BUSI 6415: MARKETING NEW TECHNOLOGY PRODUCTS
MARKET FEASIBILITY STURY
THERMOACOUSTIC REFRIGERATION
Submitted to:
TREVOR BOURGEOIS
ERIN MACNEIL
PETER SMITH
MIKE HORNE
Submitted by:
Tekin Ozcay
Banner No: B00174388
Table of Contents
THERMOACOUSTIC REFRIGERATION ....................................................................... 0
EXECUTIVE SUMMARY ................................................................................................ 2
OVERVIEW ....................................................................................................................... 3
PRODUCT DESCRIPTION ............................................................................................... 3
Strengths ......................................................................................................................... 3
Weaknesses: .................................................................................................................... 4
Stakeholders .................................................................................................................... 4
SITUATIONAL ANALYSIS ............................................................................................. 4
Environmental Trends ..................................................................................................... 4
Technological Trends...................................................................................................... 5
Market Trends ................................................................................................................. 5
CUSTOMER ....................................................................................................................... 5
Primary Target Market (For Extra-large kitchen type refrigerator)................................ 5
Customer Needs .............................................................................................................. 6
Product Features.............................................................................................................. 7
Secondary Target Market (For Small-size table-top refrigerator) .................................. 8
COMPETITION ................................................................................................................. 9
COMPANY....................................................................................................................... 10
Strengths ....................................................................................................................... 10
Weaknesses ................................................................................................................... 10
Opportunities................................................................................................................. 10
Threats........................................................................................................................... 10
COMMUNITY ................................................................................................................. 11
PROMOTION ................................................................................................................... 11
PLACE (DISTRIBUTION) .............................................................................................. 11
PRICE ............................................................................................................................... 12
PROGRAM – MARKETING MIX FIT ........................................................................... 12
MARKETING STRATEGY ............................................................................................. 13
PRIMARY RESEARCH .................................................................................................. 13
Research Method .......................................................................................................... 13
Test of Market Hypothesis ............................................................................................ 13
Analysis of customer needs .......................................................................................... 14
DISCUSSION ................................................................................................................... 14
SUMMARY ...................................................................................................................... 15
CONCLUSION AND RECOMMENDATIONS ............................................................. 15
REFERENCES ................................................................................................................. 17
1
EXECUTIVE SUMMARY
Thermoacoustic refrigerator is a device that operates efficiently by using sound
waves and non-flammable environmentally friendly gases and that is suitable for
handling residential refrigeration needs. The defined target market of the product is the
25-44 year-old married people living in Canada and owning their home. They have $ 53,000 and
higher income the number of these consumers in Canada is close to 4 million households.
The customers needs in this market segment are efficiency, long life span and warranty,
capacity, acceptable price, nice design and color, quietness, respected brand, safety and
environmental friendliness. Thermoacoustic refrigerator has the most important features built in
our products to satisfy these consumer needs. We will especially be good at offering
environmental friendly, well-designed and long lasting products.
The Marketing strategy is to get a foothold in this market by targeting high-end product
segment and receive premium payment with our superior products. This strategy will involve
avoiding direct competition with the established companies in the lower-end markets and
sustaining sufficient profit margin. We are open to cooperation with the existing companies in
manufacturing and marketing. This cooperation however should not damage our good quality
reputation.
Consumers will not only get the quality needs from our products but also self-fulfillment
through purchase of an elegant and environmentally friendly cooling device. This will be
achieved through technological superiority of our products as well as targeted promotion
campaigns.
2
OVERVIEW
This market feasibility study focuses on thermoacoustic refrigerator, which is currently
under development. The study is mainly based on the secondary research that is conducted on a
wide variety of relevant materials. Most of the arguments within this paper are the result of this
research. A small-sized primary research in the form of interviews was also conducted to test the
accuracy of the secondary research. The result of this research is reflected in various parts of the
study such as the discussion of the customer needs and product features. But there will also be a
short part devoted to the result of only the primary research.
The study tries to answer the question of feasibility of this product within the
refrigeration industry. Although the subject technology has many possible applications, from
heating to air conditioning, from industrial cooling to aerospace industry, the scope of this study
will be limited to household refrigeration applications. Moreover this market feasibility study will
mainly analyze the customers and customer needs and what product features can satisfy those
needs. Although competition and the company will be briefly examined they will not make the
core of the study.
PRODUCT DESCRIPTION
The product is a thermoacoustic refrigeration device that operates efficiently by using
sound waves and non-flammable environmentally friendly gases and that is suitable for handling
residential refrigeration needs.
Thermoacoustic refrigeration systems operate by using sound waves and a nonflammable mixture of inert gases to produce cooling. The device produces a standing wave in a
tube containing a gas (helium, argon, air) using a loudspeaker. A porous component called a
"stack" is placed in the tube in such a way that a temperature difference is created along its
length. With the addition of heat exchangers, this temperature difference can be made to provide
refrigeration
Because the thermoacoustic refrigerator only has one moving part, it will be relatively
simple and inexpensive to construct and maintain. Thermoacoustic refrigerators tend to be
compact and lightweight, and contain no refrigerants, making them a very environmentally
friendly technology. This aspect will make it a very appealing option in the future.
Despite being a relatively new technology its efficiency in some applications has been
proven. It was used in on the Space Shuttle Discovery STS-42 and tested on some U.S. Navy
ships for the cooling needs.
Strengths

