The Pricier the Better Sales: How the Apex Inc.

Create the Strong

Brand Equity
Chandler C. Chu*

March 25, 2024

In early 2010, Mr. Chun Hong Lee, Chief Marketing Officer at the Apex Inc., sat in his
simple and low-profile office in Taipei. He was reviewing the newly published annual product
catalogues and contemplating the marketing strategies employed in the upcoming year. For
many companies, 2008 and 2009 were like a fast-turning battle, with the general environment
suddenly changing from overheating in the first half of 2008 to an unpredictable financial
tsunami depression in the year’s second half. The rapid changes in the marketplace also caused
Apex Inc. to experience a completely different set of operational challenges. Fortunately,
through sound business strategies, Apex Inc. successfully weathered the storm and maintained
its revenue unaffected in 2009.

Recently, Apex Inc. has been planning its marketing program for the new year (2010).
As in previous years, Apex Inc. has introduced many new and innovative window treatments,
including new types, materials, functions, styles, eye-catching colours, and so on. Lee and his
marketing team are convinced that once customers see the annual catalogue, which looks like
a superb product, they will perceive the supreme quality that Apex Inc. has always insisted on
over the past decades.

At the beginning of this spring 2010new year, Lee and his marketing team had bold
plan. They plan that starting this year, when their customers, such as curtain treatment retailers,
decoration companies, or other industry partners, ask for this new catalogue, they will no longer
offer the latest product catalogues for free. Instead, they will ask them to pay about NTD $3,000,
the publication cost, for the new product catalogs. At the time of purchase, they would also like
to record their business information to learn their demands better. Would their business partners
be unhappy about the fee for the new product catalogues? Would the printed catalogues be sold
out? Would some new customers buy the product catalogue? Who would they be? Lee and his
marketing team kept thinking and planning for this year’s new marketing plan.
Window Treatments

Window treatments refer to various coverings used on windows for aesthetic and
practical purposes, including blinds, shades, shutters, curtains, and drapery options. These
treatments can help control light, provide privacy, enhance a room’s decor, and even offer
insulation against heat and cold. Different types of window treatments offer varying levels of
light control, privacy, and style options to suit individual preferences and needs.

Window treatments are indispensable to interior decoration. Some customers stereotype

window treatments as split cloth curtains. However, besides the split cloth curtains, there are
different forms of window treatments, including roller shades, vertical louver blinds, louver
blinds, Roman shades curtains, aluminium louver blinds, bamboo louver blinds, and
Honeycomb Shades, and so on. Appendix 1lists the most popular types or parts of the window
treatments.

Window treatments primarily serve a decorative purpose. They can be opened and
closed to adjust the lighting and shadow in a room, thereby changing the overall atmosphere
and mood. However, window treatments are generally considered the supporting element of
interior design rather than the main focus. As the curtain and drape industry continues to
advance, the functionalities of curtains and drapes are becoming more diversified. In addition
to the general sunshade, heat insulation is also being developed for sound insulation,
antimagnetic waves, and other purposes.

The construction of the whole window treatment can be categorized into two
components: “spare parts,” made of plastic with a little bit of metal, and the blind or shade. The
blind and shade determine the aesthetic feature of the window treatments in the context of
interior decoration; spare parts determine the mechanical performance of window treatment,
like the mode and the feeling of operation. Generally speaking, when consumers choose
window treatments, they mainly focus on choosing the colour, fabric, material, style, and
design of the blind or shade. Few consumers have mechanical knowledge about how the part
functions. However, the part determines the complete mechanical performance, which implies
the user experience, such as the smoothness of use, stability, and longevity, are all affected by
the design and quality of the part.
The Industry Structure of the Window Treatments

Suppliers

In the window treatment industry, upstream suppliers manufacture everything in a

window treatment, including curtains, drapes, blinds, shades, shutters, sheers, valances, and
spare parts. In the early days, there was no standard for spare parts for window treatments, and
all the manufacturers had to design and produce mechanical parts for themselves, such as tracks,
gears, hardware, and other plastic parts. Window treatment manufacturers mainly sell their
products to local curtain retailers. Besides selling window treatments to retailers, these original
window treatment producers also offer largescale installation services for entire office
buildings, such as offices, large hotels, and even factories. Like an engineering business, they
install dozens or hundreds of window treatments for a whole facility.

