Usir

Executive Summary

United States Instrument Rental’s (“USIR”) most significant problem is that it does not understand its customers, resulting in a lack of perceived differentiation with its competitors and an overall low usage rate of equipment rental among its target audience. Two principal obstacles facing USIR include a lack of intelligence regarding the motivation that drives the decisions of different size companies and each person involved in the buying center, and a seemingly narrow overall awareness of the rental concept among its customers. In the near-term, USIR’s intermediate marketing goals must be to focus on retaining current customers and expanding their usage of equipment rental services. Long-term, USIR’s bottom line goal should be to retain its current market share leader position and continue to grow sales faster than the market. An approach focusing on customer intimacy through customer segmentation provides USIR with the most attractive prospects because it allows the company to better understand the motivations and behaviors of its customers, provides the opportunity to develop effective methods to broaden awareness of the rental equipment concept, and leverages some of the earlier investments that can differentiate USIR from its competitors.

Case Analysis

The primary challenge that USIR faces in achieving both its intermediate and bottom-line goals is the lack of adequate segmentation of its target customer base. It is important to segment the target customer base such that USIR can effectively focus its marketing towards the different needs of the customer depending on the size of the company and/or the position/responsibility of that particular customer (e.g. end user vs. decision maker and). USIR has early indications that support the importance of segmentation. For example, the largest customers are looking for contracts with aggressive pricing and smaller shops are in need of a high-touch, high-service approach. Additionally, when considering segmenting by responsibility USIR salespersons comment regularly that purchasing agents are motivated by price while the recently conducted survey indicates that price ranks near the middle in terms of being a determining factor in the selection of a rental service provider. It is important to note that the survey only included USIR customers, most of which were engineers that ranked features such as repair/replacement time, instrument performance, and availability as most important in the supplier selection process. Given that there is significant potential for growth within its current customer base, this survey and feedback from the sales force help USIR to better understand the needs of its current customers. Improved segmentation would allow USIR the opportunity to target marketing and sales activities in a more effective manner. For instance, USIR would highlight the breadth and technical specifications of instruments carried in-stock to engineers/end users, while rent versus buy benefits would be targeted to the budget managers.

Highlighting the benefits of renting versus purchasing instruments is a challenge for USIR. In USIR’s recent survey, respondents overwhelmingly elected to purchase equipment (96%) versus renting (3%), but USIR management feels the rental rates should be closer to 10% of the instrument requirements. USIR has made efforts to address this seemingly narrow awareness of the rental concept by launching an advertising campaign on the topic. The sample advertisements are designed to appeal to a broad audience. Proper segmentation coupled with targeted creative advertising would allow USIR to more accurately reach specific audiences such as purchasing agents and department managers that will find comprehensive information on the rental value proposition most useful. An improved value proposition may also include elements

such as total cost of ownership, what-if calculator, and expanded service options. This type of streamlined but more complete information will likely require the involvement of sales personnel as face-time is believed to be more effective in conveying complex concepts to drive shifts in customer behavior. Advertising would