Master DryFlush Document

DRY-FLUSH SEGMENTATION RESEARCH

Prepared by:

Quinnipiac UniversityAmerican Marketing Association Chapter

Professional Development Team

December, 2013

CONFIDENTIAL

Quinnipiac UniversityAmerican Marketing Association ChapterProfessional Development Team Members

Vice President, Professional Development Mostafa Elhaggar

TABLE OF CONTENTS

PageProject Overview 1Preliminary Segment Identification 1Segment Finalists 4Competition 5Segment Scoring Process 7Segment Scoring and Analysis Results 9

Homeowners 9RV’s 11Military 13Cruise Ships 15Truck Drivers 17Buses 20Open Field Workers 22Trains 25Camping 27Disaster Relief 29

Final Recommendation 32Appendix 34

Team 1:

Team Leader:Christian Spoor

Team Members:Jacquiline MartireWilliam BarreraNicolle GokalanSamuel JacobsonTyler KarczNikin Shah

Team 3:

Team Leader:Daniel Frain

Team Members:Anisha ManglaniLyle RotondoMeghan CurleyAlison GlazerTessa McKinleyIsabella Gitto Dean Campanella

Team 2:

Team Leader:Sarah Soucy

Team Members:Robert DeryLea HerlihyEverrett AndersonSara MandelPaul Zocco

Team 4:

Team Leader:Dylan Gomez

Team Members:Kelsey HassettTyler WalshJennie SlatteryBenjamin RaymondBrenda KittredgeChristian BranzellMatthew KleinbergChristopher Wilner

1

Project Overview

Quinnipiac University’s American Marketing Association Professional Development Team was hired to develop a segmentation strategy for Dry Flush LLC’s primary product – the Dry Flush toilet. The Dry Flush product is a waterless portable toilet. The Dry Flush toilet currently has three dealers and is generating sales in some areas, however, the company plans to increase sales by targeting strong segments.

The Professional Development team has identified and analyzed markets in order to determine the most attractive segments for Dry Flush to target.

Preliminary Segment Identification

The team analyzed the product’s specifications and identified certain segments that specifically benefit from the product’s usability, portability, odorless, and waterless features. Through initial secondary research, the team identified the following segments:

Original Equipment Manufacturer

o RV’so Buseso Cruiseso Jetso Boatso Trains

Entertainmento Sporting Eventso Tailgateso Festivalso Amusement/Carnival

Outdooro Campo Huntingo Extreme Sports

Transportation Ownerso RV’so Jetso Boatso Camping Trailerso Truck Drivers

Health Facilitieso Hospitalso Nursing Homes

Governmento Disaster Reliefo Militaryo Developing Countries

Open Field Workerso Construction Siteso Contractors/Landscapingo Farm

Homeso Rental Homeso Cottageso Shore Houses

The following discussion provides the rationale for eliminating certain segments and sub-segments from further research. Note that customers in these segments still have

2

the ability to purchase the Dry Flush toilet, however, specifically targeting these segments in Dry Flush’s marketing programs is not recommended.

Sporting Event, Festival, and Amusement/Carnival sub-segments, which are included in the Entertainment segment, were removed from further consideration for the following reasons:

Thousands of attendeeso No staff to change cassetteo Capacity of cassette is currently insufficient

Porta-potties meet needs adequatelyo Cost is competitiveo Waste service is managed by the Porta-Potty company.

Hunting and Extreme Sports sub-segments, which are included in the Outdoor segment, were removed from further consideration for the following reasons:

Huntingo Difficulty of carrying product and gameo Flushing noise can disrupt covertnesso Popular hunting grounds have bathroomso Small market 7% of U.S.

Extreme Sportso Like Hunting, small marketo Young participantso Bathrooms available at venues

RV’s, Jets, Boats, and Camping Trailers which are included in the Transportations Owners segment, were removed from further because of physical restrictions that can only be controlled by the manufacturers.

The Health Facilities Segment was removed from further consideration for the following reasons:

At the meeting on November 7th, it was discussed that the understanding of the Health Facilities Segment was already exhausted by Dry Flush and that the need for our team to further investigate was unnecessary.

For the Government Segment, Developing Countries was taken out because of: Anticipated difficulty in penetration due to Dry Flush’s current market

position and relationships. Stakeholders’ strong requirement for sustainable waste management.

From the Open Field Workers segment, the Farm sub-segment was removed from further consideration because:

90% of farms are small family-owned businesses Only 4% of farms are corporate-owned farms

o Difficult to penetrate Many adequate alternatives available

3

The Home Segment, which included cottages, was removed from further consideration because since most homes are equipped with plumbing and a working toilet, little to no market potential was identified.

The Jets Segment was removed from further consideration for the following reasons: Jet owner/users/manufacturers are not very price sensitive. Current bathroom

systems in jets are quite simple and not many users think that they need to be changed. Gaining access to the private jet manufacturing market would be extremely difficult as well. Jet companies are usually well-established and large corporations that are not apt to change disposal systems unless there is a significant incentive for them to so. Toilet systems are that are currently on planes work quite well. Dry Flush does not provide an adequate incentive to change.

The Boats Segment was removed from further consideration because:

Small boats are typically used for short rides where passengers do not need toilet facilities. If needed, there are options that are currently on the market for portable toilet systems similar to the Dry Flush toilet that are less expensive. 1

Boats that are larger already have toilets that are part of the boat’s design, and meet passengers needs well. These large boats have plumbing already equipped for showers and kitchens.2

The Tailgating Segment considered in detail, but was removed after extensive research. The team’s research yielded the following information:

Threats of substitutes:o Tailgate venues primarily already contain multiple public restrooms,

most consumers who are not regulars to tailgating are more inclined to use free restrooms rather than spend money for the Dry Flush toilet.

o Porta Pottys are very common and include cleaning services. Likely to purchase multiple units/Likely to use product often each month:

o The Dry Flush would be used for roughly a few tailgating experiences a year. Therefore, buyers would not be likely to either purchase multiple units or use the product often each month.

Cartridge Consumption:o Being that the majority of this market only tailgate a few times per

year, the cartridge consumption would be rather insignificant.