Economy: The device can be produced and operated cheaper than the traditional vapor
compression cooler due to;




Mechanical simplicity and very few number of the components
No need for lubricants since there is only one moving part, which is the loudspeaker.
No expensive components
Use of cheap and readily available gases (The atmosphere is %1 Argon)
3



Power saving by proportional control: output of the device can be turned up or down
gradually in contrast to vapor compression refrigerator’s on/off control.
Lower life-cycle cost
Environmental Friendliness: The international restriction on the use CFC
(chlorofluorocarbon) and skepticism over the replacements of CFC, gives thermoacoustic
devices a considerable advantage over traditional refrigerators. The gases used in these
devices are totally harmless to the ozone and have no greenhouse effect. It is expected that in
the close future regulations will be tougher on the greenhouse gases.
Weaknesses:




Efficiency: Thermoacoustic refrigeration is currently less efficient than the traditional
refrigerators.
Talent bottleneck: There are not enough people who have expertise on the combination of
relevant disciplines such as acoustics, heat exchanger design etc.
Lack of suppliers producing customized components.
Lack of interest and funding from the industry due to their concentration on developing
alternative gases to CFCs.
Stakeholders







Refrigerator companies
Chemical companies
Consumers
Manufacturing and Production
Patent holders
Environmental regulatory agencies
Department stores
SITUATIONAL ANALYSIS
Environmental Trends
The Ozone-depleting Substances Regulations, 1998 were made under the Canadian
Environmental Protection Act (CEPA) in December 1998 and is line with The Montreal Protocol,
which is an international agreement signed by 165 countries to control the production and exchange
of certain ozone-depleting substances. The Regulations control the import, export, transit shipment,
manufacture, use, sale and offer for sale of any HCFCs or products that contain or are intended to
contain HCFCs. HCFCs or HCFC products cannot be manufactured, imported, sold or offered for
sale for use in areas of application in which a controlled substance has never been used in Canada.
Under the Regulations, the manufacture and import of many products that contain HCFCs have been
prohibited since July 1, 1999, and the offers for sale and sale of many products that contain HCFCs
have been restricted since January 1, 2000.
4
Furthermore Code of Practice for the Reduction of Chlorofluorocarbon Emissions from
Refrigeration and Air Conditioning Equipment targets to restricts the use of CFC and HCFC
substances in residential systems and domestic appliances.
Technological Trends
Besides the improvements in the thermoacoustic refrigeration conventional refrigerator
producers have also made significant improvements in developing more efficient appliances.
Electricity use of the refrigerators has significantly decreased within past 10 years. Some of the
producers have switched to new refrigerants by eliminating the use of CFCs. Another
development is the heavy investment by the gas producers to find replacement for CFC and
HCFC substances. But the skepticism over these new gases is continuing and new regulations
will likely affect them.
The effort in the refrigeration industry is mainly directed at developing new product
features to satisfy the customer needs better than the competitors. As a result of this trend many
new features have been added to the standard components of the products while the price
remained the same.
Market Trends
Household appliances market in Canada has been quite stable and the growth is modest.
Competition is mainly focused on the replacement devices rather than first-buyers. There is a
clear trend towards more environmental products and currently this demand is met with the
improved versions of various household appliances. But there is a suspicion for these products
and a new technology has a chance of gaining foothold in the marketplace.
