GroupassignmentNandaHomecase

The challenge of transforming Nanda Home into a true company

ERASMUS UNIVERSITY ROTTERDAM

Erasmus School of Economics
Seminar Innovation & Marketing, 2015
Prof. Dr. S. Stremersch
Date: 19-01-2015

Xiao Li:
Arjan den Besten:
Thomas van Huijgevoort:

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1.Introduction
The aim of this group assignment is to find a clear answer on the following question:
Should Nanda Home work to dominate the alarm clock market with its flagship
product Clocky, or should it branch into other product categories?

To find a solution to this issue, first the challenges that Nanda Home is facing will be
looked at and then a number of recommendations will be given considering the future
operations for Nanda Home.

2.Challenges
In this section, we will give a quick analysis about the major challenges that Nanda
Home is facing in maintaining the successful position with its flagship product Clocky,
before suggesting possible recommendations to deal with these challenges in the next
section.

Until now, Nanda Home has only existed of one major product, which is Clocky .The
question at this stage is, if Nanda Home is a company or just a single product (Clocky)?
If Nanda Home eventually wants to create a right of existence on the market, it should
aim to become a respectable company with perhaps an expanded product line, to
complement the successful Clocky product. As can be readed in the first chapter of the
case, Clocky has been an immense success already in the first year. However, the success

of Clocky cant seem to persist forever. As table 1 shows, the first years revenues of $2.2
million went down to a bit less than $1 million in two years (2009). Its also emphasized
that this success is mostly attributed to the excessive media publicity the product has
been receiving in 2005 (prior the launch) and in 2007, when the product launched.
Media attention is unfortunately not ever lasting. When the product reached the growth
phase in the product life-cycle, the media was not so reluctant to publish about it
anymore. In this way, it didnt continue benefiting the bottom-line of Nanda Home.
Hence, Nanda Home has to find other ways to sell its ultimate show piece called
Clocky. This is verified by exhibit 5, in which it is shown that the sales volume through
Nanda Homes own website is gradually decreasing from 2007 till 2010, while for the
international distributors channel and the U.S. retailers channel, the numbers are
increasing. This shows that there are significant opportunities in the two latter channels
and that the focus should be shifting towards increasing volumes through these
channels for Clocky. To summarize this, the biggest challenge for Clocky is clearly that it
is a hype product, of which its success (at least completely due to media attention)
seems to be short-lived. Which are the most important factors limiting Clockys
life-cycle?
Counterfeits and other competitors: Clocky (and possible new future products in
Nandas product line) need very quick distribution and market penetration.
When the prototype of Clocky has got a major amount of publicity in 2005, many
counterfeits already appeared on the market. This resulted in a downward
pressure on the product margin and a smaller market share than otherwise would

have been possible. This is disappointing, as it already presented Nanda with a

challenging business climate to grab a large share of the market. However, it can
in the future be prevented by quickly entering the market and setting up a
distribution network.
Sales challenges: due to the flattening sales numbers in the years 2008 and 2009,
more active selling methods are needed to increase Clockys sales numbers again.
For this, Clocky needs a larger and more internationally oriented distribution
network with stores who are willing to expose the product in such a way, that
customers can see the product working in real-life. It turns out from research, as
has been mentioned in the case, that customers prefer to see how the product
works, before actually purchasing it. However, retailer results failed often, due to
a wrong way of in-store displaying the product. (see exhibit 5 in the case for
current channels)

Together with flattening sales, new mobile technology (alarms on smartphones),

competing new products and the lack of knowledge about its customers, these are the
most important challenges that Nanda Home is facing at this point in time. The
recommendations in the next section will attempt to find a way for Nanda Home to deal
with these challenges.

3.Recommendations
3.1 Expansion of Product Line
As Nanda Home is now simply relying on its one-hit wonder product Clocky, and
given Clockys limited life-cycle, Nanda Home needs more than one up-to-date product
that could pioneer its business. The suggested expansion of the product line consists of
two different stages: firstly, the innovation of existing Clocky prototype; secondly, the
new product inventions that will be added to the Clocky series.

The innovation of the existing Clocky

The iRobot Case study is used as a benchmark for Nanda Home in this case. The iRobot
company announced the first generation of Roomba in 2002, by the year of 2011, the
third generation of Roomba had entered the market and had gained certain market
share, continued the one-hit wonder of the first generation of Roomba. Personalized
instead of standardized. According to the customer survey in Exhibit 7, 48% of the
customers purchased Clocky as gifts, personalized products help consumers to express
themselves in unique ways (Moon, Chadee, Tikoo, 2006).
What Nanda Home can learn from the Roomba case, is that it should add new features
to the existing Clocky, by developing different niche designs of Clocky. For instance,
Nanda Home could introduce various designs: coloured Clocky collection for kids,
football Clocky for football fans, themed Clocky for different target fan group, etc.
Besides, more modern features can be added for increasingly diverse use, for example
bluetooth and wifi connection functions may allow families to wake up their loved-ones

from afar; touch-sensitive interface may create easiness for customers to use; a
recording system may give opportunities for customers to wake up in familiar voices,
etc. Innovating the existing Clocky product, creating a larger distribution
network and finding more (other) effective sales channels is the first stage
that Nanda Home should be pursuing.

