Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/eBack Matter Cases © The McGraw−Hill
Companies, 2002a combination of the residential operablewindow with a
heavy-gauge commercial exterior frame that is easy to specify
and install. And this is what Good Timber Mfg. Co. is offering
with a combination of its basic windows and easily adjustable
accessory frames. Two other residential window manufacturers
offer a similar solution, but neither has pushed its products ag-
gressively and neither offers technical support to lumberyards
or trains sales reps like Timothy to do the necessary job. De-
Beer feels this could be a unique opportunity for Timothy.
The sales commission on residential windows would be
about 5 percent of sales. Good Timber Mfg. Co. would do the
billing and collecting. By getting just 20 to 30 percent of his
lumberyards’ residential window business, Timothy could earn
about half of his current income. But the real upside would
come from increasing his residential window share. To do this,
Timothy would have to help the lumberyards get a lot more
(and more profitable) business by invading the commercial mar-
ket with residential windows and the bigger markup accessories
needed for this market. Timothy would also earn a 20 percent
commission on the accessories—adding to his profit potential.
Timothy is somewhat excited about the opportunity be-
cause the retrofit market is growing. And owners and
architects are seeking ways of reducing costs (which Good
Timber’s approach does—over usual commercial approaches).
But he is also concerned that a lot of sales effort will be needed
to introduce this new idea. He is not afraid of work, but he is
concerned about his financial survival.
Timothy thinks he has three choices:
- Take DeBeer’s offer and sell both window and lumber
products. - Take the offer and drop lumber sales.
- Stay strictly with lumber and forget the offer.
DeBeer is expecting an answer within one week, so Timo-
thy has to decide soon.
Evaluate Timothy Morgan’s current strategy and how the pres-
ent offer fits in. What should he do now? Why?
Enviro Pure Water, Inc.*Manish (Manny) Krishna established his company, Enviro
Pure Water, Inc. (Enviro), to market a product designed to pu-
rify drinking water. The product, branded as the PURITY II
Naturalizer Water Unit, is produced by Environmental Con-
trol, Inc., a corporation that focuses primarily on water
purification and filtering products for industrial markets.
Enviro Pure Water is a small but growing business. Manny
started the business with initial capital of only $20,000—
which came from his savings and loans from several relatives.
Manny manages the company himself. He has a secretary and
six full-time salespeople. In addition, he employs two college
students part-time; they make telephone calls to prospect for
customers and set up appointments for a salesperson to
demonstrate the unit in the consumer’s home. By holding
17spending to a minimum, Manny has kept the firm’s monthly
operating budget at only $4,500—and most of that goes for
rent, his secretary’s salary, and other necessities like computer
supplies and telephone bills.
The PURITY II system uses a reverse osmosis purification
process. Reverse osmosis is the most effective technology
known for improving drinking water. The device is certified by
the Environmental Protection Agency to reduce levels of most
foreign substances, including mercury, rust, sediment, arsenic,
lead, phosphate, bacteria, and most insecticides.
Each PURITY II unit consists of a high-quality 1-micron
sediment removal cartridge, a carbon filter, a sediment filter, a
housing, a faucet, and mounting hardware. The compact sys-
tem fits under a kitchen sink or a wet bar sink. An Enviro
salesperson can typically install the PURITY II in about a half
hour. Installation involves attaching the unit to the cold-
water supply line, drilling a hole in the sink, and fastening the
special faucet. It works equally well with water from a munici-
pal system or well water and it can purify up to 15 gallons daily.
Enviro sells the PURITY II to consumers for $395, which
includes installation.
The system has no movable parts or electrical connections
and it has no internal metal parts that will corrode or rust.
However, the system does use a set of filters that must be re-
placed after about two years. Enviro sells the replacement
filters for $80. Taking into consideration the cost of the filters,
the system provides water at a cost of approximately $.05 per
gallon for the average family.
There are two major benefits from using the PURITY II
system. First, water treated by this system tastes better. Blind
taste tests confirm that most consumers can tell the difference
between water treated with the PURITY II and ordinary tap-
water. Consequently, the unit improves the taste of coffee, tea,
frozen juices, ice cubes, mixed drinks, soup, and vegetables
cooked in water. Perhaps more important, the PURITY II’s
ability to remove potentially harmful foreign matter makes the
product of special interest to people who are concerned about
health and the safety of the water they consume.
The number of people with those concerns is growing. In
spite of increased efforts to protect the environment and water
supplies, there are many problems. Hundreds of new chemical
compounds—ranging from insecticides to industrial chemi-
cals to commercial cleaning agents—are put into use each
year. Some of the residue from chemicals and toxic waste
eventually enters water supply sources. Further, floods and hur-
ricanes have damaged or completely shut down water
treatment facilities in some cities. Problems like these have led
to rumors of possible epidemics of such dread diseases as
cholera and typhoid—and more than one city has recently
experienced near-panic buying of bottled water.
Given these problems and the need for pure water, Manny
believes that the market potential for the PURITY II system is
very large. Residences, both single-family and apartment, are
one obvious target. The unit is also suitable for use in boats
and recreational vehicles; in fact, the PURITY II is standard
equipment on several upscale RVs. And it can be used in tav-
erns and restaurants, in institutions such as schools and
hospitals, and in commercial and industrial buildings.
There are several competing ways for customers to solve
the problem of getting pure water. Some purchase bottled726 Cases
*The original version of this case was developed by Professor Ben
Enis of the University of Southern California, and it is adapted for use
here with his permission.