According to Industry Canada there are 830,000 refrigerators annually sold in Canada
either produced domestically or imported. Sales of major household appliances have reached $1.4
billion in the year 2000.
In the industry there is certain trend towards consolidation. The bigger players in the
industry have bought many small companies. This trend however brought the question of the
ability of the companies to integrate these different activities. Recession has been met with the
decreased cash stocks due to the acquisitions.
CUSTOMER
Environmental consciousness of the customers has shown a clear increase with the great
publicity of the negative effects of all kinds of products. Ozone depleting and planet warming
effects of CFC has become public knowledge. But customers are yet to become ready to pay high
premiums for more environmentally friendly products.
Primary Target Market (For Extra-large kitchen type refrigerator)
Primary target market for the thermoacoustic refrigerator is the households with a
medium or large size refrigerator need. Main characteristics of this market are as follows:
Geographic:
Canada
5
Demographic: 25 to 44 year-old
Married
th
High income (4 to highest Quintile)
Environmentally conscious
Home owners
Psychographic: Environmentally conscious
When we look at the customer closer to understand the size of this market we get some
interesting numbers. 49,7 percent of the two highest quintile income group is between the age 25
to 44. And 85 percent of this group consists of husband-wife households. This is important
because according to the same survey husband-wife families spend more than the others on the
household equipment including refrigerators. This is equivalent to 4.5 million households with $
53,000 and over income half of which earn over $79,000. As the survey shows 99 percent of this
population already have a refrigerator. But survey has also shown that 70 percent of the appliance
purchases is for replacement rather than first purchases. In addition to the existing families there
are 153,000 new marriages annually throughout Canada.
Customer Needs
In order to determine the customers needs and expectations concerning a refrigerator we
firstly examined the existing products in the marketplace and their offerings. Then we have
searched the consumer associations and product advisors to understand what the customers are
looking for. Finally we have combined these results with the interviews we have made and
concluded the needs assessment below. Interviews include the consumer thoughts as well as
salespersons of these products. This part is explained in depth in the primary research.


Efficiency (power consumption): All of the customers mentioned the low usage of electricity
within the top three requirements. This is due to both the financial and environmental
concerns.
Long life span and warranty: Consumers sounded unhappy with the low warranty period of
the manufacturers, which is mostly one year. This gives the impression of poorer quality.

Capacity (size): Sufficient interior capacity is a must. It is mentioned by some of the
consumers as the yes/no decision criterion.

Price: Consumers do care about the price but they balance it with the other requirements
saying that they could pay more if the product had more superior features.

Nice design and color: Consumers assume that the product will not be an unusual color. They
often mentioned the green design of the 1970s being ugly. Almost all of them indicated they
would be willing to pay premium price more for stainless steel refrigerators within some
limits.

Quietness: This is another yes/no criterion. Consumers do not want to buy a loud refrigerator.

Brand: Brand is relatively less important for the consumers but they believe they found what
they want with the top five brands.
6

Safety: Some customers did not think it was not an important issue with the refrigerators, as
they do not believe a refrigerator may create safety risk. But some consumers had heard the
flammability of some HCFC substances and thought it was important.

