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Masco Cabinetry KM Restructuring Issues 8/17/2010

Masco Cabinetry KM Restructuring Issues 8/17/2010. KM Restructuring - Agenda. Review Recent Corrections Molding Pricing Low-end Door Style Changes How we arrived at the current state KraftMaid versus c ompetitive p roduct KraftMaid versus similar M erillat product

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Masco Cabinetry KM Restructuring Issues 8/17/2010

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  1. Masco Cabinetry KM Restructuring Issues8/17/2010

  2. KM Restructuring - Agenda • Review Recent Corrections • Molding Pricing • Low-end Door Style Changes • How we arrived at the current state • KraftMaid versus competitive product • KraftMaid versus similar Merillat product • How product is being used • Where do we go from here? • Communication – Lessons Learned

  3. Recent Corrections • Replacement Doors • Legacy – No logical progression • New progression created using a square inch methodology • Made sense on the smaller sizes • Created huge increase on the large sizes • Corrected using old Dealer List as base (not HD) • Straight line progression to match style progression • Decorative End Panels • Eldridge/Vanderbilt flip flop • New catalog shipping Friday 8/20 – letter

  4. Moldings • Information

  5. Low-End Door Style Changes - Background • Information

  6. Low-End Door Styles – Dealer Vs HD

  7. Low-End Door Styles – Vs Medallion

  8. Low-End Door Styles – Vs Merillat

  9. Sales Mix by Customer Top 25 KraftMaid Dealer Customers – Sales Mix

  10. Sales Mix by Customer Top 25 KraftMaid Dealer Customers – Sales Mix

  11. KM Restructuring – Options Moving Forward • Where do we go from here? What are the options? • Maintain planned 90 day promotion and transition to planned pricing afterwards • Continue the current promotion until the brand strategy is mature and actionable • Make a limited Merillat product offering available to dealers • Reintroduce a multiple list price structure • Drive Merillat conversion • Add a new factor for specific door styles • Others…

  12. Where do we go from here? • Option 1 – Maintain planned 90 day promotion and transition to planned pricing afterwards • Current promotion is timed to expire within the system • Promotion is limited to larger dealers - $100k in affected door styles • Cons • Does not address dealer concerns • Likely to lose business where door styles are being used to compete with lower quality/priced product • Pros • Improvement in profit per unit • Accomplished progression goals of price realignment

  13. Where do we go from here? • Option 2 – Continue the current promotion until the brand strategy is mature and actionable • Could we use as a lever to capture some level of commitment from Dealers • Would we roll to all Dealers from limited set? • Cons • May be viewed as admission that realignment was flawed • Does not undo potential damage to trust • Pros • Demonstrates a commitment to listen to Dealers’ concerns • Gives an opportunity to gain more partnership

  14. Where do we go from here? • Option 3 – Make a limited Merillat product offering available to dealers • Similar to 100/200 • Brand as Merillat or KraftMaid • Cons • Logistics challenges • May require time from constrained resources • Works against future brand strategy • Obvious channel conflict if branded “Merillat” • Pros • Product/price point may be more appropriate • May accelerate brand strategy if branded “Merillat”

  15. Where do we go from here? • Option 4 – Drive Merillat brand into affected dealers • Cons • Strategy may not be mature enough as of now • Product changes are not fully planned • Channel conflict • Certainly not perceived as an answer to some key dealers • Pros • Accelerate end-state • Responsive to Dealer’s concerns • Compete with more appropriate products

  16. Where do we go from here? • Option 5 – Re-introduce a multiple list price structure • Add a second list price for Dealers • Cons • Does not address pricing differences between channels which could be a bigger problem down the road • Administration costs increase • Requirements on a constrained group of resources (Engineering and pricing) • Admission that realignment was ill conceived • Negative profit impact • Pros • Allows more flexibility • Can address immediate concerns with progression

  17. Where do we go from here? • Option 6 – Add a new factor for specific door styles • May require a separate account number • Alternative may be to “program” into systems • Cons • Does not address pricing differences between channels which could be a bigger problem down the road • Complexity internally and for customer • Admission that realignment was ill conceived • Negative profit impact • Pros • Allows more flexibility • Can address immediate concerns with progression

  18. Communication – lessons Learned • Communication internally and externally was not effective • Key

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