To sum up, it would take a significant number of tailgating parties for the purchase of a Dry Flush toilet to be a cost-effective purchase for a buyer. This segment contains a very low profit potential in the present and future. When compared to the following segments, this one ranked too low to continue its research. 1 http://www.coveryourbass.com/shopping.html2 http://www.dbw.ca.gov/Environmental/pumpinfo/Design.aspx

4

Segment Finalists

Information from preliminary secondary research led the team to continue research on the following segments:

OEMo RV’so Cruiseso Trainso Buses

Outdooro Camp

Transportation Ownerso Truck Drivers

Military Disaster Relief

o Homeowners (affected by related power outages)o Government

Open Field Workerso Contractors/Landscaping

5

Competition

The biggest competitor to Dry Flush – across all segments considered - is “Porta Potty” type portable toilets. Other toilets, which represent competitors in specific segments - are discussed below in segment overviews.

Thetford is the leader in “Porta Potty” type portable toilets. Thetford’s website includes an excellent overview of their market segmentation strategy.3 On their website, a column named “Applications” is included with the following categories:

Recreational Vehicles Marine Trucking Camping/Hunting/Fishing Emergency Home/Bedside/Healthcare Vans Toddler Training

Thetford’s most popular models are: Porta Potti Curve Porta Potti 550P

The list price for both is approximately $180-$200. These Porta Potti models use fresh water and hold more than 50 flushes. They have three sections:

The top where the seating rim is located The middle where the water is located The bottom where the black water (waste) and chemicals are located

Thetford advertises that their toilets are odorless because of the chemicals that are added to the toilet eliminates and breaks down the odor. The consumer purchases and adds the chemicals.

The chemicals used are either blue formaldehyde or enzyme formulas. Blue formaldehyde is superior in breaking down and eliminating odor.

However, environmentally unsafe and many places do not allow disposal of waste containing the chemical. Deodorants containing this chemical, like Aqua Kem, attach warning labels that state, “This product contains a chemical known to the State of California to cause cancer.” Also, the detergent smell is pungent and is considered over powering to some.

Enzyme formulas seem to be the safest but do not do as good of a job as their chemical alternatives with masking odors.

3 http://thetford.com/HOME/PRODUCTS/PortableToilets/tabid/83/Default.aspx

6

These Porta Potti brand models are legitimate competitors to the Dry Flush toilet. They out beat the Dry Flush toilets since:

The initial investment is much lower. Recurring maintenance materials, such as water and holding tank deodorants,

are widely available through many retail outlets. The Dry Flush toilet beats the Porta Potti brand in these areas:

True odorless product that does not need harmful chemicals. Waterless. Does not need to find designated area to dump black water and chemicals.

There are higher-end Porta Potti models, such as the Thetford Electra Magic Recirculating Toilet. This has been sold more to buses and boats. It is much more expensive ($500-$700) than other Thetford units. The toilet itself is similar to its less-expensive versions but just recycles the water and chemicals so that maintenance is not as frequent.

7

Segment Scoring Process

The final contenders were scored based on the four factors and associated subfactors which are listed below.

Each subfactor was rated on a point scale of 0-8. The four factor scores reflect the average score of their respective subfactors.

Benefits vs. Segment Needso Four sub factors were measured to relate the product’ benefits to each

specific segment Functional Characteristics Dry Flush price Cost per flush Convenience and availability

Profit Potentialo Four sub factors were measured to identify the profit potential of the

waste management industry Intensity of competition Threat of substitutes Threat of new entrants Power of customers

Barriers to Entryo Four sub factors were measured to identify feasibility of each

segment’s market penetration Challenge to reach buyer Difficult to win contract/gain distribution within 12 months Potential customers happy with current alternatives today Consumer/buyer price sensitivity

Buying Behavioro Four sub factors were measured to consider the buying behavior of

each segment Buyer is likely to purchase multiple units/order Buyer is likely to repurchase toilet within 12 months Likelihood product is used every month Cartridge consumption

8

Based on market knowledge acquired, some factors were weighed heavier than others for reasons discussed below:

1. Barriers to entry – Weight = 0.45 Barriers to entry has the greatest weight since successfully entering the

segment is clearly the first hurdle that Dry Flush must overcome. Other factors are not relevant if Dry Flush is not able to successfully enter a given segment.

2. Benefits by Segment – Weight = 0.3 Benefits by segment is the second most important factor because this

factor speaks to how attractive the product’s features and benefits are to the segment. The more attractive the features, the more likely consumers in the segment are to buy the product.

3. Buying Behavior – Weight = 0.2 Buying behavior is important since this factor captures how often

consumers use the product by considering how frequently, and in what volume, consumers in the segment purchase the product and cartridges.

4. Profit Potential – Weight = 0.05 Profit potential considers buyer’s power (which reflects pressure to

reduce price) and prevalence of competitors. Since Dry Flush has few direct competitors, this segment is not weighted heavily.

The weight of the factors add up to 1.

The sub factor and segment scoring details are included in the appendix.

9

Segment Scoring and Analysis Results

Homeowners

Segment Score: 5.40

Segment Overview:

Many homes in the United States use wells to provide water for their homes and/or septic systems to remove wastewater from their homes. Both systems rely on pumps, which are powered by electricity, to operate. In the case of a power outage, well water is not delivered to the home since electric-powered pumps stop operating. Electric pumps continually pump water from the septic tank; if the pump cannot operate, the septic tank fills and waste backs up into the home. To prevent a backup, homeowners must stop waste from entering the tank (e.g., do not flush toilets).

Power outages occur as a result of storms or electrical grid failure. As a consequence of the aging power grid in the United States, power outages related to electrical grid failures have increased 124% since 1990. The frequency and duration of power outages is growing; in fact, 250,000 to 500,000 people in the United States lose power daily. Homeowners may purchase generators to supply power during a power outage. However, the standby generator market’s penetration is only 3% indicating that few consumers have invested in these systems.4 Those who do have generators need to carefully allocate their limited energy output. On Home Depot’s website, generators range in price from $700-$4500.

Owners of homes who depend on pumps for water management are ranked as the Dry Flush toilet’s strongest potential segment. Since many of these consumers lose the use of their toilet during power outages, their need for the Dry-Flush toilet is great. These consumers have the potential to be reached effectively through big box home improvement stores; consumers already purchase related supplies, and equipment such as generators, from these outlets.

