Desso Carpets: Marketing Background, Sustainable Essay, Target Market.

Marketing Background of Desso

Desso was founded in 1930 in Netherlands as a producer of woven carpets for individuals and corporates. They established a grass-manufacturing division in 1980. In 1981, they merged with Esco, a manufacturer of needle-felt carpets. The company was acquired in 1993 by Deutsche Linoleum Werke and withdrawn from the Amsterdam stock exchange. In 1998, it was taken over by Armstrong World Industries (Wallace 2015). The company, however, became independent in April 2007 after acquisition by its current board of management and NPM Capital (VanDerSteeg, Paulissen, and Roex & Mommer 2015). In February 2010, they acquired Enia Carpet NL and in 2011 majority shareholding was purchased by Bencis Capital Partners, but remaining shares were still owned by the current management board. Desso owns two factories, a distribution center located in Europe and customer service points in Europe, America, Asia, Africa, Middle East and Australia. The head office is in Waalwijk, Netherlands.

 In Australia, Desso provides carpets and carpet tiles to corporates, businesses, and individuals in over 100 countries. The company also manufactures sports surfaces like the Desso Grass master for football stadiums. The company’s vision is ‘To be the world leader in making environmentally responsible flooring products that deliver outstanding value in design and functionality and thus contribute to people’s health and wellbeing.’ In 2008, Desso signed an agreement with the Hamburg-based Environmental Protection Encouragement Agency (EPEA) to become the first carpet manufacturer to adopt the Cradle-to-Cradle sustainable design concept and embrace this into its business culture (Silvestre, DeBrito & Pinheiro 2014). This system was founded by William McDonough and Dr. Michael Braungart, and the aim was to mimic the planets nutrient cycle and replicate the same in companies through sustainable material management (Geng, Her & Statt 2014).

The carpet industry in Australia has been affected by various issues such as interest rates, the construction industry, incomes of households and the housing market. Manufacturing of carpets involves many steps. The Australian industry has a single large-scale producer, six mills, and some smaller manufacturers. The turnover of the carpet industry is $1.6billion.The key market is households who make up to 95% of the market share. Most people prefer vinyl due to its price when compared to stone, floorboards, and carpet. Demand for rugs and floorboards have increased steadily over the years (Taheri 2016). The industry, however, cannot control interest rates, wage rates, and construction rate. Strong competition between retailers of carpets has seen the industry slowdown. Intense pressures from external operators (Bunnings and Harvey Norman) saw terrible trading conditions resulting to sales only growing by 0.1%.

Carpet Industry in Australia

Consumer confidence also declined, and the housing market became unstable, and this slowed sales further. The global financial crisis led to lower incomes and consumers held off on some purchases. Interest levels placed pressure on mortgage repayments (Malik & Prasad 2014). The construction industry is also expected to fall by 4.5%, and this will have an effect on demand for floor coverings.

Floor covering retailers will, however, perform well in the coming five years and are expected to have annual growth of 2.1% with sales rising. The industry aims to give customers competitive prices and emphasis is on sustainability. There is also focus on innovation to come up with better products for customers (Malik & Prasad 2014). Floor covering retailers sell carpet, vinyl, rugs and tiles. They purchase from manufacturers and wholesalers and then resell to consumers. Increased promotion deals and competitive pricing will lead to industry growth. The industry will also have to focus on sustainable efforts to succeed. They should join the environmental certification scheme and use the bio-based material.

The Carpet Institute of Australia has conducted a resource efficiency study with assistance from the company Sustainability Victoria. It covered manufacturing and installations and revealed how the industry could become resource smart. About 56 million meters squared of carpet was supplied to Australia by June 2007, and 75% was produced locally. Production used 177000 tons in raw materials, which included fiber, backing, and adhesives. About 80% of uplifted carpet goes to the landfill once worn out. 80 percent of Australian manufactured carpets are manufactured in Victoria. Manufacturers work on their waste and recover most of the internal fiber wastes to reuse within their operations. Some carpet manufacturers use waste in other resources to produce products like plastic posts and insulation. Fiber that is unspun and wastes of soft fiber are easy to reprocess, and yarns are cut then shredded for reuse (Taheri 2016). Finished carpets contain adhesives and backing material and face fibre, which needs to be separated if the company wants to reuse the raw materials. Cropping and Shearing wastes are used in different recycling options, which are external to the carpet manufacturing ability.

