Durr Environmental Case

DÜRR

ENVIRONMENTAL

INC.

Marketing Management

Minzhongxia DING

Elie ELHAYEK

Amaury FENOLL

Olivier GAUTIER

Background DÜRR Environmental Controls is a German conglomerate

producing air emission control systems and that has

extensive industrial operations in the US.

The global market is developing, due to increasing

regulation aimed at reducing the pollutants released into

the atmosphere by the factories.

The company is considering introducing one or more offers

in the US market and believes that its product will need

lower service costs that its competitors’ products.

DÜRR possesses new technical capabilities and market

research shows that there will be 300 units sold per year in

the following decade.

Objectives Our goal is to evaluate the economic

consequences of entering the US market for

DÜRR, in order to help the managers to take their

decision.

We need to determine the best offering,

considering the specificities of the American

market : should it be a single offering, or two

different offerings? What should they be?

We also need to propose a marketing

segmentation, allowing DÜRR to target customers

with specific and efficient sales pitch.

The Market and Competition

When choosing a product available in the market, customers look at four dimensions:

1)Efficiency: percentage of recycled heat by the system

2)Delivery Time: time needed to build, test and deliver the equipment

3)Price: the cost of the equipment

4)Delivery terms

Three competitors are present in the market and their market shares are presented in the graph below:

Waste Watch, 45%

Thermatrix, 5%

Advanced Air, 50%

Conjoint analysis for existing products

A conjoint analysis of existing products in the market

gives us a prediction of the market shares as follows:

The predicted market shares (provided by the

conjoint analysis) are almost equal to the real

market shares discussed previously.

Product Real Market Share Predicted Market Share

Waste Watch 45 % 45.45 %

Thermatrix 5 % 3.95 %

Advanced Air 50 % 50.59 %

Conjoint analysis with Servair Dx

After running a conjoint analysis with the

4 products - Waste Watch, Thermatrix,

Advanced Air and Servair DX - we obtain

the following result for expected market

shares:

37,55%

1,98% 41,70%

18,77%

Waste Watch

Thermatrix

Advanced Air

Servair DX

Conjoint analysis with Premier DX



Advanced Air and Premier DX - we

obtain the following result for expected

market shares:

42,98%

1,48%

41,21%

14,33%

Waste Watch

Thermatrix

Advanced Air

Premier DX

Conjoint analysis with Base Model



Advanced Air and Base Model - we

obtain the following result for expected

market shares:

44,47%

3,95%

42,69%

8,89%

Waste Watch

Thermatrix

Advanced Air

Base Model

Profits Calculation Servair DX Premier DX Base Model

Market Share (obtained by

conjoint analysis)

18,77 % 14,33 % 8,89 %

Sales (market share × 300)

56 42 26

Profit Margin 180 000 230 000 200 000

Total Profit (profit margin × sales)

10 080 000 9 660 000 5 200 000

• All profits are greater than the 4 000 000 threshold and hence entering the market is justified.

• Servair DX and Premier DX are the two most profitable products as can be seen in

the table above. • If we want to introduce one product to the market, we would choose the Servair

DX having the highest market share and the highest profits. • If two products are to be introduced, we would choose Servair DX and Premier

DX.

Segmentation

1 4 9 2 6 5 8 3 7

867.75

1,010.8

1,291.2

1,329.8

1,788.5

3,326.6

6,211.3

13,017.

