Durr Environmental Inc.

Case Analysis
Assignment #2

MRKT 434
Marketing Analytics

Stina Tam - 260634296

Anastasia Gromova - 260620500
George Ciuciureanu - 260618823
Rohita Ramayanam - 260612022
Catherine Wang - 260613023

Desautels Faculty of Management

Thursday, October 19th, 2017

A. Provide a brief summary of the marketing question facing the company (10
points).

Durr Environmental Controls is a German multinational that specializes in the production

of air emission control systems, operating in the United States market. Stricter regulations
have been imposed to reduce the toxins that are released into the atmosphere by the
factories. However, the market continues to grow. Due to this, the company wants to
introduce a few offers in the US market. The company surveyed 31 companies from the
food and energy sector, analyzing the following: efficiency, delivery time, price, and
delivery terms. The main question facing the company is if it needs to lower service
costs, especially when considering the competition. In addition, Durr needs to come to
the conclusion of which selection of products they should sell.
B. Run Conjoint analysis using the following file: Durr Data (Conjoint).xls (30 points):
a. Among the three products that Durr is currently considering in the case identify the
new product that will be most profitable to sell in the US. Analyze if Durr should
indeed enter the US market with this product.

The Servair Dx is the most profitable product with which to enter the US market. In
order to determine this, we ran a single product conjoint analysis based on the three
potential products. Additionally, we used the maximum utility rule as these products are
high-involvement and low frequency purchases. Based on the new product profile market
share simulations from this analysis, we calculated the total profit that each product
would be able to achieve. The Servair Dx would generate the highest profit compared to
the Premier LX and the base product. These calculations are shown in the table below.

Additionally, the Servair Dx has the highest market penetration amongst the options, with
a market share of 19%. Compared to its competitors’ existing product profiles, overall the
Servair Dx offers slower delivery, less efficiency, and a high price. Its offering is most
similar to the Thermatrix in price and about the same in delivery time, but is much less
efficient and offers install instead of FOB. It is also similar to the Advanced Air product
in its low efficiency and offer of install; although, its price is higher, and delivery is much
longer. However, it differentiates itself because of its terms: install and a two year
warranty, which customers value highly. Thus, Durr should enter the US market with the
Servair Dx because it would be profitable for them and because it offers an attribute
valued by customers that doesn’t yet exist in the market.

b. Now evaluate if there is another new product that Durr can consider, beyond the
three it is already evaluating. Justify why your proposed product may be
better/inferior than the three products Durr has under consideration currently.
(Note: In both analysis don’t forget to consider competitors)
Our conjoint analysis with product profiles optimized for market share produced five new
possible optimal products. Each of these five products would have 100% of the market
share. Compared to competitors’ products, the optimal products all have a six month
delivery time, which is much faster than the 9 month and 12 month times on the market.
The optimal products are also priced about the same at $600,000 or $700,000 compared
to Wastewatch and Advanced Air. Additionally, the optimal products all have a very high
efficiency at exceeding 9%, matched only by Thermatrix. Although this sounds great, the
profit analysis of the products reveals that none of these products are profitable and in
fact, Durr would make negative returns on them. The attributes and cost analysis of the
products are shown in the table below:
In contrast, the three product profiles Durr has already created are all significantly profitable and
Durr should instead first launch the Servair Dx into the market as it is the most profitable.

C. Check if there are two segments in the marketplace that Durr can target (30 points)
a. To do this, analyze the information in Durr Data (Segmentation) Class.xls available on
MyCourses
b. Now identify which two products Durr can sell to the two segments from among the
three products it has under consideration. Evaluate if this will be financially more
profitable than entering the market with just one product. Justify.

The products that Durr should sell to Cluster 1 (size 9) is Premier DX + Base, and Servair DX
and Base Model for Cluster 2 (size 22) based the on the segment variable preferences amongst
both clusters. Cluster 1 prefers high efficiency, low delivery time, and no warranty, while
Cluster 2 doesn’t care about price and is interested in a warranty program. The profit received
from Premier DX is 2,801,400 which does not meet the minimum marginal revenue to enter, the
profit from Servair DX is 7,284,600 which is greater than the 4MM marginal revenue, even
when subtracting the 3MM additional cost of offering a second product the profit generated is
$4,284, 600. Therefore it is a financially more profitable to enter with two as there is an
additional revenue of $4,284,600 per year when entering with the Servair DX.

D) Overall, which one of following strategies would you recommend to Durr (10 points):
a.Enter with one product among the three it is considering already.
b.Enter with the one product that you have come up in your groups.
c.Enter with two products it is already considering targeted at two segments
d.Do not enter at all

As previously mentioned in Part B of Question C, the best option for Durr would be to enter with
two products for the two segments we have gotten from the segmentation analysis. By targeting
the two segments, we will gain a higher revenue.
e) Design a short marketing plan with 4Ps based on your recommendation above. Justify
your plan based on your analysis (10 points)

Product: The products that Durr should sell to Cluster 1 (size 9) is Premier DX + Base, and
Servair DX and Base Model for Cluster 2 (size 22). Price: Base = $700,000 ; Premier & Service
= $900,000 Place: Durr should sell its products through two different channels: it’s own
distribution centres as well as through an online website. Since cluster 1 prefers high efficiency
and low delivery time, an online sales platform would satisfy these needs more adequately than
selling through distribution centres. Promotion: A promotion strategy could revolve around
partnering with various sustainability groups as well as the government. These partnerships
would help promote ideas that reduce air pollution, while at the same time, increasing brand
awareness.

f) Discuss any shortcomings in your analysis and/or data and how would you change the data
collection if you had an opportunity to do so? (5 points)

In order to for the analysis to be even more accurate, if more information on revenue potential
was given for the Durr case, we would be able from the conjoint analysis to further elaborate on
the maximum profits per segment and extrapolate the market share per revenue earned. Without
these concrete information, we can only calculate the profit margins with the given profitability
equation what the profits were per product and use the market size to calculate the revenue per
segments. In addition, the conjoint analysis gives us the preference for a single period of time,
but time is not considered for any change in a continuous year.

g) Conclude with an Executive Summary of key-takeaways for the management of the company
from your analysis. (5 points)

For Durr to successfully thrive in the United States air emission control industry, they must be
able to sell their products to the right segments to earn the highest profit. With the conjoint and
segmentation analysis, Durr company should know by now that there is two segments possible as
their potential buyers. Segment one is more focused on on high efficiency, no warranty plans
and fast delivery service, while segment two are not price-sensitive and are interested in the
warranty programs. By selling Sevair DX and Premier DX to its respective segments, they can
generate revenue without cannibalization their sales. On the plus side, the cost of entry also is
considered, so they should expect more environmentally friendly customers seeking their
products by launching the two products in the US. None of the competitors can provide similar
products with the chosen attributes by Durr.