Installations of flooring lead to wastes, and they are very hard to reuse. Installers and Retailers have been trying to overcome this by making operations more efficient. Roll-end wastes that remain after carpet installations are sold to mat merchants and can be used for new mats or kept for future carpet repairs. Storage is, however, an issue as these roll-ends are numerous. This means that many roll-cuts are ending up in landfills. There is a focus to identify solutions like coming up with an improvement plan for management of waste, energy and water management and monitoring, evaluation and reporting methodology(Malik & Prasad 2014). This will lead to more awareness and environmental outcomes for the carpet industry.

• Individuals-Home owners who require installations at their homes
• Businesses-Various small businesses around Australia
• Corporates-Corporate Institutions who need different kinds of installations
• Stadiums-Various sports stadiums around Australia

Desso Target market

Desso Products and Services (Wallace 2015)

Desso Product Analysis

Intended use –Desso has worked with EPEA and identified a new value-added use for its carpets, which is cleaning the air (McDong &Prothero 2014). This has enabled the company to establish new markets for its products.

Packaging and Labelling- The global market is changing, and customers are demanding packaging that is more innovative. Organizations are being forced to make smarter material choices. The Cradle-to-Cradle concept, which Desso is part of, has come up with a certified material called Ecovative, made of mushroom. This combines agricultural waste into a compostable alternative to plastic. This is a sustainable way for Desso to package its products.

Design and materials- The pathway to a circular economy is being accelerated by using materials, which are pure and based on the Cradle-to-Cradle (C2C) methodology. The purity of materials gets challenging, as processes get deep. Desso tries to recover Nylon 6 which it up cycles to high-quality carpets. The design of the carpets is such that the yarn and backing can be easily disassembled for recycling (McDong & Prothero 2014). Desso offers a very wide range of carpets that customers can choose from their website or mobile application. They have different colors and textures and provide a wide variety of different types of customers. Desso is also involved in using new types of fiber for its carpets.

Production- The carpets by Desso are produced using the Cradle-to-Cradle concept, which uses the most sustainable materials to ensure quality. The carpets have been redesigned to clean the air.

Supply Chain Management- Desso is in a closed regional and local market, which is advantageous as there is proximity between where production happens and where the product is used. This enables Desso to have relatively low costs of transport. The company also designs its products with the intention of closing the loop through using safely recyclable materials (Hsu, Tan & Zalani 2016). They use polyolefin for its carpets, and this is 100% recyclable. Nylon 6 can be recycled again into Nylon 6 and then changed into 100% regenerated nylon yarn by Yarn Supplier, Aquafil. The company does a material health assessment of products and material ingredients by having their suppliers fill in a product declaration form (Ahi &Searcy 2013). Suppliers also have to sign a suppliers’ code of conduct. Occasionally Desso does social audits and suppliers who do not cooperate on sustainability measures risk losing business with Desso.

Desso Products and Services

Considerations for consumption and disposal- Desso’s products contain ecolyn yarn that is made from 100% recycled content including old carpets that have been brought back by consumers from its refining plant (Wallace 2015).

Desso Pricing Analysis

Desso operates in a very competitive market hence pricing is based on competition. They give prices based on the quality of their products and through this have been able to build their customer base. Due to quality, Desso has been able to install artificial tuff in two Euro 2012 stadiums. They have therefore created a brand image hence customers can relate to pricing, as they know they are getting quality. Prices are adjusted depending on costs and what competition offers.

The company has also developed a sustainable pricing strategy to achieve competitive differentiation. They have done market research and noted the switching costs, customer and product profitability and what their customers value. The company has clearly defined their pricing ownership and have ensured that they offer competitive value and have positioned their product segments as part of their strategy for pricing. Desso has also developed a model, which enables them to depend on market data to adjust prices depending on important factors. Desso has been able to accelerate improvement in its products and to focus on other areas of its business as it has attained sustainable pricing strategy.

Desso is currently using the following forms of advertising

• Print Media-the Company used print media like newspapers and magazines to advertise its products.
• The social media-The Company has an interactive website and also uses social media sites like Facebook, twitter and linked in for advertising.
• Electronic Media -Television and radio adverts as well as advertising in sports stadiums where it has installed its tuff
• Public Relations -The company also uses public relations campaigns through various advertising companies (Trujillo, Arroyo & Carrete 2014)

Desso has been able to convince its shareholders that the Cradle-to-Cradle concept would have a positive impact on business performance (Geng &Herstatt, 2014). The company launched the initiative as one that would boost Desso’s innovation capacity and would have a positive impact on the environment and public health by ensuring there are design and initiative in the product making process. Desso also leaped ahead of their competition in sustainability efforts.

