Memo To: Ethan Sloane, President/CEO From: Emma Taylor Date: 10/25/14 RE: Product Line Extension
I am pleased to inform you I have made a thorough analysis of the current situation regarding the line extension of our world innovative Peak Sealing products. Below you will find my recommendation as well as the data to back it up.
Problem Some major obstacles are currently facing Peak Sealing Technologies. Other brands such as IPack and Tensile have emerged and are a threat to the lineup provided by PST. Consumers buying competitive brands are either price sensitive or not loyal to a brand. Although PST values technological innovation, some members of the company are divided among the issue of adding an affordable extension or keeping things as they are. It is important to meet the need of potential and current consumers. Analysis The future for Peak Sealing Technologies looks to be a bright one. With an average of 36% in growth in sales, PST is doing well. Overall these past five years have seen a steady increase in sales among overall offerings. Exhibit 1 shows the past, current and projected growth in total amount of sales. Adhesive Tapes (Carton Sealing and Industrial) has been the category with the most sales percentage attributing to total sales. Through the years the percentage of K2 Tapes has decreased as a percentage of total sales as can be seen in Exhibit 2. Packing systems and solutions overtook Adhesive tapes in 2012 as a major provider of sales (percentage wise). Although the percentage of K2 tapes as total number of sales is decreasing, the amount of K2 tapes can be seen increasing at a rate of 15%. Exhibit 3 Current competition includes I-Pack and Tensile Products, both offer lower cost products. The addition of GP-48 added a new lower cost option to compete with this segment which has produced 7% of total sales in the K2 lineup in a period of 6 months, a very significant number. Competitive focus should be on the Tensile product line. They were able to achieve $2.7 million in sales in their first year, as well as having placement alongside our K2 products. PST regional
managers expect Tensile two offerings to grow in the next year, with these products directly competing with the products listed in table 1. There are resources to create competing lines, and resources are available.
Recommendation In order to remain a quality leader the K2 name and PST name should be kept intact. In this growing market for consumers with price sensitive needs it is advised that two new products should be launched to compete with Tensile offerings. These lines will not share the name of Peak Sealing Technologies, nor K2 tape. It will be branded as a new line unassociated with PST. Instead of using technology of current K2 tapes, this new spinoff will resemble a non-patented adhesive formulation for these products. Pricing strategy will be similar to Tensile. K2 has a great distribution network that can aid in the expansion of this new product. This should allow PST to acquire price sensitive customers with these two new offerings. There should be a dedicated sales force to explain this product to the consumers we are trying to target. We do not want the two brands to be associated. The sales force also needs to be trained to handle not just the end user but the distributor as well.
Exhibits:
Total Sales $500,000.00
$444,083.41
$450,000.00
s d $400,000.00 n a s $350,000.00 u o $300,000.00 h T $250,000.00 n i t $200,000.00 n u $150,000.00 o m $100,000.00 A
$326,531.92 $240,097.00 $190,879.00 $147,039.00 $117,039.00 $71,745.00
$50,000.00 $2008
2009
2010
2011
2012
2013
2014
Year
Exhibit 1: Shows total sales of all PST products, please note 2013 and 2014 are predictions.
K2 Tape Sales as a percentage of total sales 80% 70% 60% 50% 40% 30% 20% 10% 0% 2008
2009
2010
2011
Exhibit 2: The Adhesive Tapes (Carton Sealing and Industrial) products can be seen decreasing.
Annual K2- Tape Sales $80.0 s r $70.0 a l l o $60.0 D f o $50.0 s n o i $40.0 l l i M$30.0 n i s $20.0 e l a S $10.0
$0.0 2008
2009
2010
2011
2012
Years
Exhibit 3: Graphically shows that K2 sales have been increasing steadily over the past 5 years.
Name
Price to Distributor
Suggested Resale
K2Tape RD-48 RDS-72
$ $
162.31 243.85
$ $
200.56 303.73
Ecoslim Ecoplus Wide
$ $
118.02 134.44
$ $
159.85 212.94
Comparison 38% 81%
Tensile
Table 1: Shows RD-48, and RDS-72 as compared to its competing products. Our products cost 38%, and 81% respectively more in the price to the distributor.
