Zoe Atlas

Group #4
Case: Soren Chemical

A. Market Size
Coracle is one of the clarifiers developed and produced by Soren Chemicals, which targets
residential pools. They are a smaller size than commericial pools and water parks, that are served
by other clarifiers, like the Kailan MW, which is also produced by Soren Chemicals. Very small
quantities of Kailan MW are sufficient to treat large volumes of water but it is unsuitable for
smaller-scale applications such as residential pools due to the fear of misuse and safety risks. The
targeted residential pools of Coracle have a lower volume of water, a lower volume of
swimmers, and a less intense maintenance program. It is estimated that there are 9 million
residential pools in the United States. As demonstrated in Table A on page 5 of the case, the
average length of pool usage is 5 months, from May to September, with less people swimming in
cold weather from October to April. Currently, Coracle has three leading competitors for
residential pool-use clarifiers: Keystone Chemical, Kymera, and Jacson Laboratories, and each
of the competitors has a 15% to 20% share of the residential pool clarifier market. This means
that there is roughly 40% to 55% of the market share left to Coracle and other smaller
competitors. If you factor in Coracle's three main competitors along with the many other smaller-
scale suppliers, it can be suggested that roughly 15% of the market share is what Coracle needs
to address. This means that the addressable market share is $7,846,373. Based on this analysis,
the first year goal of $1.5 million in sales is reasonable for Coracle. If you divide the addressable
market size of $7,846,373 by 5 (5 months of average pool usage), it comes to around $1.57
million, only slightly higher than the target $1.5 million.

B. Channel Structure
One of the reasons Soren Chemical is struggling to sell Coracle is because it is new to
developing a brand and relatively inexperienced with marketing to wholesalers, retailers, pool
services and consumers. This inexperience has led to miscommunication in its marketing
channels, causing only 30% of consumers who inquired about Coracle to actually receive the
information regarding the product. In addition, 70% of consumers stated that Coracle was not
even offered by their distributers. Soren Chemical launched the product in September, which is
the last busy and most suitable month for swimming. The sales team did not consider the effects
of doing so, which will impact the sales revenue extremely for the first year. First off,
consumers, wholesale distributors, pool service professionals, pool specialty retailers and mass
retailers need time to know the new brand and its value. Second, the stocks of those groups will
impact the sales, especially since it was launched in the last busy maintenance month. If at the
end of September, consumers decide not to use the pool until May, they may not maintain the
pools at the end of that month since in May, they will need to clean again after a long time of
non-use. Third, Soren did not position their product correctly. The consumer market of
residential pools is focused more on aesthetics and perceived cleanliness. It is risky for Soren to
bring Coracle into the market without a suitable emphasis, focusing on what the consumers want
more. Finally, there is an unclear gap between Kailan MW and Coracle even though Kailan MW
targets commercial pools and water parks, while Coracle targets residential pools. There are still
at least two formulators who dilute Kailan MW with a private label and sell to distributors for
consumer markets. This will contribute to Coracles competition too.
C. Pricing Options
Soren should increase their retail price to offer economic incentives for wholesale
distributors to carry and promote Coracle. Currently, distributors are the main obstacle in
Coracles distribution because even though the marketing initiative targeting service
professionals and specialty retailers is well-received, many people have stated that Coracle is not
offered by their distributors. By offering a higher profit margin to distributors, they will be able
to start carrying and promoting Coracle to retailers who have already shown an interest in the
product. This is because previously distributors didnt want to carry Coracle because it reduces
the sales of other brands. Therefore, an increase in price, will translate the demand into increase
in sales volume. In addition, increasing the price will continue to build Coracles brand
awareness among retailers and consumers as the distributors will be motivated to promote the
new product and achieve a platform where Sorens pool-related products can all be sold through
the Coracle name directly to consumers. The financial implication involved in the price increase
is determined by the margin by which Soren can raise Coracles price to give distributors the
economic incentives to carry Coracle yet still beat the industry average of annual cost savings
that it can promote to end users. Coracle is actually worth more to end-users than they currently
realize. As explained in the case, the lack of advertising of the product and its benefits has
created a misunderstanding for the public. Coracle is not only a safer product, but despite its high
cost, will actually save people money in the long run. Therefore, if people were made aware of
these benefits, the consumer would most likely be willing to pay more for the product. Given
Coracles superior performance, as per the analysis above, the product should be priced higher.
As explained by Exhibit 1 in the appendix, a price of approximately $32 per container is an
appropriate price. Some of the constraints are changing the already set price, especially since it is
already higher than its competitors, there will need to be a large amount of advertisements done
to increase the awareness of the change of price and distributors and retailers might start
bargaining for more as they see the changes in the strategy of the company.
D. Channel Members Pricing Considerations
As explained in the case, distributors typically had a 20% gross margin on most products, but
they expected to maintain a 30% gross margin with selling Coracle, since its a differentiated
chemical agent. By raising the retail price, distributors will have a higher profit margin, which
will incentivize them to carry the product. Retailers and service professionals usually take a 15%
gross margin, which resulted in the original suggest retail price of $25. By raising the retail price
to around $32, retailers and service professionals will be able to take a higher gross margin. This
will differentiate Coracle from the other products, as retailers will be able to take a high gross
margin than they can with other products. Therefore, retailers will be more willing and
enthusiastic to sell Coracle, which will result in more sales for the company.

E. Recommendation
The root of the problem is that pool-cleaning professionals are not well or properly aware of
this product. In order to fix this, most of the action plan should be focused on marketing the
product. First, the marketing budget needs to be increased so that they can advertise to all
interested groups. Second, there needs to be a clear message to the users of the problem who are
less advanced. These people need to be made aware of the facts concerning the product. A clear,
distinguishing message that clearly demonstrates the difference between this product and the
inferior products needs to be established. Third, there needs to be clear margins for the
distributors who may sell the diluted product.
Appendix:
Exhibit 1
Distributor Cost Price: $2.32 (Soren's Ex-factory Price)
Distributor Profit Loss: $1.28
Distributor Selling Price: $3.6
Retailer Cost Price: $3.6
Retailer Profit Loss: $1.13
Retailer Selling Price: $ 4.73
Annual Cost of Clarifiers to customers: $47.3
Total cost of consumers if they use Coracle: (47.3 + 225)= $272.3
Total cost of consumers if they dont use Coracle: (50+300)= $350
Therefore, Soren can increase by: $7.7 (350- 273.2= 77.7 divided by 10 = 7.7)
$25 (original price) = 7.7= $32.7