Environment friendliness: All customers attached some value to this feature. But they were
not very ready to pay high premiums for it. They indicated that this could be a decision
criterion if other requirements are met.
Besides these main features some of the less frequently mentioned features can be outline as:





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Low maintenance cost and effort
Freezer size
Adjustable shelves
Ice maker
Ice/water dispenser
Humidity control
Product Features
Thermoacoustic refrigerator has some specifications that meet most of these requirements
and some others can easily be added to it.

Competitively efficient: Although the efficiency is not the core competency of the
thermoacoustic refrigerator a device that can compete with the existing products is possible.
This is supported with the adjustable temperature control system.

No CFCs: It does not use any of the CFC or HCFC substances thus its negative
environmental impact is close to zero.

Adjustable temperature control: Enables the consumers to control the temperature at the
necessary level. The existing products run until some temperature level and then stop and
then start again when the temperature gets too high. This decreases the efficiency of the
refrigerator. Temperature control with the thermoacoustic devices can be done by simply
decreasing or increasing the sound volume.

No lubricants: since there is no moving parts there is no need to use chemicals as lubricants.
This will increase the life span of the product an decrease the maintenance cost.

Safe (No-flammable gases): The device uses common gases such as a mixture of helium and
argon which are found in the air and totally inflammable.

Minimum moving parts: These refrigerators have no sliding seals and can be built by using
few or no moving parts.

Extra-large: The product will be produced in extra-large size (Over 24 Cu) for the primary
target market.

Stainless steel body: This feature particularly expected by the consumers as an important
feature of a high quality “elegant” refrigerator.
7
Efficient energy use
4
Long life span
4
Capacity
2
Price
3
Design and color
3
Quietness
2
Brand
3
Safety
1
*
*
1
Freezer size
1
Whirlpool
Maytag
Kenmore
2 4 4 3 2
*
2 3 3 4 2
4 4 4 4 4
*
Adjustable shelves
General Electric
4 3 3 4 4
* *
2
Electrolux (Frigidaire)
Stainless Steel colour
$2500-3000 Retail price
Over 24.1 Cu (Extra large)
4 3 2 3 4
3 4 4 3 4
*
* * * *
Low maintenance
1
*
*
Environmental friendly
High
Low
Average
No lubricants
*
*
3* *
Ice maker
Minimum number of pieces
Adjustable temperature
Customer Needs
Gas (No CFCs) or HCFCs
Importance
The table below presents the product matrix of thermoacoustic refrigerator and competitive
products.
*
*
* *
*
4 2 3 3 2
5 4 4 4 4
3 2 2 2 3
2 3 2 2 1
*
*
4 4 4 4 4
*
*
5 5 4 4 3
5 0 5 0 5
27.3 4200
24.1 2400
26 2900
TARGET SPECIFICATIONS
Note: Gray areas indicate the features that thermoacoustic refrigerator will be the best of class.
Secondary Target Market (For Small-size table-top refrigerator)
Secondary target market of the thermoacoustic refrigerator is the c ottages with small
size table-top refrigerator needs. Despite the difficulty of finding information on the
number of the cottages we assume that there are a considerable number of cottages that
can possibly be targeted with small size refrigerators. These refrigerators are also
preferable in the offices, as they do not take big space. Geographic location is again in
Canada. The consumer characteristics include the same demographic components as the
higher income groups are more likely to have a cottage besides their home.
8

Mobility: The refrigerator should be easy to move since the space in the cottages almost
always limited. It should be easy to place it in different locations within the room.

Convenient design: It should fit the environment that it is placed in especially. For example
the door of the refrigerator should be designed in different ways so it can be used in different
tight environments.

Quiet: This is very important as people would want have relaxed environment in the cottages.

Price: For many people who own a cottage, the refrigerator may be a secondary need so the
price becomes an important issue.
Besides these main characteristics, efficiency, safety, and warranty are also important. But this
type of refrigerator will not have a freezer, as it is not feasible to have it in such a small device.
Product features: Small size refrigerator will enable the company use the advantages of the
thermoacoustic technology such as the minimum moving part requirements. The efficiency will
not be a challenge since the cooling area is much smaller and homogenous. Besides the
environmental features that were mentioned above main characteristics will be:

Small size (smaller than 11 Cu)

Mobile: it will have wheels for ease to move

Different designs: Either front or top door.

