Marketing Audit Report of Clivus Multrum - Case Study Example

MARKETING AUDIT REPORT OF CLIVUS MULTRUM   Student’s name   Course name Instructor’s name Date of submission The Target Market With the world wide campaigns about global warming and its effects on the environment, Australian community requires products that are eco-friendly, cheap and easily available. Consumers world over are increasingly becoming environmentally conscious leading to an increasing preference for demands that fit this new order. (Lynn, 2001, p.87) It is in a bid to satisfy these customer preferences that Clivus Multrum toilet systems from Clivus Multrum Australia, a company that has vast experience in the environment, seized the opportunity to make realistic and desirable changes in the Australian heritage through its concept of a waterless composting toilet system that is a waterless, self contained, odorless toilet treatment method. It does not make use of any chemicals, water, and heat and does not produce any polluting discharge. It enables the average household to save over sixty thousand liters of water in a year in addition to costing less than the regular treatment methods. The technique of treatment is based on an old but very basic principle of nature: simple organic decomposition. The Clivus Multrum Composting Toilet System targets a variety of customers in the Australian market found in some of the following places: Environmental Education centers - schools, colleges, universities, domestic households, tourist lodges, resorts and cabins. Perm culture centers, camping grounds, alpine regions of the North South West and sporting groups. The toilets have a low-maintenance cost, can be used in places with limited water supply or where the soil is rocky or has a poor drainage. They are also found in places near waterways and therefore not allowed to discharge into septic systems. Ideally these are toilets for those committed to environmental protection; those who seek double benefit of water conservation and ecological continuation by using these systems; they are also for business people who want to provide toilet facilities that are self contained for many users with minimum maintenance. Also the toilets of choice for to environmental safeguarding, who derive benefit of water conservation and ecological continuation from using these system. For people in businesses which need to provide self contained toilet facilities to numerous users and with requiring minimum maintenance, Clivus Multrum toilet systems would be the most natural and best choice. Clivus Multrum toilet systems believes in creating segmentation frameworks that comprise broad based customer groups brought together by a few but key variables. The company has created lenses through which it views its customers for a number of specific purposes- cross-sales, retention etc. It brings customers within every segment to life by illustrating their consumption behavior, profiles and motivations. The company also has special techniques which go hand in hand with their reported motivations. These techniques require fusion of market research and data analysis. (Tonkin in Clivusmultrum.com, 2010) The Marketing Mix The Product Clivus Multrum is a company that offers a type of composting toilets that is based in Australia though it has subsidiaries all over the world. Clivus Multrum could also refer to a brand of composting toilets marketed by this company. The toilet uses the principle of organic decomposition to get rid of waste rather than the use of water. The first composting toilet was invented by Rikard Lindstrom, a Swedish art teacher who patented it in 1962. The first commercial model was unsuccessful due to complications in aligning toilet, kitchen and the large composting tank. The system of composting toilets is referred as an enclosed long-standing toilet characterized by low-maintenance costs, odorless and a capability of yielding clean, and pathogen-free fertilizer which can be employed in agriculture. Composting toilets offer ecological and economical solutions in place of portapottys, incinerating toilets or the dated conventional outhouse. They provide practical solutions for businesses and homes which experience difficulties in terms of topography, high groundwater, low-percolation rate, inadequate lot size or merely issues of environmental conscience. What makes the composting toilet such a viable business venture is that the product is an essential product while at the same time serving as a convenience product. This is because the product serves to satisfy the basic needs of the users while at the same time catering to their other secondary needs such as environmental conscience. Another factor that increases the marketability of the product is its exclusive patent right. (Steinfield 2000, p. 256) The packaging of the composting toilet by Clivus Multrum encourages all clients to leave the packaging at the store where it is bought so as to reduce wastage. This is important for the environmentally conscious clients. Other companies such as CTS, Vera and Phoenix have no such packaging policy. The composting toilet system has been commercialized for over forty years and hence is in the maturity stage of the product life cycle. Brand awareness is strong and this contributes to increases in sales volume. Competition from other companies such as Phoenix, Vera and CTS is intensive threatening market share, in addition to reducing prices. It is becoming increasingly difficult for