Cluster ID

After running a segmentation, we get the following Dendogram

To avoid a big loss

of information, we

choose to divide

the market into 2 segments

Size/Cluster Overall Cluster 1 Cluster 2

Number of observations 31 9 22

Proportion 1 0.29 0.71

Dis

tan

ce

Segmentation The following table shows the segmentation variables for the two

clusters

Segmentation variable / Cluster Overall Cluster 1 Cluster 2

Exceeds 9% 27,3 15,6 32,1

Exceeds 5% 16,9 6,11 21,3

Meets specifications 8,35 4,22 10

Short by 5% 0 0 0

6 months 31,2 17,3 36,8

9 months 19,1 10,1 22,8

12 months 9,19 6,44 10,3

15 months 0 0 0

600000 18,6 32,3 13

700000 12,6 24,3 7,77

800000 6,39 12,3 3,95

900000 0,161 0,333 0,0909

Installed, with 2-year warranty 20,4 29,3 16,8

Installed, with 1-year warranty 13,9 19,6 11,6

Installed, with service contract 5,58 4,33 6,09

FOB, with service contract 0 0 0

Segmentation The following table shows the discriminant variables for the two

clusters

Discriminant variable / Cluster Overall Cluster 1 Cluster 2

Food 0,194 0 0,273

Energy 0,226 0,778 0

Sales$_2004 13,077 34,133 4,464

Profit% 5,461 9,611 3,764

Return_on_Equity 18,223 19,467 17,714

Employees 26,371 56,333 14,114

SalesGrowth_(2003-2004) 17,058 9,467 20,164

TopMgt 30,871 18,889 35,773

Engineering 34,645 20,111 40,591

Finance 15,548 28,889 10,091

Purchasing 19 32,111 13,636

Growth 13,161 21,889 9,591

Profit 22,968 28,333 20,773

MarketShare 11,484 14,222 10,364

TechLeadership 10,806 15,778 8,773

CorpCitEnv 19,871 6 25,545

GovReg 21,806 13,556 25,182

Segmentation

Energy industry

Large in size and more

profitable, with lower

growth

No extra requirement

on technological

advancement above

minimum level

Sensitive on pricing

Value more after sales

service (2 year

warranty)

1st Segment 2nd Segment

Food industry

Smaller in size, less

mature, lower profit

with more promising

growth rate

Technological

advancement

(exceeds 5%/9%) as

important factor

Delivery time matters

more than cluster 1

Conjoint analysis with segmentation:

Segment 1 Predicted market shares

Wastewatch; 4,52 Thermatrix; 0,

Advanced Air; 59,28

New Product Profile;

36,2

...with Servair DX

Wastewatch

Thermatrix

Advanced Air

New Product Profile



Wastewatch;

21,49

Thermatrix; 3,39

Advanced Air;

71,72

New Product

Profile; 3,39

...with Premier DX

Wastewatch

Thermatrix

Advanced Air

New Product Profile



Wastewatch; 22,62

Thermatrix; 4,52

Advanced Air;

68,33

New Product

Profile; 4,52

...with Base model

Wastewatch

Thermatrix

Advanced Air

New Product Profile



Wastewatch; 63,16

Thermatrix; 3,51

Advanced Air;

28,07

New Product

Profile; 5,26

...with Servair DX

Wastewatch

Thermatrix

Advanced Air

New Product Profile



Wastewatch;

59,65

Thermatrix; 0,

Advanced Air;

17,54

New Product

Profile; 22,81

...with Premier DX

Wastewatch

Thermatrix

Advanced Air

New Product Profile



Wastewatch;

61,4

Thermatrix; 3,51

Advanced Air;

22,81

New Product

Profile; 12,28

...with Base model

Wastewatch

Thermatrix

Advanced Air

New Product Profile

Targeting As we can see, Servair DX has the highest expected market share in the

first segment (36,2%), therefore we recommend to target segment 1

with Servair DX

Total profit = 36,2% × (300 × 0.29) × 180 000 = 5 668 920

Moreover, Premier DX has the highest expected market share in the

second segment (22,81%), therefore we recommend to target segment

2 with Premier DX

Total profit = 22,81% × (300 × 0.71) × 230 000 = 11 174 619

Therefore, the overall total profit will be the summation of the two

profits above from which we subtract the 3 000 000 additional cost

Overall profit = 5 668 920 + 11 174 619 – 3 000 000 = 13 843 539

Advantages and Limitations

The method used helps us in determining the preferences of

the customers and adjust our offers accordingly in order to

maximize the profits realized.

It also allows us to segment the market and target each

segment obtained with the most appropriate product that

could realize the maximum profits possible.

On the other hand, the model provides us with the preferences

for a single period of time and does not take into consideration

the change in these preferences or the time effect that could

modify the preferences and hence the results.

Durr Environmental Case

Documents

year warranty

expected market

market shares

advanced air

servair dx

premier dx

technological

table shows