Desso also ensured that there was communication across the whole organization. The Cradle-to-Cradle concept was explained to all managers and staff, and they were glad to be associated with the same. The staff developed high energy, which led to great innovations. Employee satisfaction surged (Mahmoud 2016). Persuading suppliers was a challenge as half were not willing to make changes. The company moved on with the suppliers that would make the changes. One of the suppliers invested millions into new equipment that would enhance Desso’s sustainability efforts.

Desso sells its product directly to consumers. They focus on education, healthcare and government channels (Mishra, Sinha & Singh 2014). Customers can order through their website, mobile phone application or a direct visit to the company’s offices.

Desso Product Analysis

Desso in 2008 transformed its business model to Cradle-to- Cradle concept by enhancing the use of non-toxic systems of manufacturing in which products are designed for disassembly using materials that can be recycled. The aim was to get products that could be endlessly recycled. Desso, therefore, had to change its supply chain accordingly (Ahy & Searcy 2013). Suppliers are expected to do an analysis of what the ingredients of their products are and eliminating those that do not pass the standards of Cradle-to-Cradle. Products must have the ability to be disassembled so that they can be upcycled. The materials used are viewed as nutrients for new goods production or the biosphere. The aim of Cradle-to-Cradle is to move to up cycling rather than recycling. Up cycling enables materials from returned products to be disassembled and then used to make other high-quality products (Cheng & Wu 2015). The model also seeks to follow a service-based approach where customers lease products and when they upgrade, manufacturers take the old product and up cycles it to a new one. Suppliers are also expected to design goods, which have a positive impact on the environment and human health.

Suppliers, therefore, provide a list of the ingredients they use to Desso. They have also come up with a refined process where they take used products and up cycle them (Wallace, 2015). Desso together with Dow Chemicals have come up with a new carpet tile backing that replaces bitumen. Ecobase has a polyolefin layer which can be upcycled, and it received a Cradle to Cradle Silver Certificate for attaining 97% materials that are well defined.

Strengths-Desso is experienced in carpet production as it has been in the business for many years. It has therefore perfected this skill and has used it to gain a sustainable advantage in its processes. The company has well-established channels of sales and distribution, and this makes it be able to serve its customers on time and take advantage of supply chain benefits.
The company has an established domestic market, and this has made it easier for growth to continue taking place. The company also has high revenues, and it has used this to establish and adopt a cradle-to-cradle system that has enabled it to achieve high-quality standards hence competitive advantage. The company is also advanced technologically regarding marketing strategies, and customers can make orders from the convenience of their phones (Kuluk 2017). The Cradle-to-Cradle system has enabled the company to have an innovative workforce, as employees are proud to be associated with the company. This has led to high productivity and efficient processes.

Weaknesses-The Company experiences high research and development costs especially because it was one of the pioneers to use Cradle-to-Cradle concept. The company also faces high competition as more and more companies are getting into sustainable marketing (Spekman, 2015).

The opportunities- The Company can take advantage of the growing economy and higher wages to increase its market share. The company has also established great partnerships with leading companies, and this has helped it grow and attain competitive advantage. The company has an international presence hence making it easy to continue on its growth path (Leonidou, Katsikeas & Morgan 2013). Desso has a strong brand image especially after installing tuff at Wembley. The company has an established customer base that includes corporates, and this has led to the free marketing of their quality products and installations. They are the pioneers of the cradle-to-cradle system in the carpet industry and are therefore being used as a benchmark for sustainable activities. This has led to great partnerships and public relations for the company.

Threats-Sustainability efforts can be quite costly hence; the company has to ensure sales are high to cover these costs (Spekman 2015). Labor costs are also increasing day by day. Some suppliers do not want to cooperate with the company on its sustainability efforts.

The perceptual map shows us the perception of customers and potential customers concerning various carpet companies in Australia (Leonidou 2014). It also shows the position of Desso, about its competitors. This map shows some of the competitors of Desso Carpets (Davari &Strutton, 2015). Desso Charges low prices for high quality as its other competitors, Ontera Carpets, and Fettex Carpets. Kingsmead and Victoria Carpets charge low prices for lower quality.Stainmaster and Star Carpets charge high for high quality

Target Market

• Create a niche market
• Engage community in sustainable activities to build presence

Product

• Increase product differentiation so as to build market share(Goi 2015)
• Find cost effective means of market research
• Partner with more sustainable companies

Price

• Engage in strategic pricing based on customer needs
• Give consideration to loyal customers and give price cuts (Kuluk 2017)

Place

• Drop suppliers that do not meet the company’s requirements

Promotion

• Engage in more online advertising
• Continue with PR efforts

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