Clivus Multrum to differentiate its products from its competitors and thus it is forced to adopt other methods such as encouraging clients to switch from competitors, penetrating into the non user market. Clivus Multrum has in this regard made modifications to its product by adding features such as maintenance tools, and vent and drainage kits to differentiate the toilet from others in the market. The price of the toilet is the lowest in the market so as not to lose market share. To make its product easily available, it has partnered with resellers through sales promotions to avoid the loss of shelf space. It has also given customers incentive through discounts to get clients to switch and create brand loyalty. Promotion There is a need for any business to promote its products for it to maximize its sales and increase its profitability. Clivus Multrum uses various ways to promote its products. To begin with, Clivus acknowledges that education plays an integral function in sustainability. (Steinfield 2010, p. 93) Consequently, Clivus Multrum Composting Toilet systems are being used in universities as teaching tools to promote conservation, sustainability and green-building ideas. One such example is the University of Georgia where composting toilets and solar lighting are combined to create a useful teaching aid. Through this program, the company gains intellectual recognition and therefore can partner with these institutes in research to come up with better brands that are eco and customer friendly. The company also guarantees its customers of maintenance services should their Clivus Multrum composting toilets fail to work properly. The Company can arrange to provide its customer’s facility with a variety of maintenance services regardless of their location by either visiting them or reaching them through the company’s local subcontractors who will ensure that the repairs are done right and on time. This way the company gains the customer’s trust and loyalty. The company has written numerous articles on saving water and energy through superior sanitation. These articles feature in the world’s leading magazines hence giving people from all walks of life deserved opportunity to read and understand the need to adopt lifestyles that are eco-friendly. Through these magazines, newspapers, journals and pamphlets, the company remains relevant in the much popularized global champagnes against global warming. The company also promotes composting toilets through viable projects based on science and technology such as composting science- a bio-chemical decomposition of organic matter using aerobic organisms; greywater science, a technology that uses water from clothes washers, showers, sinks and dishwater but does not include black water; and, source separation that makes it possible for potential polluters to take care of their own waste and eliminate the possibility of contaminating reusable materials. Another way the company promotes composting toilets is by running an easy to use easy to find website that contains vital information about the company and its products. The company through the website can advertise its products; publish the latest changes in prices and branding and even the offers available. The site also allows customers to make orders online or make contact with the company with ease. The company has also organized quite a number of workshops on human waste management in many parts of the country to teach people on the best practices of managing human waste. At these workshops, customers get to interact with the company’s employees who would address their queries. The customers also watch live installation of Clivus Multrum composting toilet systems and how the toilets work so that they can make sound decisions on the type of toilets they need to install to suit their requirements. (Tonkin in clivustrum.com 2010). Place There are a variety of factors that must be taken into account when selecting the distribution channel and method for the product. There are market factors, producer factors and product factors which must be taken into account. Market factors include buyer behavior, buyer needs, willingness of agents to sell the product, and the mark up for the intermediaries. Producer factors include questions on whether the producer has the necessary resources to distribute the product or not and what this entails. An important producer factor is how much control he wishes to exercise over the final price of the good. Direct distribution for instance would afford more control. Large, complex products are more ideally suited to direct supply to customers in contrast to small products. (Snider 2009, p. 356) Clivus Multrum has employed the exclusive distribution strategy in the supply of its composting toilets. The company opted for this channel of distribution due to the nature of its product. Compositing toilets are large and complex and are best suited to large sellers and distributors who are able to afford the stocking costs of the product. This approach has been adopted by the company due to the increasing competition in the market. This strategy enables the company to reduce costs of training resellers on the use of the product. The reduction of costs thus enables reduction in the price of the product. The clients on the other hand, get to benefit greatly from this distribution channel as opposed to other channels like intensive distribution. This channel enables clients to be trained on the use maintenance and installation