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This sample marketing plan was created with Marketing Plan Pro software.

H20 Industries' marketing strategy will be to execute and communicate its value proposition of service and market segmentation advantage in providing segregated regeneration of customers' resin.  This will be expanded on in upcoming sections.

Mission

H20 Industries' mission is to segment the market for pure water by providing niche products to specialized industry sectors who are otherwise not properly serviced by large pure water suppliers. Segregating a customer's deionization resin and regenerating it on a portable tank basis to hospital dialysis units is an excellent example of such a niche product that stresses quality and service to users who are prepared to pay a premium price.

Marketing Objectives

  • Maintain positive, steady sales growth each quarter.
  • Achieve increase in market penetration every two quarters.
  • Generate brand equity so that H20 Industries becomes a household word within the industry.

Financial Objectives

  • Decrease fixed costs by increasing the sales base, leveraging economies of scale.
  • Increase profit margin by 2% a year through operating efficiencies that are then passed throughout the organization.
  • Do not decrease research and development, as a percentage of sales, regardless of the economic climate or market position.

Target Markets

The market for deionization encompasses many industries, and within them is a wide range of purity needs.

At the low end, a car wash might use deionized water in the final rinse only. Their need for purity might be only .5 Megohms (Ohms measure resistance). Water is only a good conductor because of the quantity of dissolved solids in the water. As the ion exchange process lowers the level of total dissolved solids (TDS) the resistance, measured in ohms, increases.

A purity level of .5 Megohms is pure enough for a car wash final rinse cycle, but not even close to pure enough for a electronics wafer manufacturer. They would need 18 Megohms, at which point the water would be pure and incapable of acting as a conductor.

Generally speaking, those sectors of the market that need the highest levels of purity are the customers for H20 Industries' main niche product of segregated DI exchange service. This means that the resin coming back from the customer is never mixed with any other company's resin.

This is a very strong sales feature when dealing with dialysis units of a hospital, labs and pharmaceutical manufacturers, and electronics makers. These customers are happy to pay a premium over the price charged for bulk DI regeneration service because they do not want their resin co-mingled with resin coming from a metal plater or a car wash.

Quantifying the market for segregated portable deionized equipment is not easy. Unlike the market for used cars, metal furniture, or nearly every product one can think of, there are no readily-available statistics on the market for portable DI exchange. There is overwhelming agreement that US Filter has the commanding market share of DI exchange business, opinions range from 85 to 95% majority.

According to the publisher of Ultrapure Water, (May-June 2001 volume 16, number 5) US Filter had sales of $1 billion in 1997, and has grown to $5 billion in 2002. Portable DI exchange is only a small portion of their business.

Sales in Northern California of only DI portable exchange is estimated at $25 million. This has been confirmed from several sources. Firstly, one of the owners of H20 Industries is a former employee of US Filter. In 2000, their DI exchange business reached $12 million. This was only 65% of the market.

hen the company acquired Culligan, adding another $8 million in portable DI exchange business in Northern California, and bringing the total to $20 million. It is assumed that sales have grown to $25 million over the past several years.

Based on a recent quotation received by US Filter for a typical portable DI exchange set-up for a 5-gallon per minute customer, the costs come to $590 for a total of 14.4 cu. ft. of regenerated resin. This amounts to $41 per cubic foot. A sales level of $25 million would translate into 610,000 cubic feet. Assuming that US Filter has as much as 90% of the market, 100% of the market for portable DI exchange in the Northern California states would total approximately 670,000 cu. ft. annually.

The relationship between input water and DI exchange capacity is charted. Assuming incoming water quality of 200 parts per million of TDS, a 3.6 cu. ft tank of regenerated resin can handle 10,800 gallons. This means that an average user with a flow rate of 10 gallons per minute would use up a 3.6 cu. ft. tank in 2.57 days, or 1.4 cu. ft. per day.

