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Management School & Economics Business Studies Honours New product Development: Bringing Innovations to Market Assessment: Vipp A/S (Designer Trash Bin Company) What is the problem? Written by Asta Young-Smith Matriculation number: s0566397 Word count: 2442 1

NPD Case study No 3

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Page 1: NPD Case study No 3

Management School & Economics

Business Studies Honours

New product Development:

Bringing Innovations to Market

Assessment: Vipp A/S (Designer Trash Bin Company)

What is the problem?

Written by Asta Young-Smith

Matriculation number: s0566397

Word count: 2442

Date: 20/03/08

Tutor: Prof. John C. Crawford

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Table of contents:

Situational Analysis

1. Nature of Demand: Page 32. Extent of Demand: Page 33. Nature of Competition: Page34. Environmental Climate: Page45. Stage of PLC: Page 46. Cost structure of Industry: Page 57. Skills of the Firm: Page 58. Financial Strength of Firm: Page 5

Problems/Opportunities

1. Key opportunities: Page 62. On Balance, the Situation is: Page 63. What is the problem?: Page 7

Alternatives

1. Alternative 1.: Page 72. Alternative 2.: Page 83. Alternative 3.: Page 8

Decision: Page 9

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Situational Analysis

1. Nature of Demand

There is always a great demand for cheap and simple design trash bins and other

bathroom wear, and there is a growing demand for the high quality luxury

commodities. Vipp, a family run business, has been producing high quality design

trash bins for many years and it grown to be a success. The demand for supporting

luxury products had been growing too. ‘After decades of subsistence revenues, Vipp

had increased production 30-fold and staff 16-fold to meet the accelerating demand

from around thirty national markets’1 The Vipp bins earned its success with the help

of family member’s dedication to business and also through intense advertising at

charity shows and exhibitions. There are many nice trash bins around but most of

them do not have the same DNA as Vipp bins do.

2. Extent of Demand

The company has a variety of products within their product line. The Vipp bin come

in different sizes and colours and is the main product that company sells within

Europe. The other products that had been created by Vipp are: toilet brushes, soap

dispensers, plastic bags for bin, and towels.

In 2005 the annual production volume reached 50,000 bins and in 2006, Vipp was

best known in Denmark, where it sold 22,000 bins per year. The company exports to

30 countries, mostly in Europe, also Canada, Japan, United States, New Zealand, and

South Africa.

3. Nature of Competition

The Vipp firm is not trying to compete with the large-scale producers. The main

competitors within their niche market are businesses, which are selling similar quality

designer products. This enterprise is not a volume-driven, but design-focused

1 R. D. Austin, D. Beyersdorfer, , ‘Vipp A/S’, Harvard Business School, December 19, 20063

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company. In order to maintain their high margins they have to have a sexy product

which is distributed through the right channels. The owners of the company are not

concern with the imitators who are making a very similar design product. Those

imitators do not have designers or PR and they can run on low margins. ‘It’s cheaper

to imitate than when you actually invent.’2 They know that there are many good ‘cans’

out there, but Vipp try to compete on the lifestyle and DNA that their company have.

The 90% of Vipp’s business comes from individual customers, who buy their

products from the design shops. Those customers are the ones that appreciate good

design. The owners of the company believe that their future competition will be other

luxury brands like for example Armani Home. Therefore the Vipp Company will

always be competing within their niche market full of products that provide exactly

the same service. However, with its quality product which has been put together by

talented craftsmen, it might be able to sustain the competition and gain a valuable

market share for Vipp products.

4. Environmental Climate

At this moment in time there are no legal actions being taken against or on behalf of

Vipp firm.

5. Stage of PLC

The Vipp enterprise is going through the growth stage as the company has established

its distinctive competences and enjoys some product-market success. In this stage, the

emphasis is put upon achieving rapid sales and realising advantages accruing to larger

scale. All functionally based structure is established, and authority is delegated to

different family members and procedures are formalised. At this stage still there is a

high level of uncertainty and it is crucial for the company to monitor the market place

and adapt initial strategies to major changes. The Vipp Company continuously faced

with problems like managing sudden company’s growth, matching demand increases

and maintaining cash flow.

