Kunst 1600 Case Analysis
Commercializing Kunst 1600 Dry Piston
Vacuum Pump
1. What are the major, quantifiable value and price elements associated with the Kunst
1600?
Ans:
From a quantitative perspective, the superior value and price of the Kunst 1600 can be
attributed to these three elements which are as per below.
• Value Elements:
o Cost savings due to the elimination of oil change expenses and messiness --
Most owners and technicians significant oil change related costs.
o Incremental revenue and profits –Incremental revenue and profits refers to
new income that can be attributed to greater product efficiency. In this case
study, this occurs in only one segment – light commercial refrigerator repairs.
In all other segments, repair firm revenues remain the same regardless of any
brand pumps are used.
• Price Element:
o Increased pump durability -- The Kunst 1600 lasts 2 to 3 times longer than the
incumbents in most segments. This means that repair firms will have to buy
more conventional pumps than Kunst 1600s. This impacts the price a repair firm
has to pay for conventional pumps (i.e., 2 to 3 times greater) and not the
number of jobs it can complete! In the economic sense, there is no incremental
profit merely greater price
2. What additional value placeholders, elements not presently quantified, merit
consideration in your value model?
Ans:
• Value Placeholders
For the most part, there are few differences among conventional pumps and the Kunst
1600. Here are a few placeholders.
o Weight differential – The Kunst 1600 is lighter than pumps currently used in
residential AC repairs and heavier than those used in home refrigerator and
light commercial refrigerator repairs. These weight differences may impact
technician preferences.
o Durability of parts – As the Kunst 1600 is constructed of molded aluminum, its
parts may be subject to less corrosion and thus last longer.
o Brand equity – Currently, Kunst and Atler have little brand equity in the potential
market segments. This may put them at a competitive disadvantage with long-
established rivals.
o Expected value of oil dumping fines – You can either treat this as a placeholder
or include the expected probability of fines into your cost savings category for the
Kunst 1600 in the value model. You would calculate the expected value as “the
sum of company and individual fines times probability of being caught times the
amount of oil dumped per year.” There is limited case information that enables
you to do such calculations, but this will be difficult to pin down in that any
calculation will involve assumptions about how often the contractor illegally
dumps the oil
3. Construct a customer value model for the Kunst 1600 in the residential AC, home
refrigerator, and light commercial refrigerator repair market segments.
Ans:
Cost Savings Per oil change
Cost savings per oil change (A) Residential AC Home Light
Repair segment Refrigerator Commercial
Repair Refrigerator
segment
Oil Price $8 $4 $4
Labor cost $6 $ 7.5 $ 12
Clean-up supplies $ 0.65 $ 0.65 $ 0.65
Oil disposal cost $ 1.25 $ 0.625 $ 0.625
Total $ 15.90 $ 12.775 $ 17.275
Number of oil changes per year 20 12 12
Cost savings per year for oil $ 318 $ 153.30 $ 207.30
changes (A)
Incremental profit per year NA NA $ 720
(B)
Differential price per year (C) $ 16.67 - $ 33.33 $ 16.67
Customer Value Models
Kunst 1600 Value (per year)
Residential AC Home Light
Element Repair segment Refrigerator Commercial
Repair segment Refrigerator
Oil Change Savings (A) $318.00 $153.30 $207.30
Incremental Profit (B) $0 $0 $720.00
Total Value $318.00 $153.30 $927.30
Differential Price (per year) $ 16.67 - $ 33.33 $ 16.67
4. Using your value model, select a target market segment(s) for commercialization
efforts. Justify your choice.
Ans:
Justification of choice of target segment(s) for the Kunst 1600.
• Given Kunst’s status as a new acquisition, Evan and Will should target a single
segment at this time. Given that this is a small firm, they should focus their limited
resources on the segment that offers the most feasible chances of success. They
can use this segment as a “foothold” to penetrate other segments later on
perhaps with other Alter products.
• Of the Three segments, the one offering the greatest potential is a light commercial
refrigerator repair. This is the only segment where all three value/price elements
(incremental profit, cost savings from oil changes, and durability) come into play for
the Kunst 1600. The fact that the Kunst 1600 enables firms to do more jobs per
week is the pivotal factor in that owners and technicians trivialize changing the oil
and overestimate the lifetimes of conventional pumps.
o Earn More:
The value-in-use per year (i.e., $943.97) and value created per year ($927.30) are
significant and far greater than that created in the other three segments.
o Value for money:
The incentive to buy the Kunst 1600 in this segment is significant (i.e., around
$844 per year).
o Do more work do:
The Kunst 1600 reduces repair job time by 10 minutes and increases the number
of job possible by 2 per week during the summer months.
o Make your employee happy:
The Kunst 1600 eliminates the hassle of oil changes for these largely independent
operators.
o Save environment:
There is no likelihood of fines due to illegal dumping of oil.
o The competition will probably not be as strong in this segment as it will in
other segments, namely residential AC repairs.
• Although it is highly attractive in terms of size, the residential AC repair segment is
not feasible because of perceptual barriers and the fact that the Kunst 1600 may
be underspecified (1.6 CFM pump in a 3-6 CFM application). Target another Atler
product at this segment!
• The home refrigerator repair market may be viable long-term however, the Kunst
1600 may be over specified for the application (1.6 CFM pump in a 1 CFM
application). The Kunst 1600 does not create incremental jobs here and pumping
only takes 15 minutes.
5. Write a value proposition for the Kunst 1600 for the target market(s).
Ans:
“With Kunst 1600, Earn more, Value-for-money, do more Job done, make your
employee Happy and save nature”