Low price
COMPETITION
There are over 30 companies in Canada producing and selling refrigerators, but the
market mainly divided among five strong brands. Kenmore does not have any production facility
but buys from the other producers instead. The industry is in the maturity stage and very stable.
Established companies cover most of the market share. The market gives the impression of an
Oligopoly despite high number of actual players. This is so because five strong brands effectively
sell most of the products in the market. The most selling five brands are as follows:
Frigidaire: The brand of Electrolux in North America. It has four more brands sold in Canada,
Gibson, Kelvinator, Tappan, and Westinghouse.
General Electric: It is household appliances division of General Electric Corporation.
Kenmore: Kenmore is the Sears store brand. It's the largest brand in North America with all of its
appliances made by GE, Whirlpool, Maytag, Frigidaire, and some other manufacturers.
Maytag: Main brands are Admiral, Jennair, Maytag, Magic Chef
Whirlpool: the biggest household appliances manufacturer in North America.
9
The competitors are mainly well-established companies operating in Canada and abroad.
They have, with the exclusion of Kenmore, strong production capabilities and marketing
activities. Kenmore has the backing of Sears department store, which is the first purchase location
mentioned by the customers when they are asked where they buy their refrigerators.
The biggest barrier to entry of thermoacoustic refrigerator is the resistance of the
established manufacturers since it effects their technology adversely. It can be expected that they
will try to prevent or delay its entrance to market with their best means. The best way to
overcome this barrier is to make a long-term collaboration with some of them. The second barrier
is to gain the financial backing and it can also be solved with the support of big cooperation. A
marketing attack to the center of the market by a new entrant will likely fail thus it is important to
find some niche in this market.
COMPANY
The company is going to produce thermoacoustic refrigerator and organize the marketing
activities necessary to sell these products to consumers. The production may start within three
years if the product development process goes as planned. It should have the sales force that have
the technical knowledge on the products and experience on sales. Although it may be difficult to
build an effective sales force it is nevertheless crucial to get a foothold in such a competitive
market. Partnership with the distribution channels or one of the existing manufacturers may be
very useful to overcome many of the challenges. It is useful for us to make a SWOT analysis of
the company to understand its standing.
Strengths
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Knowledge base necessary to produce the thermoacoustic refrigerator will be build until
the company starts its operations.
Property rights of the technology developed will belong to the company
The company does not have the bad environmental reputation that the current producers
have due to their CFC or HCFC refrigerant use.
Production of the thermoacoustic devices is much simpler than the other devices because
of their structural simplicity.
Weaknesses
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
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The company lacks the market knowledge and experience
Financial and human resources are scarce in the product development phase
Economies of scale are hard to achieve in the earlier years of production
Opportunities



Environmental regulations can create a market niche for thermoacoustic refrigerators
Community awareness can enhance the opportunity above
High R&D costs of the competitors because of their search for more environmental
options
Threats