Assuming the salesman was accurate in his statement of 2,000 customers, this would work out to 840,000 cu. ft. of regenerated portable DI exchange business per year. This figure is somewhat greater than the figure of 610,000, however, the subject of this business plan, H20 Industries, will has a productive capacity of only 140 cu. ft. per day, which represents between 4.5% and 6.3% of the total market in Northern California.

Taking the midpoint estimate for the total Northern California market of 780,000 cu. ft. annually, these high purity users would represent a 558,000 cu. ft. market.

Hospital Dialysis Units and Stand alone Clinics
California lists 16 stand-alone dialysis clinics, many of whom have multiple locations with varying numbers of stations. Every dialysis clinic, as least in Michigan according to BESCO, use deionization units for polishing, after initially running the water through a reverse osmosis system. In addition, there is blood analysis work which is normally done using "wet" analysis equipment that requires H20 Industries. Assume this sector represents only 10% of the high purity market, or 55,000 cu. ft. annually.

Labs and Pharmaceutical Manufacturers
A list of labs and pharmaceutical makers in Northern California contains 330 names. A sample calling indicated that some use no pure water, others use such small qualities (10 gals/months) that they buy the water from suppliers like Hubbard-Hall, already made up. Others use so much deionization water that they have their own built-in DI system. The rest who have flow rate needs of between one and 20 gallons per minute are in the range most economically serviced by portable DI exchange. Assume this to represent 20% of the 558,000, or 112,000 cu. ft.

Electronic Manufacturers
Semiconductor manufacturers and other makers of electronic components need pure water to flush with. As microprocessors use wafers of ever-decreasing size, the requirements for pure water to rinse with increase, as do various other additional micro filtering. A list of electronics manufacturers in Northern California names 189 makers. Assume this sector represents 40% of 558,000, or 223,000 cu. ft.

Machine Tools and Parts
This is one of the fasting growing sectors as more manufacturers conform to the ISO 9000 standard, which requires delivered parts to be clean (defined as rinsed thoroughly with water of one Megohm purity or better). This category includes a need for deionized water in machines consuming cutting oil, any machine with cooling systems, and other uses. Assume this sector represents 30% of 558,000, or 167,000 cu. ft.

Other
This sector of the market will represent the market for DI exchange water lower than one Megohm in purity. Assume that the following industries take up the remaining 30% of the total market. Some industries that would be included in this "other" category would be:

  • Car washes need deionized water for the final rinse.
  • Food and beverage industry would use it for improving taste and texture of baked goods, cutting and blending alcoholic beverages, dissolving food colors, etc.
  • Cosmetics industry needs it for the production of shampoo, liquid soaps, cold creams, hand lotions, nail polish remover, permanent waving solutions, rubbing alcohol, and hydrogen peroxide.
  • Electroplating industry utilizes deionized water in anodizing, electro-tinning, rinsing, rust proofing, and actual plating with various metals such as nickel, copper, silver, and chromium.
  • Ceramics industry requires it to control pH in preparation of slips and glazes, rinsing clay pieces, producing enamel.
  • Textile industry uses deionized water in steam irons and other steaming equipment, humidification systems, as well as rinsing, dying and bleaching processes.
  • Railroad industry for high pressure boilers, cooling systems and storage batteries and for many applications where steam is used)
  • Others, such as applications for grinding optical lenses, silvering solutions for mirrors, manufacturers of blueprint paper, manufacturers of ice, humidification of gas supplies to superchargers of high speed aeronautical engines, growing orchids, etc.

Positioning

H20 Industries' ability to regenerate resin on a segregated basis, rather than only bulk, is a capability that should provide quick and easy entry into the user market where the highest water purity is needed.

These users, blood analysis, hemodialysis units, and medical laboratories for example, are especially sensitive to contamination risks. Simply pointing out to these users that bulk regeneration involves the co-mingling of their resin with resin used in the metal-finishing and car wash industries usually is quite convincing.

Segregated regeneration results in the further advantage of achieving a higher DI capacity per cubic foot as greater quantities of chemicals are used during a longer regeneration period.