Home improvement stores are already active in the “alternative” toilet market. Home Depot is currently stocks portable composting toilets. The toilets recycle waste into soil. The price of fully equipped compost toilets ranges in the thousands of dollars.5

4 Generac 2012 Annual Report5 http://www.homedepot.com/p/Sun-Mar-Compact-Electric-Waterless-Medium-Capacity-Self-Contained-Composting-Toilet-in-White-COMPACT-white/203503053?MERCH=REC-_-NavPLPHorizontal1-4-_-NA-_-203503053-_-N#.UpYSo2TSMWkhttp://www.homedepot.com/s/compost%2520toilet?NCNI-5

10

Benefit vs. Segment Needs:

Functional Characteristics o The waterless operation is very attractive for a consumer placing the

product in one’s home since an external power source is not needed to deliver water and/or remove waste (as in the case of septic systems).

o The odorless feature is an advantage to the consumer because the product will sit in the house with waste.

Dry Flush Priceo Because the product costs approximately $400, the consumer will

carefully consider the price, however, the Dry Flush toilet is less expensive than other options (e.g., generators, other types of waterless toilets).

Cost per Flusho May be an issue since a family of four will exhaust a cartridge quickly.

However, consumers are likely to accept the cost when compared to alternatives during a power outage.

Convenience/Availability o The Dry Flush toilet and cartridges can be purchased, stored, and used

when needed.

Profit Potential:

Intensity of competitiono The competition is moderately intense and includes toilets that are

more expensive and lack the Dry Flush toilet’s most attractive features.

Threat of substitutes o No perfect substitutes identified.

Threat of new entrantso There is a possibility that a competitor can enter the market; but

currently there is not a threat of new entrants. Power of customers

o The price of this product is fairly inelastic, especially after major power outages occur. Consumers will purchase whatever is available.

Barriers to Entry:

Challenge to reach buyero Retailer – maybe be challenging since it is traditionally difficult for

small companies to close deals with big box retailers.o Consumer – already perceives big box home improvement retailers as

a source for supplies and equipment needed during power outages and disasters.

Difficult to win contract/gain distribution within 12 months

11

o The difficulty is moderate. It may take up to two years for Dry Flush can gain distribution through a major big box home improvement retailer.

Potential customer happy with current alternatives todayo There are few alternatives.

Consumer/buyer price sensitivityo In times of disaster, the price is inelastic; in normal conditions, the

sensitivity is moderate.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero A big box home improvement retailer will buy this product in bulk.

Buyers is likely to repurchase toilet within 12 monthso The repurchase is seasonal since many power outages are the result of

seasonal events (e.g., hurricanes). Likelihood product is used every month

o Also dependent on the number of power outages. During times of normal conditions, the product may not be used often.

Cartridge consumption o The Dry Flush toilet will be the only toilet accessible during times of

disaster. In these times, cartridge consumption will be high. o During times of normal condition, cartridge consumption will fall

dramatically because there will be little use for the product.

RV’s

Segment Score: 5.15

Segment Overview:

RV manufacturers currently install permanently mounted toilets with holding tanks.6 The most commonly used unit is the Thetford Aria Classic White High Profile Foot Flush Toilet (model 19800). It requires plumbing and the price ranges from $500-650.7

Benefits vs. Segment Needs:

Functional Characteristicso RV owners can greatly benefit from the odorless feature of the Dry

Flush toilet. Current RV sewage systems often emit odors back into the cabin.

6 www.rvs.com, www.rvusa.com7 http://thetford.com/HOME/PRODUCTS/PortableToilets/tabid/83/Default.aspx

12

o Owners can change out cartridges and dispose of them in trash when necessary.

o The hassle of pumping out sewage and sanitizing through chemicals would be eliminated by using the Dry Flush product.

Dry Flush priceo The price of the Dry Flush will be included in the MSRP and

potentially increase the profit for the manufacturer as well as possibly lowering the overall price for the ultimate buyer.

Cost per flusho A pump for current RV sewage systems cost upwards of $650,

compared to $0.60 per flush; thus making this feature attractive for the RV owner.

Convenience and availabilityo Overall, the Dry Flush is much more convenient than RV’s current

waste management system since the need to pump the tank is eliminated.

Profit Potential:

Intensity of competitiono Many portable toilets marketing to RV’s (e.g., Thetford).o Nature’s Head composting toilet is marketed to RV’s. However, is not

as portable as the Dry Flush toilet. Threat of substitutes

o Permanently mounted toilets are well-established in this segment. Threat of new entrants

o Not applicable because of the prevalence of permanently mounted toilets.

Power of customerso RV manufacturers will buy in bulk and will have power to negotiate

price. o RV manufacturers have complete power to determine the price of the

finished product. The consumer will purchase the RV with the toilet already installed.

Barriers of Entry:

Challenge to reach buyero The challenge to reach the buyer will be difficult. Advertising the

availability of the Dry Flush toilet in the new RVs will intrigue current, previous, or future owners. It may also make a person more interested to buy due to the cut in time and effort an owner must invest to maintain the vehicle

13

Difficult to win contract/gain distribution within 12 monthso Contracts may already be in place with other waste management

system manufacturers. Dry Flush is not proven in this segment so manufacturers may be reluctant to adopt it.

Potential customers happy with current alternatives todayo The current RV waste management system, even with its flaws, is

quite functional and reliable. Consumer/buyer price sensitivity

o Despite the Dry Flush toilets attractive features, the RV manufacturer will be price sensitive since cost objectives must be met.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero The RV manufacturer is likely to purchase toilets in bulk.

Buyers is likely to repurchase toilet within 12 monthso With the constant increase of RV production and sales, the Dry Flush

toilets would be needed by manufacturers and retailers alike for installment or warranty replacement, if needed.

Likelihood product is used every montho While in the RV, the product will be more than likely used daily. So, if

the RV is a residence for the owner, cartridge consumption will be much higher than that of an owner who travels a few times a year. The segment score reflects frequency-of-use differences between different types of owners.