6. Cost Structure of Industry

2 R. D. Austin, D. Beyersdorfer, , ‘Vipp A/S’, Harvard Business School, December 19, 20064

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It is difficult to comment on the company’s cost structure, as there are no data

available in this case study.

7. Skills of the Firm

The Vipp enterprise is a family run business, which has been very successful in

creating very high quality products. Jette’s Egelund (CEO) experience in human

recourses and father’s contrasting examples helped her to develop a style conducive to

the need to hire and keep great people. The company has a small in-house design

group which is led by Morten Bo Jensen, also a team of craftsman who are very

dedicated to the work they do, which is putting bin parts together and creating the

high quality goods. The Viip also has three people in Public Relations, which helps

the company to promote awareness of their products in the press, with dealers, and

with end customers. The company is also good in advertising the firm through various

charity events, and exhibitions, attracting more and more design-conscious consumers

who are on the look-out for a stylish waste bin for their bathrooms and kitchens. The

largest event to take place in Vipp’s history was in April 2006. Vipp got invited to

exhibit at Carrousel du Louvre in Paris. Chilean designer Mauricio Clavero created

some challenging art experience by using Swarovski crystals and Sicis mosaics. This

exhibition tours major cities throughout Europe and helps Vipp company to advertise

their products.

8. Financial strength of the Firm

In 2005, revenues rose 45%. By June 2006, the annualized growth increased to 56%.

In autumn the same year, the company was going to launch the new towel collection

and some other products, which are believed, would have projected a growth of 80%

for 2006. In June of 2006, the Vipp bin, displayed in Danish Design Centre, sold for

€149 to €500. The prices would always depend on bin size, geography, and retailer.

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Other products like Toilet Brush sold for €129, Soap dispenser for €75, and Plastic

bags from €5.

In general the company is growing very fast. This leads us to believe that financially

the firm is doing very well. The important part is for the firm to sustain its rapid

growth and continue to expand their new product range, which might help the

company to exceed bin revenues within the next five years.

There is limited information on the company’s financial status, so it is difficult to

decide on their financial strength.

Problems/Oportunities

1. Key opportunities

One of the key opportunities for Vipp enterprise is to continue developing a

broader product line which could be later diversified for the whole home. But to

do that they have to bring more resources and develop more capabilities into the

business, who will be able to give Vipp some new ideas and help with the

growth. Also by creating more resources and capabilities, company could start

entering many untapped markets with many influential buyers around the world.

Another opportunity could be approaching business-to-business clientele. It has

been done before in Vipp’s history and it could be done again. They would need

to approach architects or hotels and restaurants that are at the high end of the

market. As long as there is a relationship between the old products and the new

products, there will be always a story and a lifestyle attached to its brand.

2. On Balance, the situation is

On balance the Vipp’s main focus at the moment is in promoting their brand

and new products externally, because it is influenced by the fact that the

products had been developed by a company which has its roots in advertising,

like for example the charity show in Paris where Vipp had received good press

coverage and also Louvre exhibition which travels around selected luxury

shops in Europe and the U.S. However, the Vipp company has not clearly

identified the product value attributes before moving to the next innovation.

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What it really means is that preoccupation of keeping pace with the rapid

growth has led to a lack of attention to market research, as well as the

temptation to enter too many markets simultaneously.

1. What is the Problem?

Vipp’s problem lies in marketing research.

Alternatives

Alternative 1.

Abolishing or altering contract concept

Vipp need to abolish or make some alterations to their contract concept.