of the product in addition to other services such as after sales services which can be easily coordinated in this system. The distribution strategy plays a great role in determining sales volume and penetration of the market. As the company is in the maturity stage of the product development cycle, it has quite a substantial market share and hence the adoption of an exclusive distribution strategy is convenient for it. This is because the company can keep tabs on the distribution and maintenance of quality of the product. At this stage of the product development curve, it is especially important to differentiate the company’s product from competitor products. The use of exclusive channels of distribution enables the company to get feedback from the customers so as to improve quality as well control the prices of the product. Price Clivus Multrum sales strategies are aimed at maximizing sales, increasing market share, and keeping the competition at bay. The price of a full toilet unit usually depends on the model and style, fixtures needed and whether any accessories are to be used for installation. Waterless models that are for regular domestic use usually range from $1900 to $2500. Larger commercial units are priced higher ranging from $3900 to $8500. This excludes the delivery and installation costs. Clivus Multrum however offers discounts to repeat clients. Prefabricated amenities toilets are normally designed as a cost-effective solution for lone buildings in public areas like roadside stops, community facilities, and parks. Clivus Multrum ex factory prices range from $10500 for a single unit to $60000 for a four booth unit. It also varies depending on the access means, options and wind load requirements for a certain installation. (Tonkin in Clivusmultrum.com 2010) The prices of Clivus Multrum are relatively higher than their competitors such as Phoenix, Vera and CTS. For instance the waterless models of the four companies all range from $1800 to $2700, while large commercial units range from $4000 to $8000 all inclusive of installation. Prefabricated amenities for lone buildings range from $11000 to $50000 all inclusive of installation and delivery. The Clivus Multrum models are relatively cheaper in terms of maintenance and spare parts. Additional components for Clivus Multrum are generally cheaper than for either Phoenix or Vera. The vent and drain kit for Vera costs $345 while it costs $300 for Clivus Multrum. The objective of the prices of Clivus Multrum is to acquire market share and to retain existing clients. The offering of cheaper accessories and spare parts for its product ensures that the users of the products of the other companies use its spare parts in maintaining and repairing their products from the competing companies. In doing this, the company is able to influence clients into switching allegiance from competing companies in addition to fostering customer loyalty through discounts offered to repeat clients. The pricing strategy is in line with the company’s stage of development. As the company is in the maturity stage, there is less need to acquire market share as it is already established in the market. The focus of the company is in taking away market share from its competitors and penetrating the untapped market segment. The company’s focus is on product differentiation and quality enhancement. Price at this period is of less importance as brand loyalty is particularly high. Clivus Multrum only needs to align its prices to the competition to a certain extent. (Tonkin in clivusmultrum.com 2010) The relatively higher prices of Clivus Multrum are in line with their promotion, place, and product policies. By offering price discounts, the company is able to retain repeat customers. The use of direct distribution channels enables the company to lower its costs of doing business while at the same time maximizing their profits by reducing prices. The prices offered by Clivus Multrum though relatively higher are informed by the increasing environmental awareness which would make the product still attractive as it is the company with the highest eco friendly policies. Most customers would therefore want to be associated with the company and its products. Competitive Advantage There are a variety of business strategies that can be employed by a company in order to attain competitive advantage. Clivus Multrum employs several of these strategies in achieving its strategic goals. Such strategies include differentiation, cost leadership, differentiation focus, and cost focus among others. Clivus Multrum has adopted the strategy of value creation in that it attempts to add value to its products at the factory and after they have left the factory. This it has done by making sure that its composting toilets are the most durable in the market lasting up to 40 years. The products of Clivus Multrum are also the most efficient in the market as compared to the latter entrants such as Phoenix and Vera. (Lynn 2010, p. 145) The company has through its chain of exclusive stockists ensured value addition through providing after sales services such as maintenance installation and delivery of its products. Suppliers of Clivus Multrum are also trained in the installation and operation of Clivus Multrum so that they can be able to assist customers buying the products. Clivus Multrum employs cost leadership with the aim of becoming the lowest-cost producer in the composting toilets market. The company strives to make the prices of its