Cartridge consumption o If people use RV as a residence, the Dry Flush cartridges would be

consumed daily; whereas if a consumer uses an RV for travel a few times a year, cartridge consumption would decrease.

Military

Segment Score: 5.11

Segment Overview:

The military hires military contractors to provide facilities including toilets. In bases that are never stationary, holes made in cement are used. These installations while inexpensive, are unsanitary and pose health risks. The Dry Flush toilet is a potential alternative for these installations.

14


Functional Characteristicso The portability, durability, and waterless feature are all very attractive

features for this segment. o Military sites on foreign soil have harsh environments and are always

on the move. Dry Flush price

o The ideal functional features outweigh price concerns. Cost per flush

o However, the Military’s current waste management method is very cost efficient. Dry Flush’s cost of operation is significantly higher.

Convenience and availability o The functional characteristics of the Dry Flush toilet make it very

convenient for the military.

Profit Potential:

Intensity of competitiono Intensity of competition is moderately significant. The military

currently uses holes made in concrete as toilets to provide a useable, however, unsanitary, way to dispose waste.

Threat of substitutes o Potentially a significant issue due to the substitutes listed above.

Threat of new entrantso The government currently does not provide sanitary toilets for the

military. Many new entrants are looking to sell to the military because of the nearly untouched market.

Power of customerso The government is powerful and will buy in bulk indicating the ability

to negotiate price.

Barriers to Entry:

Challenge to reach buyero United Technologies, a large military contractor, does business with

more than 180 countries and has over 50,000 suppliers and has partnerships with large and small businesses across the world. It may be possible for Dry Flush to partner with United Technologies or another military contractor. For example:

There are three distinct military companies who specialize in selling products to the military; DORCE, ECOLOG, and Trimo Investments. They also have specific contracts with the military for use of certain products.

15

Difficult to win contract/gain distribution within 12 monthso Contracts with the government and military take a significant amount

of time to be finalized. Many phases must be completed and approved before the Dry Flush product can be approved by the government and be implemented in the military. However, Dry Flush is SAM approved which may help expedite the process.

Potential customers happy with current alternatives todayo The current alternative for the Dry Flush in the military is the concrete

hole. Potential customers would be much happier with the portability and sanitary feature that the Dry Flush provides.

Consumer/buyer price sensitivity o The concrete hole is very cost efficient, which can lead to higher price

sensitivity. The government has a large budget, however, cost reduction initiatives are often active.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero The government will buy in bulk.

Buyers is likely to repurchase toilet within 12 monthso Constant military activity makes the government very likely to

repurchase the Dry Flush toilet within 12 months. Likelihood product is used every month

o As previously stated, the military is constantly active. The likelihood the Dry Flush product is used every month is very high.

Cartridge consumption o The Dry Flush toilet has a potential for heavy use resulting in a high

level of cartridge consumption.

Cruise Ships

Segment Score: 4.90

Segment Overview:

Cruise Ships use mounted vacuum toilets offered in their fully furnished bathrooms. These toilets tunnel into a holding tank, which then needs to be emptied. The toilets are aesthetically pleasing however contain these flaws:

Require electricityo When power goes out, the toilets cannot flush.

Cruise Ships empty holding tanks in the ocean giving them terrible publicity by the media and environmental activists. 8

8 http://www.cnn.com/2013/04/15/travel/crown-princess-toilets/http://www.foxnews.com/us/2013/03/14/power-outages-overflowing-toilets-reportedly-plague-another-carnival-cruise/

16

Oceana, an organization supporting the protection of the world’s ocean, is pushing the Environmental Protection Agency to set and enforce better regulations to prevent cruise ships from polluting into the oceans. 9


Functional Characteristics o Not needing plumbing makes Dry Flush very attractive for this

segment. Cruise ships currently dump sewage into the ocean. The Dry Flush offers a much more environmentally friendly alternative.

Dry Flush Priceo The price of the Dry Flush is cost effective when compared to the

costs of maintaining the sewage system on each cruise ship. Cost per flush

o As listed, constant maintenance of current sewage systems is costly compared to Dry Flush’s cost per flush.

Convenience and availability o Current sewage systems are unreliable and have been reported to fail

during trips.o Cartridges can be attended to by already employed cleaning staff.

Profit Potential:

Intensity of competitiono Intensity is low. Besides the current sewage system, there are no other

competitors. Threat of substitutes

o The current sewage system, as stated previously, is unreliable and poses many environmental risks. The Dry Flush is a better alternative.

o Efforts are being made to chemically treat sewage contained on cruise ships.

o The Nature’s Head composting toilet has been marketed to boats and ships. However, is not as portable as the Dry Flush toilet.

Threat of new entrantso With various issues of today’s cruise ships’ plumbing, the market is

vulnerable to innovation and new entrants. Power of customer

o Cruise ships will buy in bulk giving them moderate power in negotiation of price.

9 http://oceana.org/sites/default/files/o/uploads/cruiseshipwaste_uslawsandregulations.pdf

17

Barriers to Entry:

Challenge to reach buyero Difficult for a small brand/company to gain access to large cruise line

headquarters. Difficult to win contract/gain distribution within 12 months

o Difficult to sell a product with limited brand equity in the segment. Product requires major change in ship’s operations.

Potential customers happy with current alternatives todayo Cruise ships have terrible public relations for dumping waste in the

ocean. Dry Flush’s sustainability feature makes it a much better alternative.10

o The current sewage system has been known to back up leaving the toilets inaccessible.

Consumer/buyer price sensitivity o Current sewage systems are much more costly to install than the Dry

Flush toilets. Cruise manufacturers have large budgets.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero A cruise ship has many bathrooms all needing a toilet. The

manufacturer will buy in bulk. Buyer is likely to repurchase toilet within 12 months

o Cruise ships will continue to purchase the Dry Flush toilet for new ship lines and replacements.

Likelihood product is used every montho Cruise ships sail constantly throughout the year.

Cartridge consumption o Cartridge consumption will vary among the time of year but on

average will always generally be very high.