More companies may follow to produce similar products
10


The competitors have strong resources and experiences in the market and can implement
long-lasting fierce competition strategies
Efficiency of the conventional refrigerators are rapidly increasing
COMMUNITY
According to Statistics Canada’s publication “Spending Patterns in Canada”
spending on household appliances has shown a steady increase between 1970 and 1999,
which is the latest year when this research was conducted. Income level effects the
spending patterns significantly. For example the lowest quintile spend half of their
income on basic needs like food etc. while in the highest quintile this is less a quarter.
The highest quintile spends 4 times more than the lowest on the household appliances.
61% of the ones in the lowest quintile live alone while on the top quintile this is only 4%.
The environmental awareness of the Canadian population especially among the
people with higher education has increased. The pressure on the companies and
regulatory agencies has led to more advanced environmental regulations.
PROMOTION
The company will show the product to the market in the national exhibitions such as
Canadian Hardware & Home Improvement Show and National Housewares Show, both of which
are organized in Toronto. The thermoacoustic refrigerator will also be exhibited in more local
shows to reach the consumers throughout Canada.
It is very important to get a place in the department stores like Sears since customers
mostly buy their appliances there. High profit margin will allow the company to offer department
stores an attractive business opportunity. Initially, some of the profit can be sacrificed to reach
this goal.
Advertisement will be published in the home improvement magazines and life style
magazines since the target consumers is the biggest reader group of those publications. Due to
scarce financial resources TV and similar media commercials may not be feasible in the
beginning. Instead the company organize consumer competitions where refrigerators are given
away for free to spread the brand name.
The table-top refrigerator may be promoted under another brand name. This may be
necessary to prevent its adverse effect on the main product. As the main product is supposed to
create an expensive image the small figure of the secondary product may harm this image.
PLACE (DISTRIBUTION)
The department stores are the most common place that customers buy household
appliances and particularly refrigerators. It is imperative to get the attention of these channels to
thermoacoustic refrigerators.
Catalog sales are also possible to use as a distribution channel since it is relatively cheap
for the company.
11
Internet can be a very effective sales channel and allow the company build its own online
store with affordable costs. Internet usage in Canada is continuously increasing and more and
more consumers are shopping online. It is also a perfect tool to demonstrate the products.
PRICE
For the pricing of the devices cost will be a secondary issue. Since the products are
designed to offer the most required features it should also receive the price premium for those
features. For the product, which has approximately $1000 manufacturing cost the price should be
between $2500 and $3000 for retail. This price is also necessary to offset the product
development costs up to date and further development after production. This price is designated
to meet the strategic objectives of the company and the product that is to offer consumers a high
quality product that appeals to consumers not only with its physical attributes but also
psychological impact. Customer should feel better for having a product that does not harm the
environment, a product that they can tell friends about. The price of the refrigerator should reflect
this objective. So for this product main challenge is to measure the willingness of the consumer to
pay and how we can create that willingness.
The table-top refrigerator however, will have a different pricing strategy. Since it is
mainly used for practicality its price cannot be very high. Company can use a lower price strategy
to increase the sales of this product and use the cash flow for promotion of the product. The price
of these products will be $600-800 retail price.
PROGRAM – MARKETING MIX FIT
Customer
Primary: Home owners
Customer
Secondary: Cottages
Competition
Company
Community
Product
Price
Promotion
Place
 Efficiency
 Long life span
and warranty
 Capacity
 Acceptable
price
 Nice design and
color
 Quietness
 Respected brand
 Safety
 Environmental
friendliness
 Small size
 Mobile
 Front or top
door.
 Low price
 Efficiency
 Quietness
 Capacity
 Design and
color
 Price
Company designed
for this product
Environmentally
friendly
$2500-3000
Trade shows
Magazines
Internet
 Department stores
 Online Shop
 Catalog sales
$600-800
Magazines
Internet
 Department stores
 Online Shop
 Catalog sales
$2400-4200
TV commercials
Magazines
Newspaper adds
Internet
$500-1000
$1000 production
cost
Low life-cycle cost
Industry associations
Environment Canada
Other NGOs
 Department stores
No direct sales
channel
Trade shows
12
MARKETING STRATEGY
The product will be marketed as a high quality and environmentally friendly product. The
company should not in the beginning attempt to diversify to all product segments. This may
slightly increase the sales in the short run but would have a negative effect on the brand for which
we are trying to build a special image.
The product will be targeted to the market segments where the competitors have a
relatively weaker standing. A direct attack to the whole of the market would meet a strong