The second most important position statement is H20 Industries' concentration on the DI exchange business. This concentration will force H20 Industries to provide a higher level of service, and more quickly, too. It must be remembered that the cost for the highest level of water purity is not a significant cost element in the overall cost structure. However, a service shutdown, for quality or for service reasons, would be very costly to high-technology users of H20 Industries.

Strategy Pyramids

The single objective that H20 Industries faces is to position itself as the premier service provider of portable deionization equipment, quickly developing market penetration.

The marketing strategy will seek to first create customer awareness regarding the products and services that H20 Industries offers, build a network of dealers that can assist H20 Industries in the distribution, and build a large foundation of satisfied, repeat customers. 

The message that H20 Industries will seek to communicate is that it offers a wide range of flexible options for all different types of portable purification units. These flexible options will be coupled with extraordinary customer service.

This message will be communicated by various methods.  The first method will be advertisements.  The advertisements will be placed in industry journals, not only the water purification industry, but industry journals of the customers.  This will help H20 Industries develop brand awareness.

Another method of communication will be participation in trade shows.  Being a part of the trade shows is almost a requirement these days and H20 Industries will have a significant presence.  The last method of communication will be a roving sales force whose task it is to set up a dealership network.

Marketing Mix

H20 Industries' marketing mix is comprised of the following approaches to pricing, distribution, advertising and promotion, and customer service.

  • Pricing: In-line with the conclusions drawn in the positioning statements, H20 Industries can charge a higher price for its segregated regenerated resin. There is virtually no competition for this product in the Northern California market.

    Charging $63 per cubic foot (mixed bed), as used in the sales projections, is more than a 65% increase over the price for US Filter's bulk resin price for mixed bed. H20 Industries is currently successfully charging in excess of $70 for this product.

    It is essential that H20 Industries place a premium price consistent with its superior product.  Wholesale prices have been established to encourage the quick formation of a dealership network. Dealers are afforded a 33% discount.

  • Distribution: Wherever H20 Industries cannot economically sell directly, due to distance or quantities, it will utilize a network of water service companies. These companies will be carefully chosen for their quality of service.

    An arrangement will be set up whereby the distributor will offer DI exchange service along with its other water services. The installations can easily be handled by them. They would tag the tanks and return and pick up from the H20 Industries plant.

    Being able to offer this service increases the image of the local water service company. It fosters a feeling a one-stop shopping. A 33% discount off the retail price should be adequate to satisfy the distributors.
  • Advertising and Promotion: The main focus of promotion will be two-pronged: promotion to H20 Industries end users, and promotion to wholesalers.  Promotion to wholesalers should receive primary stress due to the extended reach made possible by the wholesaler network with its existing customer base.

    The sales force of these wholesale distributors needs to be educated on H20 Industries' positioning statement so that they all understand the important sales advantages of segregated resin. Being able to offer DI exchange service to a distributor's customer list is a great advantage to the distributor, and this fact needs to be clearly spelled out to them.

    Therefore, the H20 Industries relationship with a dealership network is one in which both sides benefit. H20 Industries should strive to create a small-town, friendly relationship with its customers. Company brochures will show a map with all the H20 Industries locations, including each newly acquired distributor. The distributor trucks, as well as H20 Industries vehicles, would carry the H20 Industries logo, helping all to achieve name recognition. Cost savings would result through sharing literature, leads (by territory and/or industry), co-op marketing costs, and the sharing of technical expertise.
  • Customer Service: The approach to customer service can be succinctly stated - The customer's expectations must be exceeded, always.  The only way the company can succeed is if they ensure all of the customer's needs are being met and the customer leaves the transaction with the feeling that they were truly appreciated.

Marketing Research

H20 Industries performed comprehensive amounts of market research before the initiation of these business plans.  Much of the research occurred at the empirical level where two of the principals have had extensive industry experience.

The owners were aware when they entered the industry that at some point in the future they desired to operate their own business instead of working for someone else.  With these ideas implanted in their minds, they both worked for larger companies for years while making observations and doing research within the industry.  This comprehensive research brought them to the conclusion that there was an unserved niche in the market that could be profitably exploited.

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