Truck Drivers

Segment Score: 4.85

Segment Overview:

Truck Drivers have no direct competitors with the Dry Flush but it is important to understand the product’s substitutes:

Porta Potty type units Buckets

10 http://thehill.com/blogs/regwatch/business/298327-sen-rockefeller-presses-health-safety-standards-after-poop-cruise

18

Urinal bags/cathetero Travel John Portable Toilet -18 pack approximately $30.11

Truck Stops

Truck drivers constantly blog about sanitation management issues indicating the potential need for the Dry Flush toilet.12

Some trucking companies, like Schneider, forbid such devices from their trucks possibly because companies are afraid of leakage, which would damage the trucks. This is a silver lining in that if Dry Flush LLC can reach out and prove the non-leakage of the Dry Flush toilet, these companies could be convinced to make an exception to their policies. 12

Truck magazines include:o Transport Topicso World Truck Challenge Magazine

Chain truck stops include:o Flying Jo Petroo T/A Truck stops


Functional Characteristics o The odorless, waterless, and portable features of the Dry Flush toilet

are strong for this segment. Truck drivers driving cross-country have tight schedules and have little time for pit stops. They currently use buckets as their means of waste management, which is highly unsanitary and causes terrible long lasting odors.

Dry Flush Priceo The price can be an issue. Truck drivers would most likely have to

fund the Dry Flush toilet themselves. Cost per flush

o The cost per flush might also be an issue. Truck drivers would have to fund the cartridges themselves.

Convenience and availability o The convenience is a key factor that meets the needs of a truck driver

with a tight schedule. The price of the Dry Flush product and cartridges may be outweighed by the benefits of having a sanitary toilet on demand.

11 http://www.mypilotstore.com/mypilotstore/sep/263212 http://www.truck-drivers-money-saving-tips.com/portable-toilet.html

19

Profit Potential:

Intensity of competitiono As discussed above, there is competition in this segment. However,

Dry Flush offers benefits making it a competitive alternative. Threat of substitutes

o Nature’s Head composting toilet has been marketed to trucks. However, is not as portable as the Dry Flush toilet.

Threat of new entrantso Not identified as a significant factor at this time.

Power of customero The consumer will be each individual truck driver. Therefore, the

consumer has relatively little power over the price of the Dry Flush product.

Barriers to Entry:

Challenge to reach buyero It is challenging to reach a market of individual truck drivers. Trucker

magazines mentioned in the segment overview can be utilized to advertise the Dry Flush toilet.

Difficult to win contract/gain distribution within 12 monthso Gaining distribution through outlets, listed in the segment overview,

that sell accessories to truckers is very likely. Note a strong distributor may purchase multiple toilets per order to stock.

Potential customers happy with current alternatives todayo Pit stops result in delays while buckets are unsanitary and emit odors.

Consumer/buyer price sensitivity o The price sensitivity is moderate. Even though the Dry Flush toilet

offers a great solution, funding the purchase may be challenging for an individual truck driver whose average salary is $49,000 annually.13

Buying Behavior:

Buyer is likely to purchase multiple units/ordero This segment is unlikely to purchase multiple units. The Dry Flush

toilet in this segment is for personal use. A truck driver only needs one product. If sold through a distributor, multiple units may be ordered.

Buyer is likely to repurchase toilet within 12 monthso Because a truck driver only needs one Dry Flush toilet, it is unlikely

that there will be a repurchase within 12 months. Likelihood product is used every month

o Truck drivers are on the road year-round. It is highly likely that the Dry Flush product is used every week.

13 www.indeed.com

20

Cartridge consumption o Truck Drivers are driving almost every week of the year. It is

estimated that they will use more than seven cartridges per month.

Bus Manufacturer

Segment Score: 4.80

Segment Overview:

Bus Manufacturers use four different types of toilet systems; three being Dry Flush substitutes and one being a slight competitor.

Glova Bus is a large foreign manufacturer that produces three regular flushing toilets, and the Vacuum Flushing toilets, for buses:14

Recirculation flushing only (CC) Fresh water flushing only (WC) Combined fresh water/recirculation flushing (WC/CC) Vacuum Flushing (VAC)

The first three toilets listed above are the Dry Flush substitutes. Each model requires a holding tank.

The Dry Flush toilet’s closest direct competitor is a toilet using the Vacuum Flushing (VAC) system. However, these toilets are costly, are not very popular, and also require a holding tank.

Most buses use recirculation flushing toilets that lead to a holding tank. Many toilets, but not all, contain a flap separating the bowl of the toilet from the holding tank to reduce odor. The tank also contains either blue formaldehyde or non-formaldehyde chemicals that molecularly break down the odor. The holding tank is emptied daily by the maintenance staff into the sewer. This cost of this process is included in existing maintenance contracts. 1516


Functional Characteristics o The odorless feature is powerful but not unique. o The easy replacement feature allows the bus drivers to replace

cartridges in little time.

14 http://www.glovabus.com/15 Personal communication, Short Line Buses, Olympia Buses16 Short Line Buses (Mahwah, NJ); Olympia Buses (Elizabeth, NJ)

21

Dry Flush Priceo The price of the Dry Flush will be included in the MSRP. Compared to

the waste management system currently installed on buses, the Dry Flush toilet would reduce the manufacturing cost of the bus.

Cost per flusho Current removal of waste on buses is very low cost. Cost per flush of

Dry Flush can be undesirable. Convenience and availability

o The Dry Flush is quite convenient on a bus when considering all of its features. The only inconvenience is the price and replacement of cartridges, especially on a long trip where a replacement is needed before arriving to the destination.

Profit Potential:

Intensity of competitiono There are few direct competitors in this market.

Threat of substitutes o Many substitutes are listed in the Section Overview.

Threat of new entrantso There is a possibility that a competitor could enter the market.

Power of customero Bus manufacturer buying in bulk can have an effect on price

negotiation.

Barriers to Entry:

Challenge to reach buyero Intercity buses are required to have toilets making the Dry Flush a

necessity. However, reaching bus manufacturers is difficult. Difficult to win contract/gain distribution within 12 months

o There is no regulatory process that Dry Flush must go through. However, gaining distribution within twelve months is not likely. Bus manufacturers have to change the design of the bus first, which would take time.