reaction from the competitors, who may use their experience and brand power to eliminate our
product completely. The initial marketing strategy is to gain a foothold in the marketplace not
cause a price war.
Except these competitive strategies a more clever strategy may be the cooperative ones.
Cooperation with one of the competitors can open the market to these products easier than
competition would. Our first goal is to introduce the products to the customers with the most
effective means available. If it is the cooperation with the competitors that open the door for us it
is worth trying it.
As we have seen in the table above about the program and marketing mix fit we are
focusing on three main features that we believe are important. These are the environmental
friendliness of the product, appealing design and long life span. We have chosen this strategy for
two reasons. The first one is the customer demand for these features and the second is that these
features are the core competencies of our technology and the product. Moreover the competitors
are relatively weak on these issues so there is significant chance of succeeding. A fight on the
efficiency would be to our disadvantage since the current status of our technology is weak on the
efficiency.
PRIMARY RESEARCH
Primary research was conducted to test the accuracy of our assumptions about the
customers demands and needs. It was a relatively limited research as mentioned above, since the
main scope of the feasibility study was the secondary research. The interviews were made with
five persons from consumer group and two from the distribution channels that is Sears
salespersons.
Research Method
Research method was interview, which was made with consumers and salespersons in the
Sears department store in the Halifax Shopping Center. This method was selected due to its
effectiveness despite the limited time and resources. A survey would probably take much longer
time to get the results and to evaluate. The interviews were chosen over focus groups as well. It
was not considered to be very effective to conduct a focus group study since there was not a
product or substitute to compare in the focus group.
Test of Market Hypothesis
The consumers were selected as to represent the target market. All five interviewees
belonged to the 4th quintile, which is income group between 53,000 and 79,000. None of the
13
interviewees were from the top quintile. Consumers were asked to specify their expectation from
a high quality refrigerator. Questions included the ones aimed to determine whether they are in
the right market segment or not. Then they were asked product-related questions. Interviewer
further inquired about some particular issues when the consumers omitted them. This happened
when the consumers did not mention the environmental friendliness of a product. The impression
is that in general consumers did not consider it as a vital issue, but when they were asked they
showed an interest. This may imply that environmental friendliness is not a feature that they
would pay premium alone.
Analysis of customer needs
Fourteen of the product features stated in the needs assessment above were mentioned by
the consumers, only the humidity control was added by the Sears salespersons. Seven of these
features were mentioned by all five of the interviewees. These are efficiency, long life span and
warranty, capacity, price, nice design and color, quietness and brand. The environmental
friendliness was mentioned by two of the consumers. Sears’s personnel did not mention this
feature.
Consumers were also asked about what kind of products they would never buy. Two of
the consumers mentioned the unusual colors. One consumer would never buy an unsafe product
and another a small size refrigerator. Sears’s personnel thought consumers would never buy a
noisy product.
Price was important only after the product features. Stainless Steel is perceived as high
quality “though” product and also excellent looking. They did or would pay a considerable
premium for stainless steel refrigerator. But they also thought that at the moment they are more
expensive than they deserve.
DISCUSSION
The thermoacoustic refrigerator can have a niche in the market at the moment if its
environmental friendly features are supported with a quality image. One obstacle to that could be
the general impression in the society about environmental product. Because of the inferior quality
of these products in the past there is a prejudice against them. Although it is not always true this
perception is well established on consumers mind. But there is also a developing understanding
that environmental product deserve a higher price than the others, because the others have a
higher social and environmental cost to the society.
However the company will find it difficult to enter this industry. The competition is
strong and big players have big competitive advantages. The manufacturing and market
experience will force the new entrants to smaller niches in the market.
Department stores and especially Sears have a significant bargaining power in the
market. A weak new entrant will probably share a big portion of the profit with these channels to
get a foothold. High profit margin estimations for the thermoacoustic refrigerator may offset the
loss to the department stores. But it should never be forgotten that the final production cost might
be much higher than estimated today.
The technology offers another question mark. Although we assume production of these
devices is technically possible within three years, underestimated technical difficulties may delay
this process to a much later date. And this will further complicate the financing of the venture if it
