Peak Selling Case Lecture Notes - Recently a small regional tape producer had found some success with a cheaper economy grade version that lacked the

Peak Selling Case Lecture Notes - Recently a small regional...

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Unformatted text preview: • • • • • • • • • • • • • • • • • • • • • • • • • Recently a small regional tape producer had found some success with a cheaper, economy grade version that lacked the patented adhesive technology and high quality materials that K2-­‐Tape products offered Some members of PST’s executive steering committee thought the best way to defend against this threat was to add a similar lower quality, less expensive product to the PST line up. President wasn’t convinced In adhesive industry, PST was recognized as a leader in quality, performance, and technological innovation PST products were generally utilized for packaging and manufacturing Company sales and profits grew consistently over the past 5 years 2012: net sales= $240 million with earnings before tax of almost $35 million K2-­‐Tape: PST’s brand name for its pressure sensitive carton sealing tape line-­‐suitable for manual/dispenser use or automatic machine use K2-­‐Tape value proposition focused on the lowest overall cost to the end user through superior performance K2-­‐Tape offered most advanced adhesive technology, but often competed against inferior, economy grade products like those produced by Ipack Ipack tapes were lower quality, BOPP backed products that lacked K2-­‐Tape’s strength and consistent performance, but end-­‐user pricing was often 25-­‐35% below K2-­‐Tape 2012: K2-­‐Tape sales= $68.6 million Ipack sales= $28.5 million Tensile-­‐ offered an economy BOPP film backed carton sealing tape and had recently entered the Boston metropolitan area with great success The industry could be segmented by product type as well as end-­‐user market Product segmentation: natural adhesives, emulsion and dispersion chemistries, hot melt formulations and other reactive and solvent-­‐based adhesives End-­‐user segmentation: packaging, manufacturing and assembly, construction, consumer/other Majority of K2-­‐tape end users: packaging, retail and manufacturing business, specialty customers in in military supply and hazardous materials Application for K2-­‐tape: carton sealing, bundling, and critical closure applications In Jan 2012, K2-­‐Tape introduced GP-­‐48 a general purpose tape GP-­‐48 created to offer a more price competitive option for customers with less demanding needs Company employed a premium pricing strategy that provided an attractive margin of variable costs PST had a very selective distribution policy so distributors generally complied with the suggested prices Packaging engineers drove approximately 40% tape procurement decisions PSTs sales force spent the majority of their time working with end users Carton sealing tapes, the sales forces had to sell against economy grade products • • • • • • • • • • • • K2 had achieved solid sales growth in the recent economic downturn by seeking out new customers and educating them on how high performance products could be lower overall expenses Sloane often cited the analytical sales approach as a key factor in the company’s success Gross margins for packaging systems were normally higher than for K2-­‐Tape products 22 person sales force devoted 85% of their time to K2-­‐tape products After acquisition 35% of their time allocated to K2-­‐Tape, and 60% to packaging systems and solutions, and 5% allocated to the other PST products Sales force compensation above industry average 125 distributors: 55 of them are “Distinctive Distributors” because together they handled 80% of the business Some distributors had said that PST sales teams were not spending enough time servicing the existing K2-­‐Tape customer Tensile’s BOPP economy product line featured two items and had quickly gained a foothold in the Boston metropolitan market Minimal startup expenses with no major capital investment required for an economy grade tape Preliminary estimate for the total variable costs per 50m, 36-­‐roll case was $80.75 for a competitor to Ecoslim and $107.95 for competitor Ecoplus wide Taylor had to decide whether to recommend the company stay the course with advanced technology, high-­‐quality products or enter the economy grade segment ...
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  • Spring '14
  • ConwayL.Lackman
  • PST

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