Potential customers happy with current alternatives todayo Direct competition seems to currently work fine. With toilets that have

flaps separating the toilet from the waste tank, odor is limited. o Blue formaldehyde is used around the bowl of the toilet and tank to

contain odor, which works well. o There is a maintenance staff in place to empty waste tank to sewage.

However, having the Dry Flush toilet can eliminate this daily process and reduce labor costs.

22

Consumer/buyer price sensitivity o Bus manufacturers already incur waste management expense so they

are not very sensitive and long as changes do not negatively affect profitability.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero As an OEM manufacturing multiple buses, it is likely the buyer will

purchase in bulk. Buyers is likely to repurchase toilet within 12 months

o Buyers in this segment are more likely to purchase one bulk order. Likelihood product is used every month

o With buses being a dominant means of public transportation, the Dry Flush product will be in constant use.

Cartridge consumption o Restrooms are not very frequently used by the public on buses.

Cartridge consumption would be average.

Open Field Workers

Segment Score: 4.59

Segment Overview: This segment contains landscapers and contractors. The Dry Flush toilet is very relevant to this segment. The annual conventions make this product very accessible to the buyer.17 However, sales volume will be comparatively low due the fact that most landscapers and contractors are small businesses will few employees.

The Porta-Potty (different from the Porta Potti) is dominant among contractors and the initial investment is appealing when compared to the Dry Flush. However, in the long run, it is more cost-effective to own Dry Flush. An overview of Porta-Potty costs follows:

Weekend / One - Day Rental Rates:

One potty with no additional cleaning service - $75.00 Two potties with no additional cleaning service -$70.00 (each) Three potties with no additional cleaning service -$65.00 (each)

Monthly Rental Rates:

One potty, serviced every week - $95.00 One potty, serviced twice a month - $85.00 Additional cleaning / servicing $25.00 per unit18

17 http://convention.agc.org/18 http://porta-pottyrental.com/Porta-Potty_Rental/Rates.html

23


Functional Characteristics o The environmental benefit and odorless feature are not very relevant to

this segment.o The portability feature is a convincing feature. The ability to have a

toilet that can be set up and more easily moved than many other toilets on the market gives Dry Flush a strong advantage.

Dry Flush Priceo Initial purchase price is high for open field workers. However, the Dry

Flush toilet will save money in the long run. Cost per flush

o Dependent on the number of workers at the site. The cost per flush will be more of an issue if the Dry Flush toilet is being used by six workers opposed to one or two.

Convenience and availability o Having a bathroom available at all times on site is very attractive.

Profit Potential:

Intensity of competitiono The intensity of competition is high. The major competitor is Porta-

Potty. This company has reasonable prices to rent for a short period of time but is less cost efficient in the long run. Once the Dry Flush hits a breakeven point relative to the Porta-Potty, the competition has a disadvantage.

Threat of substitutes o Porta-Potty and its ability to be used without the need for constant

maintenance by the owner (field worker) is a threat. The overall benefits provided by Dry Flush, however, are not matched by other substitutes.

Threat of new entrantso Currently there is not a threat of new entrants.

Power of customero Purchases will be made by small companies. They will purchase a

small number of Dry Flush toilets giving them little power in price negotiation.

24

Barriers to Entry:

Challenge to reach buyero Not difficult. Conventions, such as the AGC Annual Convention, will

be an effective way to reach the segment. Because of the portability, demonstration of product at conventions will be easy and attractive.

o Other conventions include: MCAA in Arizona, NERCA Roofing Contractors Convention in New Jersey, the Contractor Connection in New Orleans, and the AGC Annual Convention in Las Vegas.19

Difficult to win contract/gain distribution within 12 monthso Many firms and companies attend conventions looking for new

innovative products. Registering a booth makes the gain in distribution within 12 months highly likely.20

Potential customers happy with current alternatives todayo The best current alternative is the Porta-Potty. The Dry Flush toilet is

more efficient in many ways. However, the Porta-Potty can be used many times without cartridge replacement. Other eco-friendly alternatives are very costly.

Consumer/buyer price sensitivity o The price sensitivity is at a medium. Portable waste management is

always necessary for this segment. However, price sensitivity varies depending on size of firm.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero Most contractors are independently owned, and are generally quite

small. The U.S. Bureau of Labor Statistics confirms that as of 2010, there are over 10.3 million independent contractors throughout the country.21

o Small firms generally employ six or seven people. These firms will not purchase the Dry Flush in bulk.

19 http://convention.agc.org/; http://www.mcaww.net/services/mcawwevents/photos/18http://www.nerca.org/Convention.aspx20 http://www.census.gov/newsroom/releases/archives/facts_for_features_special_editions/cb10-ff15.html21 www.bls.gov

25

Buyers is likely to repurchase toilet within 12 monthso Repurchases are unlikely. The needs of these firms are met when first

purchase of the Dry Flush toilets is made. o The Dry Flush is approximately $400 and average contractor firm

revenue is approximately $90,000.22 The product is a considerable investment and contractors are unlikely to keep buying once they already have one.

Likelihood product is used every montho The majority of contracting jobs are small but long-term. The Dry

Flush will be used very often for the duration of the job. Cartridge consumption

o One Dry Flush toilet for an independent firm is projected to consume 4-6 cartridges a month.

Trains

Segment Score: 4.36

Segment Overview:

Trains use vacuum toilets. Vacuum toilets have been able to withstand the pressure shock waves generated in tunnels.23 Glova Rail is large foreign manufacturer of vacuum toilets for trains acting as a direct competitor for the Dry Flush toilet. 24


Functional Characteristics o The odorless feature is a strong benefit for people seated on a train.

Dry Flush Priceo The purchase and installation of a Dry Flush toilet is much more cost

effective than that of a regular toilet. Cost per flush

o It would be difficult for conductors to switch cartridges. A new staff member would have to be assigned for the product’s maintenance.

Convenience and availability o Toilets are already installed in trains. It could be cost-prohibitive for

current trains to replace their toilets. The Dry Flush toilet would have to be implemented in the making of new trains.

22 http://work.chron.com/average-salary-general-contractor-6862.html23 http://www.toilet-guru.com/train.php24 http://www.glova.dk/

26

Profit Potential:

Intensity of competitiono There are already well-established toilet manufacturing companies

who provide efficient toilet systems for trains. Threat of substitutes

o People using the bathroom prior to their travel or commute. Threat of new entrants

o There is a possibility that a competitor can enter the market if the Dry Flush is implemented in trains; but currently there is not a threat of new entrants.