In Taiwan, besides producing blinds, drapes, curtains, shades, and mechanical parts,
window treatment manufacturers also import various materials, colours, and styles in all
different categories of curtain fabrics, window treatment fabrics, aluminium Venetian blinds,
bamboo Venetian blinds, organ curtains, sheers, etc. By matching different window treatment
parts and different kinds of curtains, curtain manufacturers can provide different product
specifications for themselves and their retailers and create differentiation from those of their
competitors.

Retailers

Taiwan has around 2,000 to 3,000 window treatment retailers, which can be categorized
as large or small retailers in the industry’s midstream, serving as the marketing channel. In
general, there are two business models for curtain or drape retailers. One targets and sells the
product to the final customers directly, and the other targets the interior designers as their
primary customers. In addition to the above two types of customers, several larger curtain
companies also occasionally undertake large-scale construction projects like what the window
treatment producers serve in the previous introduction.

In business, curtain companies selling their products to the final customers mainly rely
on increasing the sales volume and generating economy of scale to survive in the competitive
industry. They provide similar products to customers, including installation and limited
warranty services, accumulating a large sales volume from transactions of many small amounts.
The window treatment retailers will not place production orders to window treatment
manufacturers until they receive formal sales orders from the final consumers. These direct-to-
consumer retailers can be large or small in scale. For example, many small-scale companies
cluster in the Yong-Le Market on Dihua Street in Taipei City, and large-scale companies with
many branch stores, like Ta Chen Lung Mei Home Life, focus on building their brand image
and product popularity. The other large-scale companies include some houseware, furniture, or
hardware specialty stores such as B&Q, IKEA, and so on.

Unlike retail models that serve final customers directly, this model targets interior
designers as customers. Retailers employing this model seldom interact with final customers.
These retailers work with interior designers and offer their products and services to the final
customers together. On average, high-end window treatments are expensive and require long-
term cooperation between the designer and retailer to be delivered perfectly. Based on the
experience of these curtain companies, once interior designers become familiar with using
window treatments from specific manufacturers, they are less likely to try new products and
switch their business to different manufacturers. The primary reason is that interior designers
rely on word of mouth to grow their business. If a designer loses the business because of
offering an improper curtain treatment, the secondary product of the whole interior design
contract, the gains from trying new products do not compensate for the losses.

The installation of the window treatments will be served by the internal staff of the
retailers or outsourced to professional technicians. In Taiwan, there is a worker union of
specialized window treatment technicians. Generally speaking, the higher the quality of
window treatments, the easier the product installation, and more curtain companies tend to
outsource the installation service of their high-end window treatments to installation specialists.
In contrast, when the quality of curtains is more unstable, or the installation requires more
experienced knowledge (such as installing electric parts in the window treatment), or other
factors may cause the cost of outsourcing to increase, the retailers will finish the installation
activity by themselves.

Customers

The downstream, the final customers of the window treatment industry, can be
categorized into traditional consumers and organizational purchasers. Traditional consumers
can also be further categorized into price-sensitive consumers, who make their purchase
decisions given a budget constraint, and high-quality product purchasers. The price-sensitive
consumers shop around among different window treatment retailers, seeking their favorite
styles and colors, and find the products with the highest cost-performance ratio; the high-
quality product purchasers look for a professional opinion, listen to the designers and the
specialists’ advice, pursue the high-quality living atmosphere through the establishment of the
overall interior design environment. According to the market survey in Taiwan, the average
purchase cycle of window treatments is eleven years, which means consumers cannot
accumulate the product experience through repeated purchases, and they have little knowledge
about how the parts influence the overall performance of window treatments.