Stemming from Vipp’s ‘store-in-store’ concept, the contract would require

dealers to take the whole range of available products and display them in

accordance with Vipp standards. Smaller companies may not be able to hold

the full range of products through lack of shelf space. There could also be the

lack of budget to stock Vipp’s full range. In addition, Vipp’s idea of how to

present their products in smaller stores must conform to that of the

owner/manager. Similarly, larger stores have their own merchandisers who

decide on shelf space usage and displays. Trying to force companies to devote

space for the product and telling them how to present it may have negative

effects. Vipp would find their influence significantly reduced as cause of these

factors, and would have to alter their contract concept accordingly. Offering

the products to new markets, using a sale or return policy would significantly

heighten Vipp’s chances of having stores take the full range. They may even

attempt to abolish the contract for smaller companies in a lesser financial

position. They could issue merchandising information as a suggestion and not

that of a contracted order. Finally, Vipp could use personnel to liaise with

stores to suggest a layout face-to-face, increasing the likelihood of the

company following their directives.

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Alternative 2.

Invest in resources for carrying out market research

Vipp need to invest more in resources to market research and act upon its

findings to increase its control over the market. Different markets need a

different marketing approach to appeal to different consumers. Marketing

research was conducted in the packaging design of Vipp, but the all white

packaging design did not report back positively. Customers felt the product

“disappeared” on the shelf. Vipp disregards this as it is aiming for a sense of

identity with its packaging design. They aim to compete for more shelf space

by adding more products and “pushing out” other companies’ displays,

therefore creating larger displays and increased brand recognition. However, it

would be very difficult to achieve this if the customer feels the brand is

“invisible”. They could use a “trial and error” method to test various

packaging designs. In addition, Vipp would benefit by liaising with potential

customers to layout their ideas and gain feedback. There is a need to produce

adequate advertising and point of sale material in order to convince businesses

of their aims to expand within their stores. For example, if they are going to

proceed with white packaging, they need adequate in-store point of sale to help

promote the product for the customer. Vipp have to realise that they will have

very little control over shelf space within outlets which they have to react to

the feedback of retailers in order to maximise sales for all involved.

Alternative 3.

Diversify Advertising Budget

Vipp needs to spread out their budget for advertising to cover numerous

sectors as opposed to selective ones. They had so far a great success through

recognition in the charity shows, exhibitions, also through the artist’s designs

on their bins. But this way of advertising lacks in interaction with the market

place. This artistic, extravagant mean of advertising has always benefited

Vipp. However, they are deep rooted in style and fashion. Dramatic changes in

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fashion may not produce the longevity which Vipp needs. Much of the interest

and hype around the Vipp brand has been built up by the media interest and by

chance opportunities (such as exhibition entrance). These are out with the

control of Vipp. Marketing ploys such as the expensive concept of the salon

rely heavily on the media “storm” which follows such original product

promotion ends when the storm dies down. Although the salon provides a

good base to display the products, however, the idea of specifically designed

buildings to showcase their products would be highly expensive and it is too

localized an advertising tool once the media storm rests. From having bad

experiences in earlier marketing techniques, such as the use of agents, Vipp is

reluctant to go down the same route again. This failed largely due to the agents

not being supported by an advertising campaign due to a lack of funding. With

funding now in place Vipp are in a position to financially support such a

campaign. Reverting to fundamental marketing techniques such as agents

backed with appropriate advertising campaigns would considerably lower the

risks and financial costs of more exclusive, more expensive means of

advertising. Using agents would allow Vipp to gather further information

about market differences and how to further promote the product, and relay

information on how competition are promoting their products. Furthermore

using agents allows for face to face contact with the customer and consumer.

This would allow Vipp to gain a more detailed analysis of the market place

than simply showing the product off in a few selected locations. Vipp need to

control both the length of time advertising runs for and what markets in which

they reach. Current forms of advertising do not give sufficient control.

Decision

It has been decided that Vipp should follow with the alternative three, as it will

help the company to better understand the market place. If the company will

follow the proposed alternative they will have a better understanding of how

the market place operates relative to its products. Being able to identify market

and trends related to their inventions, they will be able to promote their new

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products by cultivating the market place and by attracting and keeping their

new customers. If they start gathering and analysing market research

information, the Vipp will have no difficulty determining if their marketing

plan is in line with their competitors, and what adjustments they have to make

in order to improve the overall competitiveness. The other two alternatives

would provide only a short term solutions for the company.

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