TaKaDu’s strategy needs to be centered on gaining market share and adding new clients. Company: TaKaDu has grown quickly thanks to valuable proprietary technology - statistical software that identifies issues such as leaks and busts in pipes in real time that could lead to service interruptions - which saves clients money. However, their product is low margin and the low number of clients keeps the company from becoming profitable and self-funding.
Context: Up to 30% of the global managed water supply is lost in transit before reaching the consumer due to infrastructure issues. This non-revenue water represents a potentially immense market for TaKaDu’s product. However, TaKaDu has had some trouble gaining widespread traction with utilities.
Customers: There are around 250,000 water utilities of various sizes worldwide. The high amount of non-revenue water creates demand for solutions like TaKaDu’s system. The system functions like an Enterprise Resource Planning (ERP) system as well as a Customer Relationship Management (CRM) system. However, there is significant resistance to adopting TaKaDu’s system, as it comes with significant cost and little perceived benefit. Currently, TaKaDu has nine clients and would like to gain more to become profitable.
Competition: Currently, no one has as comprehensive of a product as TaKaDu, but large enterprise software and service companies, instruments and measurement companies, and small software and consulting companies all may target the same customers as TaKaDu.
Collaborators: TaKaDu established relationships with water utilities by partnering with the IT companies already serving these utilities. While these partners take 20% of revenues, they increase the likelihood of purchase and handle a significant portion of the after-sales cost, making these relationships crucial for TaKaDu’s operation.
Segmentation
TaKaDu has already identified the two most important criteria for evaluating potential customers. Those firms which have installed sensors and sufficient IT infrastructure in their network are the ones capable of using TaKaDu’s system. Of the 5,000 firms that fall into this segment, only firms of a certain size are deemed large enough to be profitable clients. TaKaDu estimates that there are about 1,000 of these firms worldwide. Strategies that expand the potential client base require significant amounts of time and capital.
The 1,000 firms that meet the criteria above may further be segmented into those utilities with older infrastructure that would be more likely to face leaks and those with newer systems. Another important distinction is made between public and private utility companies, as these will each have different motivations for potentially adopting TaKaDu’s system. A utility’s reported level of non-revenue water may be a useful baseline to consider, but given the incentives for utilities to manage their reported figure, it should not be used in assessing client attractiveness.
Geographically, the market can be loosely segmented into mainly urban utilities, and companies that service the rural areas. Rural companies may serve fewer customers, but are more likely to have large systems which extend into remote areas. Different countries also offer a degree of segmentation with regard to cost of water and regulatory structure.
Targeting
Although utilities with newer systems are more likely to have installed sensors, among those who have made such an investment, those with older systems should be targeted by TaKaDu. As their systems age, they will be more likely to confront service disruptions and repair costs, which might be alleviated by the adoption of TaKaDu’s system. Their investment in sensor technology likely means they are aware of the potential problems, and are willing to expend some capital to address them.
Private utility companies are also an attractive segment to pursue. These companies are more likely to be motivated by the cost savings offered by TaKaDu. While demonstrating the value of the product will be challenging to both public and private utilities, those run for profit are more likely to prioritize cost savings and are more likely to move quickly to implement a new system. Public utilities tend to be more risk-averse and image-conscious, and while they may be attracted by the potential to reduce service disruptions caused by water main breaks, they will likely require more time and effort to acquire as customers.
TaKaDu should also focus on acquiring new customers in Australia. This market is relatively attractive, with a high cost of water and a strong regulatory presence. Costs associated with increasing sales staff would be less than in other locations, given that TaKaDu already has an office and strong partner relationship in Australia. Furthermore, if TaKaDu is correct in assuming that Australian utilities are willing to recommend the system to one another, each new customer would further reduce acquisition costs.
Given the small size of the market, it is important that TaKaDu remain flexible and give appropriate consideration to any utilities which express interest in their product. However, TaKaDu’s sales force should focus on private companies with older systems, particularly in Australia, in order to gain new customers in the quickest and most cost effective manner.
Positioning
Communicating the product’s value to the utility company is the greatest challenge for TaKaDu as it attempts to acquire new customers. In addition to the cost of the system, potential customers will likely be resistant to changes in their procedures and staffing. TaKaDu must focus on the simple premise that their system reduces cost and increases continuity of service.
In focusing on private utility companies, the emphasis on cost reduction should be a key component of promoting the system. Sales agents will have to have to be equipped with data from comparable utilities showing that the system does reduce bursts, and therefore costs. Such data would have to be tailored to reflect the size, location, and age of the target company. However, as this is the central aspect of the sales pitch, an extra investment in creating this demonstration of effectiveness is certainly warranted.
When pursuing public utilities, TaKaDu must encourage the customer to view the product as an effective means to reduce service interruptions. As these customers are less cost-conscious, and less concerned about the negative effects of bursts, framing the product in terms of continuity of service will be essential to overcoming customer skepticism. However, switching the customer’s priority from “quick to fix bursts” to “smart about preventing bursts” will require a significant time investment from TaKaDu’s sales force. Product
For the foreseeable future, TaKaDu should allocate the majority of its discretionary spending to sales and marketing, instead of investing in developing new features for its product. The core value of the system is in quickly predicting, identifying, and addressing leaks and bursts. The existing features do this relatively well. Additional features are unlikely to convey the product’s value more effectively, and may add complexity which will hinder the communication of the product’s value in a simple manner. The product’s brand should be a reputation for effectiveness in reducing non-revenue water, and not focus on secondary features.
Price
Estimates of the Economic Value to the Consumer vary widely for a customer such as Queensland, based on the frequency and size of leaks, as well as on estimates of the efficacy of TaKaDu’s system. The most conservative estimates yield an EVC of $1.1 million per year, with an EVC of up to $318 million per year in the most extreme case. TaKaDu should tailor these calculations to Queensland’s existing leak figures, but for the moment, we conservatively assume that their EVC may be in the range of $50 million. TaKaDu strives to offer up to a 300% ROI; this could be achieved with a price as high as $16 million per year. Place (Distribution)
The existing partner relationships should continue to be a central part of identifying new customers for TaKaDu. These partners also play a valuable role in the customer’s evaluation of the product and its alternatives. However, the installation of the system should continue to be handled by TaKaDu engineers. This is essential to ensure the system operates effectively, and allows TaKaDu to directly teach the customer the full potential of the system. Personal involvement from a team of TaKaDu engineers may also convince the customer of the system’s complexity, which would imply greater value than a system which they could install themselves.
After the initial setup, TaKaDu may be able to reduce cost by shifting some of the system maintenance duties to the partner company. Not clear on the structure now – I thought after the six weeks they really did nothing. Are we talking about those six weeks? Sales agents would have to conduct routine follow-up visits to ensure that customers are getting the best experience possible, reducing the chances that a client would stop using the system or switch to a competitor.
Promotion
A key deficiency in TaKaDu’s current strategy is in conveying relevant information about the value of their product to potential and existing clients. In order to address this, TaKaDu should expand its in-house sales force, and use these agents to communicate directly with customers as much as possible. These interactions will be vitally important to increasing the customer’s awareness of their need for a product such a TaKaDu’s, and for convincing them of the value of purchasing the system. Partners can be a source of information about the customer, which can improve the efficacy of the sales pitch. Another valuable channel for communicating value is recommendation by existing customers. TaKaDu may want to explore options for encouraging this behavior, such as discounts for customers who refer other utilities.