Power of customero Manufacturers would buy in bulk giving them power in price

negotiation.

Barriers to Entry:

Challenge to reach buyero Difficult for a small company, with a product not tested in the

segment, to reach the buyer. Difficult to win contract/gain distribution within 12 months

o No regulatory barrier identified. o Installing Dry Flush represent major installation project and change to

train operations. Potential customers happy with current alternatives today

o Toilets have never been an issue for travelers and commuters.o Typically commuters utilize bathrooms prior to travel.

Consumer/buyer price sensitivity o Train manufacturers have large budgets, however pressure to reduce

costs is significant.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero Multiple cars per train call for bulk order of the Dry Flush toilets.

Buyers is likely to repurchase toilet within 12 monthso Moderate and dependent on how often manufacturers plan for new

lines of trains. Likelihood product is used every month

o Trains transport passengers daily. Cartridge consumption

o The Dry Flush toilets would be used very often.

27

Camping

Segment Score: 3.65

Segment Overview:

There is a market for the Camping segment. However, there are many portable toilets already offered, which are listed in the Competition section.

Camping is done seldom throughout the year. The 2012 Outdoor Foundation reported these facts that are relevant to the Dry Flush product:

The average camper went on 4.97 camping trips Almost 43 million Americans went camping in 2011 Forty-seven percent of camping participants are unemployed. Twenty-nine

percent are students. Twenty-eight percent of campers say that airbeds or air mattresses are the

greatest luxury product to have on a camping trip while toilet facilities rank at two percent.

Thirty-nine percent of “non-luxury” campers say that a tent is the most essential camping product while toilet facilities rank at one percent. 25


Functional Characteristics o Portability and waterless features are strong for this segment.

Dry Flush Priceo Bought by direct consumers who can consider the Dry Flush toilet as a

luxury more than a necessity.o Camping, on average, is not done very often. o Substitutes that are more cost effective.

Cost per flusho Moderate cost compared to other costs of camping.

Convenience and availability o A family owning the Dry Flush toilet makes for great convenience and

bathroom availability when camping.

Profit Potential:

Intensity of competitiono There are a few other alternatives to the Dry Flush. However, they are

not as innovative.

25 http://www.outdoorfoundation.org/pdf/research.camping.2012.pdf

28

Threat of substitutes o Other options include toilets that are waterless and use water. Both of

them priced under $100 but not as advanced as the Dry Flush toilet. o Most campgrounds have Porta-Potties and bathroom facilities.

Threat of new entrantso There is a possibility that a competitor can enter the market if the Dry

Flush is implemented in the camping market; but currently there is not a threat of any new entrants.

Power of customero Direct consumers have little buyer power.o Retailers buying wholesale have power to negotiate price.

Barriers to Entry:

Challenge to reach buyero Camping supplies are only sold in certain number of stores. Gaining

shelf space is tough. Difficult to win contract/gain distribution within 12 months

o The low number of outlets makes it harder to gain shelf space, which can take a long time.

o Connecting to niche retailers such as Bass Pro Shop and Cabela’s decreases difficulty to gain a solid distribution within 12 months.

Potential customers happy with current alternatives todayo Most campgrounds have Porta-Potties and set up bathrooms.

Consumer/buyer price sensitivity o Campers might not want to spend $400 on the Dry Flush if it is only

used a few times a year.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero The Dry Flush toilet is for personal use. Buyer is likely to purchase

only one. Buyers is likely to repurchase toilet within 12 months

o A family only needs one Dry Flush toilet. Likelihood product is used every month

o Camping cannot be done all year round. Many people camp only a few times a year.

Cartridge consumption o The Dry Flush toilet will only be used at times of camping.

29

Disaster Relief

Segment Score: 3.54

Segment Overview:

For this segment, it would be profitable to use a disaster relief organization, such as FEMA, to provide the Dry Flush product to victims of disaster. However, many products have made efforts to reach this segment:

There are waterless, odorless, composting toiletso Nature’s Heado Sun-Maro Environlet26

Composting toilets are more environmentally sound. The waste converts to soil that can be used for the land in disaster stricken areas. However, they are more costly and require enzymes.

California Institute of Technology designed a solar-powered toilet that generates hydrogen and electricity. 27

Loughborough University designed a toilet that produces biological charcoal, minerals, and clean water. 28

University of Toronto designed a toilet that sanitizes feces and recovers resources and clean water. 29

FEMA is a government organization, which requires stringent regulations to be met. There is a dedicated program to become an affiliated vendor with FEMA in which there are three separate stages and processes to go through.30 It would take time to pass through each stage of the approval process. There is the opportunity for small businesses to be involved with FEMA. However, the company is required to go through the liaison program or get contracted by the government; both of which are lengthy processes.


Functional Characteristics o Water supply is limited in this segment. o It is important to move toilets around to different areas as needed.

26 http://www.natureshead.net/; http://www.sun-mar.com/; http://www.envirolet.com/27 http://www.caltech.edu/content/caltech-wins-toilet-challenge28 http://www.smartplanet.com/blog/intelligent-energy/next-gen-toilets-that-could-change-the-world/29 http://www.gatesfoundation.org/media-center/press-releases/2012/08/bill-gates-names-winners-of-the-reinvent-the-toilet-challenge30 http://www.fema.gov/

30

Dry Flush Priceo Price is moderately sensitive. However, government will most likely

buy in bulk at a high discount level. Cost per flush

o The price per flush is the least attractive aspect of the Dry Flush product. It is relatively expensive.

o FEMA will need to purchase and distribute many cartridges to each victim who has been issued a toilet.

Convenience and availability o The Dry Flush product itself is convenient but the need for cartridges

is not.

Profit Potential:

Intensity of competitiono Porta-John manufactures toilets specifically for disaster relief. It

makes portable toilets that fold for easy transport and storage. o Another product is Uncle John that functions similarly to the Dry

Flush. It is compact, waterless, portable, and holds 40 flushes per cartridge.31

o The outdoors can be used as a latrine. Threat of substitutes

o There are several substitutes but none serve the exact functions of the DryFlush product.

