Mattress Manufacturer

C: Okay, I would like to confirm my understanding of the problem by reiterating it. Our client is a mattress manufacturer who wants to increase the sales. We have to give the recommendations for the same. Am I correct?

I: Yes, that is right.

C: Now, I would like to ask some questions around the business to gain some knowledge of the situation. Is our client only manufacturing the mattresses or is it present across the value chain?

I: So, our client majorly manufactures the products, but we have 3rd party retailers whom we contract with to get our product to the consumers

C: And are we dealing in the domestic market or we have international reach too?

I: Consider domestic markets for now.

C: Okay, and what is the variety of products that we are dealing with? Do we have any product differentiation?

I: Yes, we sell two kind of mattresses, one is the premium anti-bacterial mattress, and the other ones are of the low-cost.

C: Do we have a percentage split of the market share between these two sections for our sales?

I: So, 25% of the sales account for the premium products and 75% for the non-premium products.

C: And why do we want to increase the sales? Is there an industry wide trend of increase or it is just the client specific thing?

I: Good question, it isn’t an industry wide thing, our client just wants to venture.

C: So, are we planning to increase the sales by value or by volume?

I: Our client just wants to increase sales by any means. The recommendations can be on both the ends.

C: Interesting, talking about the competitor market now, can I know the market share split between our client and the competitors. Also, is there any product differentiation that can set us apart from the others?

I: So, the market is split equally, and we have anti-bacterial mattresses that are not available in the market yet among any other competitors. Although it can be produced easily and doesn’t hold a long-term value in terms of uniqueness. 

C: Since we want to increase the sales, I would like to split the analysis between value and volume. I will dig deeper in the volume aspect first and then we can look at the value. In terms of volume, I would like to concentrate on the value chain of our company. Will that be fine?

I: Yes, that seems fair.

C: So, is there any information regarding the efficiency of the manufacturing? Are our plants used at the full capacity? 

I: No, they are functioning at a lower capacity and we can increase the production as per our discretion. Currently we are meeting the demand that is why we are not pushing it.

C: Interesting, this takes out the option of introducing newer technologies to increase the production too as we can expand on the current one itself. So, the next question will be on our retail channels. Are we present both online and offline?

I: No, we have only offline retailers.

C: What is the presence of these retailers in the market? Are they able to reach to the customers at every location? What kind of customers do they cater to?

I: So, we have a strong retail network with presence in over 2000 cities including both tier 1 and tier 2. Considering the markets, they are catering to that includes households to small businesses to large enterprises like hotels and hospitals.

C: Considering the situation, our presence online can make a little difference as our presence offline is very strong. But we can still explore going online as this might increase awareness among the customers, especially household ones to buy mattresses online. Are there any barriers to enter the online market currently that has restricted us to enter there till now?

I: Yes, in fact there is a barrier. Our current retail partners will not be happy with this are they get a commission out of the sales and we will be stealing their shares.

C: Okay, so what we can suggest is that after going online the sales will still be driven through the retail stores. That way the commissions will not be hampered, and our volume might increase.

I: That is a fair deal.

C: Now coming to the value part of the sales, I would like to specifically look at the consumer requirements here. Whether by selling the premium product, we get a higher margin we can expand the market of premium products from current 25% share to a greater one.

I: Yes, we get a higher margin with premium products. How do you suggest expanding the market for premium goods?

C: So, I would like to know the split between the Industrial, household, and small business customers here. And what is the spilt in these individual sections related to the products they buy?

I: So, our industrial customers are around 10%, household around 60% and small businesses form the rest of the share. Also, industries prefer premium products while small business have around 30% demand for premium and rest is non premium. For households only 10% buy our premium products.

C: And is there any difference between the lifetime of premium and non-premium products?

I: Yes, so premium products last for 7 to 10 years while the non-premium ones last for 5 years at max.

C: So, what I can observe is that a large amount of small business market is using non premium products and it can be converted to premium buyers. We can leverage the high quality as well as the longer lifetime of premium products for the sales. Also, we can set up loyalty programs where we can provide timely services for the maintenance of the product. We can give credits on the frequent buys too. For households, a 10% share seems fair as these must be the rich and effluent class that is buying premium mattresses. For industries, we can target government establishments too because they can be the potential buyers of premium mattresses. Such contracts can last long and can increase our sales both in terms of value and volume.

I: Interesting Ideas! What else do you suggest?

C: Apart from these, we can use the fragments of our production to tap different markets. Like we can use the cotton used to fill up the mattresses to create different products. We can enter the rugs and carpets market as their manufacturing will be highly similar. We can sell complimentary products with the mattresses. Also, we can provide after sale services from refilling the mattresses to changing them. This will build consumer trust and increase the retention rate of buyer thus increasing the sales of the complimentary products too.

I: All these seem to be fairly good ideas. Thank you, we can close the case here.