products to be as near as possible to the market average so as not to lose market share. Low costs of production are achieved by the company having a significant market share and a loyal customer base from the virtue of it being the oldest company in the composting toilets industry. Clivus Multrum being a cost leader discounts its products and services to repeat customers allowing it to maximize sales and gain a significant cost advantage over the competition further increasing its market share. There are high costs of switching from Clivus Multrum to other brands. The company has made the costs high in order to retain its market share. Clivus Multrum products cannot use spare parts from other companies like CTS and Vera yet the products of these companies can use Clivus Multrum spare parts. The company then goes ahead to make its spare parts and maintenance services cheaper than those of competitors. This makes it easier for clients to use Clivus Multrum product more at the expense of Phoenix Vera and CTS. Clivus Multrum has taken full advantage of its market share to gain a competitive edge over its rivals. Commanding over 65% of the market share, the company has the leeway to set and control prices in the market to its advantage. Clivus Multrum has put a lot of effort into increasing its market share by reducing prices and giving discounts. This has gone a long way in eating into their rivals’ market share. The company also aggressively markets their products to untapped and emerging markets which have leanings towards issues of environmental conservation. There are also groups who have physical problems with the existing toilet systems such as topography, insufficient water supply and high-water tables. These are just some of the groups that have been targeted by Clivus Multrum through customization of its products to fit customer needs. (Snider 2009, p.453) Invention and innovation are key drivers of a company’s growth and staying power in any industry. Clivus Multrum has invested in invention and innovation of products since its incorporation and commercialization of its composting toilet. Ongoing research has consistently provided novel ideas which have continued and continue to improve the products of this company. Being a large company, Clivus Multrum has the necessary financial muscle to actively engage in intensive and extensive research unlike its competitors. The company dedicates 10% of its revenue to its ongoing product and market research. Successful product innovation has enabled the company to be to achieve complementary development in other areas of the business such as customer service, marketing, distribution and human resources. Among the factors that give a company a competitive edge, one of the most important is differentiation of the product from the products of competitors. In the composting and eco friendly toilets industry, this becomes particularly problematic due to parallels in technology existing in the market. Clivus Multrum has striven to differentiate its products through prices, after sales services and brand management. It has also gone a long way to patent and trademark its new inventions and innovations to ensure that it can effectively protect its hard earned leadership status in the market. The company has invested heavily in both reproducible and distinctive capabilities for its products over the last few years. For instance, the services of installation, delivery and price discounts can and have been replicated by Phoenix to some degree. Its models and innovations have been patented to prevent reproduction. (Tonkin in clivusmultrum.com 2010) Assessment of Clive Multrum’s Success Clive Multrum’s success in the provision of composting toilets has been driven by its competitive edge over its rivals. The company has an edge in product leadership where it has invested heavily in invention and innovation. The company is always looking for ways to provide high-quality services and products to its clients. Most of these products and services are produced in response to specific demands and needs of the market for instance environmental consciousness. The effective two way communication that has been established between the clients and the company through the selling agents of the company has been highly successful in promoting quality, innovation and product improvement. The company’s policy of maintaining an environment that fosters creativity and a corporate culture that fosters innovation is admirable. Clivus’s policy of always implementing and commercializing its ideas and innovations in a timely and reasonable manner has enabled it to better respond to market needs and hence become the market leader rather than a reactor. This has been an instrumental factor in improving its market share by penetrating into untapped markets and eating into rivals’ market share. As the company commands the largest market share in the industry, it has been able to effectively use this to its advantage. The company has aggressively sought to increase even further its market share through price reductions to acquire additional market share. By offering preferential services to repeat customers, Clivus Multrum is able to retain its market share. As it also has a large market share, it also has the advantage that most sellers are more willing to stock its products rather than the products of their competitors. (Snider 2009, p.219) The large market share has also been use to its advantage in that the company is able to