Threat of new entrantso The Bill Gates Foundation, which is leading the “Reinvent the Toilet

Challenge,” may result in entrance of a new product. o Improvements in innovation are constant.

Power of customero Disaster victims have little say in price control. o FEMA and the Red Cross direct the means of trade from manufacturer

to direct consumer. Therefore, they can negotiate price.

Barriers to Entry:

Challenge to reach buyero Highly difficult due the application process to win a contract with

organizations such as FEMA. Difficult to win contract/gain distribution within 12 months

o Difficult and time consuming to become an affiliated vendor with FEMA.

o There is the opportunity for small businesses to be involved with FEMA, but must go through the liaison program or get contracted by the government.

31 http://www.toilets.com/disasterrelief.htm

31

Potential customers happy with current alternatives todayo Current alternatives exist but are high in price.

Consumer/buyer price sensitivity o FEMA has a large budget but like most governments is very price

sensitive because of tight budgets.

Buying Behavior:

Buyer is likely to purchase multiple units/ordero FEMA would buy in bulk to support many victims.

Buyers is likely to repurchase toilet within 12 monthso Depends on the demand, which depends on how frequent disasters

occur. Likelihood product is used every month

o At the time of the disaster, the toilet would be used a lot, but after the disaster is cleaned up, the toilet will no longer be needed.

Cartridge consumption o In times of disaster, the 17 flushes would be used very quickly because

of many users.o Cartridge consumption will slow once disaster is relieved.

32

Final Recommendation

Based on the results of segment scoring and our analysis, we recommend that Dry Flush LLC makes targeting the homeowner segment its first priority when implementing its segmentation strategy. Although additional primary research is needed to better quantify the size of this segment, the low market penetration of backup generators in this segment, and the prevalence of power outages, indicates a strong need for this product by homeowners who depend on electric pumps for water or waste management. Other segment factors, which are reflected in the segment’s score, further support the relative strength of this segment.

Based on our research, we conclude that Dry Flush LLC should approach Home Depot to efficiently and effectively reach the homeowner segment. Specifically, when compared to Lowe’s, Home Depot is a superior home improvement retailer choice for these reasons:

Home Depot has reported sales of $19.5 billion for the third quarter of fiscal 2013 while Lowe’s reported $13 billion. Home Depot has seen 52 week highs in its stock this year outpacing Lowe’s.32

Aside from numbers, differences in the two retailers’ target markets explain which of the two retailers is the better target for Dry Flush. Lowe’s most consistent and loyal customers are primarily females, while Home Depot has a more balanced mix of men and women shoppers (see Figure 1).33

Home Depot commands a high share of the market for home improvement and related products.

Also, Home Depot has great brand equity giving the product’s it sells credibility in the eyes of a consumer.

Home Depot has a “Supplier Diversity” program where businesses apply to have Home Depot stock their product. This program is only accessible through the corporate website. The program opens opportunities for businesses controlled by minorities, women, and veterans. In case of a veteran, the website indicates, “at least 51% owned, operated, and controlled by a veteran.”

Further, Home Depot has the potential to reach consumers in other segments (i.e., those identified above and removed from further consideration) providing Dry Flush with the potential for incremental sales to these segments and subsegments without a dedicated marketing effort targeting these segments. Since many activities related to the need for a Dry Flush toilet (e.g., hunting, camping, fishing,

32 http://phx.corporate-ir.net/phoenix.zhtml?c=63646&p=irol-newsArticle&ID=1878097&highlight=http://media.lowes.com/pr/2013/11/20/lowes-reports-third-quarter-sales-and-earnings-results-4/33 http://www.forbes.com/sites/prospernow/2013/04/15/if-lowes-wants-to-get-serious-about-home-depot-itll-have-to-man-up/;

33

tailgating) are dominated by men, Home Depot’s dominance in reaching men make Home Depot an attractive target for Dry Flush.

Figure 1. Lowe’s vs. Home Depot Customers (source forbes.com)

Entering a new segment is always risky. To hedge risk, Dry Flush LLC should utilize a portfolio approach by simultaneously targeting more than one segment as it implements its segmentation strategy. Rankings of other segments, combined with the discussion of each segment, will provide Dry Flush with direction as it defines the segment portfolio to pursue.

34

APPENDIXSEGMENT SCORING DETAILS

Homeowners RV'sSegment Score - 5.40 Segment Score - 5.15Subfactor Scoring Subfactor Scoring

Benefits by Segment Score Benefits by Segment ScoreFunctional characteristics 8 Functional characteristics 8Dry-Flush price 5 Dry-Flush price 6Cost per flush 7 Cost per flush 6Convenience/availability 5 Convenience/availability 7

Average Subfactor Score 6.25 Average Subfactor Score 6.75

Profit Potential Score Profit Potential ScoreIntensity of competition 3 Intensity of competition 4Threat of substitutes 4 Threat of substitutes 3Threat of new entrants 3 Threat of new entrants 7Power of customers 4 Power of customers 4


Score ScoreBarriers to Entry Barriers to EntryChallenging to reach buyer 6 Challenging to reach buyer 7Difficult to win/gain contract 4 Difficult to win/gain contract 2Successful use of product 6 Successful use of product 2Consumer/buyer price sensitivity 4 Consumer/buyer price sensitivity 5


Score ScoreBuying Behavior Buying BehaviorMultiple units/order 8 Multiple units/order 7Product used every month 2 Product used every month 5Cartridge consumption 8 Cartridge consumption 5Likelihood used every month 4 Likelihood used every month 5


35

Military Cruise ShipsSegment Score - 5.11 Segment Score - 4.90Subfactor Scoring Subfactor Scoring









36

Truck Drivers Bus ManufacturersSegment Score - 4.85 Segment Score - 4.80Subfactor Scoring Subfactor Scoring









37

Open Field Workers TrainsSegment Score - 4.59 Segment Score - 4.36Subfactor Scoring Subfactor Scoring









38

Camping Disaster ReliefSegment Score - 3.65 Segment Score - 3.54Subfactor Scoring Subfactor Scoring









Documents

Master DryFlush Document