pricing. According to the survey, 70% of the retailers reported that Coracle had not been offered by their distributors. That is probably because of the low gross margin; the offered 21.25$ price leaves only 30% margin for distributors. Since Coracle reduces the need for other chemicals by 25% on average, the figures added together do not seem so appealing for the distributors to place the Coracle on top shelves. To gain distributors’ support, Soren Chemicals should offer incentives or leave a higher gross margin for distributors.

In conclusion, Soren Chemicals should focus on spending its resources on creating a better brand awareness by communication the benefits of the Coracle to end-user consumers and on offering a better gross margin percentage for distributors.