cut costs through economies of large scale production which enables it to offer products at reduced prices. Clive Multrum’s differentiation policy is exemplary not only in the field of composting toilets, but in the wider business world. The company has striven to the utmost to make its products and services different from those of competitors such as CTS and Phoenix while at the same time retaining their high quality. The company has succeeded in making of innovations and inventions which are both reproducible and distinctive. By investing in both, it has been able to provide products that suit the markets needs while increasing its market share and sales. The distinctive products which the company has patented and trademarked have enabled it to have a head start on its competitors over new technologies. Differentiation of its products and capabilities from generic products offered by the competition has enabled the company to stand out and to build a strong brand which customers identify with. The company’s policy of value creation and addition has borne fruit for the company in that the company has been able to penetrate into untapped market potential more easily than its competitors. The use of exclusive sellers of its products has enabled the company to provide exemplary services and products to its clients. This has been achieved through active control of prices of goods and services offered by the sellers. The company has also been able to cut costs of training clients as only a few select retailers are trained and they in turn train the clients on the products use. The problems of differentiation of the product also tie in with value creation. Clivus Multrum has in this regard been highly successful in value addition by offering after sales services such as delivery, installation and maintenance at cheaper prices. This has been a highly successful business strategy though it needs to be revised as it is a reproducible strategy which can be copied by the competition. (Steinfield 2000, p. 323) The realization by Clivus Multrum of the importance of segmenting the target population has been highly successful. This policy of segmentation of the target population has enabled the company to penetrate into unreached populations and increase market share while at the same time respond to specific needs and requirements of their clientele. The Australian market has a varied clientele with different preferences based on environmental consciousness, water scarcity, difficult topography, and high-water table. These are the groups that Clivus Multrum specifically targets in marketing their products. This is in opposition to their rivals who do not offer specific products for specific clientele but rather focus on a few products. By offering a wide variety of products, the company serves a larger number of people which has enabled them to take advantage of economics of large-scale production. The employment of cost leadership in the composting toilets industry has been central to the competitive edge of Clivus Multrum. The company has always striven to reduce its costs to be as equivalent or as near as possible to the market average. This policy has worked well enough for the company as it has been able to keep at bay the competing companies who do not have the capacity to lower prices. The company having enough financial resources is able to undercut its competitors by offering relatively prices. Cost leadership for Clivus Multrum has been possible and successful due to the large market share it commands which enables it to operate in oligopoly. The huge financial muscle of Clivus Multrum has enabled the company to engage in innovation and research. Innovation and research has enabled the company to develop novel ideas and improve existing one and hence have helped it to become a market leader in a variety of other fields as well such as marketing customer care distribution and others. These are developed as a result of complementarity which is bound to develop any time there are systemic inventions and innovations. (Lynn 2010, p.176) Clivus Multrm’s strategy of under pricing its maintenance and installation costs have been successful in fulfilling the target market’s needs as the company provides value for money, and high-quality products. The strategy has largely been successful as it caters for the immediate need of the customer of maintenance and installation which other companies have failed to provide. All these play a great part in acquiring market share from competitors, penetrating new markets, and retaining existing clients. Clivus Multrums has utilized its competitive edge well enough to achieve its business objectives of driving sales, increasing market share while at the same time catering to the specific needs of the client. This approach is what has and will continue to lead Clivus Multrum to even better business performance in days to come. References Lynn, A 2010. ‘Introducing the new eco-restroom: composting toilets do more with less for less money’, Parks & Recreation, vol 2, pp 94-98. Snider, N 2009. ‘Composting Toilets Emerge as Viable Alternatives’, Oxford University Press, Melbourne, Australia. Steinfield, C 2000, ‘Composting Toilet System Book: A Practical Guide to Choosing, Planning and Maintaining Composting Toilet Systems. Center for Ecological Pollution Prevention, New York, USA. Tonkin, G 2010. ‘Waterless Composting Toilet Systems’, Clivus Multrum Australia. 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