New Inventions that will be added to the Clocky Series

After Roombas success, iRobot continued to expand its customer base, introduced
Scooba and Dirt Dog. Although all other products were also received by the public, they
are not adopted as readily as Roomba (iRobot Case study). For Nanda Homes case, it is
suggested to enlarge its diversity, in order to attract more prospective customers. Nanda
Home has already developed a few products that hold similar philosophy -- function and
fun, for example the existing prototype: the power saving plug called the Spitlet, the
Ambulatory Houseplant Pot and the roving personal robot called Follo (Ofek, Avery,
2012). These innovations can be initiated in a later stage of the company. As for the
moment, the Ticky and Tocky products have already been prototyped and should be
launched after completing the first stage (described in the previous paragraph).
Expanding the Nanda Home product line with the products Ticky and
Tocky is the second stage that Nanda Home should be pursuing.

3.2 Branding - Which brand approach to take?

Especially Clocky already has a lot of equity as a brand. For Nanda Home it is important
to make a decision whether the company will offer all of her products under one brand
which serves as a house of brands or whether Nanda keeps the current strategy with one
brand name for each product?

The main product philosophy of Nanda Home is humanizing technology, by giving it a

personality. Therefore, while expanding its product line, Nanda Home should also give
itself a strong brand name, and build a strong brand image and equity, in order to raise
brand awareness and then further develop the breadth and depth of this awareness.
When the product line is better developed, various products can be enclosed under the
same brand name, in other words, all products should be branded under one umbrella
megabrand.

All these products are part of the Nanda Home product portfolio, that is hoped to
provide lodging options to fit as many customers as possible. The brand name can be
varied from the main driver -- Nanda Home -- for choice, this is to pass the message of
the quality endorsement, at the same time allows the individual product to show its own
distinctiveness (Keller, 2013). When the mother brand is built and the new product
announced, brand extension will take place to provide multiple routes for increasing
revenues. Reasons are: extensions may appeal to different segments and thus bring in

new users; and extensions offer variety to existing users, increasing purchases per user
(Keller, 2013).

3.3 Marketing strategy

Price strategy:
When iRobot Roomba (automated vacuum cleaner) firstly entered the market, there was
a monopoly product called Trilobite, whose price was ten times higher than the original
Roomba, and the units sold were only thousands (iRobot Case study). Given these facts,
iRobot used the price difference as their competitive advantage, made Roomba
extremely affordable, and rapidly occupied the market (iRobot Case study).

As for the Nanda Home case, it is known that a normal alarm clock from pharmacy and
supermarket costs only 10 US dollars, while Clockys price tag is fixed at 39 US dollars.
Plus the retailers cut off markups to satisfy the customers, leads to a price that is much
lower than Nandas expectation (Ofek, Avery, 2012). It is suggested that, given the
individual features of different products -- that Ticky and Tockys manufacturing costa
are two to three times higher than Clockys respectively (Ofek, Avery, 2012) -- Clocky is
better to be positioned at a rather lower-end, meaning that to cut the price down and
try meet the normal alarm clocks price as close as possible. While Ticky and Tocky
should be positioned relatively higher, in order to attract upscale retailers and hence
approach the higher-end customers. More background on the target group and brand
positioning will be provided in the next section.

Positioning: need market vs. fun market

There are two camps of potential Clocky buyers. The need market and the fun market.
The need market exist out of people for whom getting out of bed each morning posed a
challenge. One-third of the adults who used the snooze button hit it at least three times.
This could be a sign that many people have troubles with getting out of bed but it could
also be that they just like snoozing. The fun market is the second potential clocky buyers
market. For this market Nanda could stress Clockys more lighthearted features, such as
his exterior and playful nature. Many people give Clocky as a gift, so improving the fun
element of clocky might increase the sales of Clocky as a gift as well. However, Nanda is
afraid that the fun market approach could lead to Clocky being classified as a fad item.
So, in positioning the Clocky brand in the time to come, it is a good idea to focus
primarily on the need market segment. As shown in Exhibit 7, the Clocky Purchaser
Survey presented that 47% of total Clocky purchasers bought the product because I
cant wake up, while only 23% customers were attracted to Clockys distinctive features.
Hence the priority targeting group should be the need market, where Clockys functional
features are highly required. The survey has also shown that Clocky is most popular
among age group 19- 24, from both purchasers and recipients perspective. Hence Nanda
Home should focus more on the younger aged customer group from 19 - 30. This
corresponds with the previously chosen pricing strategy, in which it is decided that
Clocky (and its innovated designs) should be aimed at the lower-end target group. In the

second stage, Ticky and Tocky should be positioned at the higher end of the market,
given their relatively higher manufacturing cost (and selling price).

Distribution strategy: mainstream stores (such as Wal-Mart) vs. upscale electronics

stores
Looking at exhibit 5 of the case, it is clear there will be a decline of Clocky purchases on
the website of Nanda Home. Customers want to see the product for real, before they buy
the Clocky. On the other hand, there is an increase expected up to 35% in 2010, in
Clocky purchases in retail stores.
These observations (together with the observations from the pricing strategy and
positioning paragraph) strongly suggest that Nanda Home should consider to expand its
retail distribution network, with a focus on more downscale and mainstream stores
(such as Wal-Mart), as this is most likely to bring the product closer to the targeted
market segment (age 19-30, sleep market). Ticky and Tocky should be distributed
through the more upscale electronic stores, as this ensures the product to reach a more
high-end target group, thereby enlarging the total market reach of Nanda Homes entire
product portfolio.

References
Elie Ofek and Jill Avery, 2012. Nanda Home: Preparing for Life after Clocky
iRobot Roomba case study, retrieved from:
http://bccsirobot.blogspot.nl/2011/10/irobot-case-study.html
Moon, Chadee and Tikoo, 2006, retrieved from:
http://www.sciencedirect.com/science/article/pii/S0148296307001312
Kevin Keller, 2013, Strategic Brand Management: Building, Measuring, and
Managing Brand Equity, 4th Global Edition