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is decided to go on. The theory behind this technology is proven and also some applications have
been tested. But feasible applicability for household appliances may not be that easy to build.
Some experts estimate that this technology will need much refinement and we may not see it at
our homes before ten years. Besides the time is running against this innovation. The refrigeration
industry has been investing heavily to improve the environmental efficiency of their product
together with the chemical and gas producers. Dupont has spent hundreds of millions of dollars
on their environmental improvement program. This effort so far produced some substances that
are currently not restricted but still carry the risk.
Another important issue is the intellectual property rights of the technology. Research on
this technology is going on at different locations by different companies and institutions. Some of
the patents belong to U.S. government and some to other private companies. Any improvement to
this technology may be restricted by the patent laws and cost of buying those patents may well be
higher than the company can afford. An effective patent mapping study is necessary to find out
any barriers to developing these products.
SUMMARY
Thermoacoustic refrigerators are devices that provide cooling by using sound waves and
environmentally friendly inert gases. It is a promising technology that may overcome the
environmental problems caused by the current refrigerators. The devices have few or no moving
parts and thus do not need any lubricants.
The product will be targeted at the high-end customers for whom the price of the product
will be secondary issue after the other product features. We aim to satisfy the high quality
demand of the consumers while enabling them to purchase an environmentally friendly product.
Target customers are 25-44 year-old married couples who own their home and have $ 53,000 and
higher income. These approximately account to 4 million households in Canada.
We have defined the customers needs as efficiency, long life span and warranty, capacity,
acceptable price, nice design and color, quietness, respected brand, safety and environmental
friendliness. We will have the most important features build in our product to satisfy these
consumer needs. We will especially be good at offering environmental friendly, well-designed
and long lasting products.
Competition in the market is fierce and mainly covered by five big players. These
companies have strong manufacturing and marketing capabilities. Department stores are also
important players in the household appliances market.
The marketing strategy of the company will be focused at getting a foothold in the highend products segment.
CONCLUSION AND RECOMMENDATIONS
As we have seen in this market feasibility study, household appliances market in general
and refrigerators market in specific has strong barriers to entry for any potential entrant. The
novelty of the thermoacoustic technology brings both advantages and disadvantages. The
advantage is that it is a new and environmentally friendly technology that the consumers do not
hold any adverse feelings about. It has a potential technical superiority that can turn the venture
into profitable business. The disadvantage is that established companies will likely react to any
move by this technology since they do not have the knowledge base to imitate it. The new venture
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will have all the disadvantage of a small start-up; inexperience, financial difficulties, weak market
reach etc. But this also brings the possibility of partnership with the strong competitors.
It is therefore recommended that the project should for obtaining such a collaboration that
would offer certain advantages. The first advantage of such collaboration is the financial and
other types of resources that a strong company can offer. Second is the market expertise that they
have accumulated in long years of operation. Third advantage is the technical problem solving
experience in refrigeration technology. Finally these companies have the best manufacturing
capabilities that a small start-up company might find difficult to build.
The patents and the other property rights should definitely be looked for. Otherwise the
project might arrive at a deadlock despite any technical achievements. Besides such research may
actually provide new insight to the project. A patent mapping may offer the project group a
valuable idea about where the technology is heading and what the potential innovations may be.
A final word on the project should be devoted to recommendation on whether this project
should go on to next stage that is new venture creation. It is definitely worth examining the
possibilities after considering the issues mentioned just above. Production of refrigerators
requires very high investment both during the product development and later. From the technical
perspective there are perhaps many problems to solve and many failures to see. From marketing
perspectives however it would not be easier even if we had a working and efficient prototype in
our hands at the moment.
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REFERENCES
Reader, Marketing New Technology Products
Garrett, Steven L. and Scott Backhaus, The Power of Sound, American Scientist
Spending Patterns in Canada, Statistics Canada, 1999
Census, 1996, Statistics Canada
Environment Canada, http://www.ec.gc.ca/
Major Appliance Industry in Canada, Industry Canada, http://www.strategis.gc.ca/
Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI),
http://www.hrai.ca/
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