Organizational buyers pay more attention to the monetary calculation of costs than
ordinary consumers. When window treatment retailers or manufacturers face organizational
buyers, they may have different strategic objectives. On the one hand, they intend to make a
fortune from the contract of large sales volume. On the other hand, they will not only consider
short-term profit. Further purchase or service demand from the same or the other organizational
buyers may be more profitable. The sacrifice of short-term profit for establishing a long-term
reliable brand image may be an important trade-off issue to be pondered.

Types and Trends of Window Treatments

In terms of operation and design, window treatments can be broadly categorized into
window treatment of split stack, roller window blind/shade, Roman blind, honeycomb/cellular
shade, curtain, sliding panels, vertical window blind, and horizontal window blind (like louver
blinds). During the development of Taiwan’s window treatment industry, these window
treatments were once the most popular in the fashion trend. The popularity of window
treatments is closely related to the shift in lifestyle, the change in architectural trends, or the
popularity of interior design. Around 30 years ago, the most popular type of window treatment
was the split stack drapery or curtain. As time passed, when the apartments dominated the
house as the most popular living unit in the urban region, this option was succeeded by various
other styles, such as horizontal and vertical window blinds, roller window drapes or blinds, and
Roman blinds. All the following window treatments remain more open areas for windows or
leave more options for users to control the brightness of the window than the previous products.
All the changes derive from fewer and fewer windows people have in their crowded living
environment.

Under the continuous urbanization process, experienced manufacturers of window

treatments keep a close eye on trends and continuously develop new products to meet evolving
demands. Unlike the rapid changes in popular clothing, the trend shift in curtain treatments is
relatively slow. The durability of the window treatment makes most customers hardly
accumulate the purchase experience and consider them unsought goods in marketing
terminology. All these facts indicate that window treatment producers have more opportunities
to collect and accumulate market information and monitor market trends than final customers
and retailers. The producers can even lead fashion by introducing new products to the market
in time. Therefore, retailers in the window treatment industry not only purchase products from
manufacturers but also consult with manufacturers for the latest information about fashion
trends and sales suggestions.

The fashion and design of window treatments are mainly led by European
manufacturers. The world’s major window treatment designing and manufacturing companies
include JM of Germany, SOMFY, MERMET, and the other five or six large factories in France.
Taiwan’s window treatment manufacturers or agents go to Europe every year to participate in
the annual window treatment exhibition, and the RCT, the world’s leading trade fair for roller
shutters, doors/gates, and sun shading systems once every three years in Germany, is an
exhibition that cannot be missed. While visiting or participating in the exhibition, Taiwan-based
manufacturers can learn about the latest product trends. They can also strive to obtain exclusive
distributorship or sales rights for products in Taiwan from mainstream window treatment
manufacturers present in the exhibition. Based on their own business knowledge and
experience, Taiwan’s window treatment manufacturers will select a basket of products from
the major international manufacturers they work with and return them to Taiwan, and then
select the annual products to promote after the market testing.

When people make purchase decisions in the local Taiwan market, in general,
customers give priority to the types of window treatments and the design, like colour or fabric,
of the shades and blinds. Consumers will not place any purchase orders until they figure out
the desired curtain treatment styles with their interior designers. Manufacturers can increase
sales by offering a variety of window treatments that cater to different fabrics, colours, and
designs which satisfy customers and designers.

Apex Inc.

Apex Inc., founded in 1977, is a leading company that develops, produces, and sells
high-quality blinds, shades, and parts for traditional and innovative window treatments. The
company is located in the Da Ya District of Tai-Chung City in Taiwan. Apex Inc. initially
specialized in producing plastic parts for controlling horizontal blinds using raw materials from
Nan Ya Plastics Corporation. Apex Inc. learned the mechanical construction of the plastic parts
in the window treatments through learning by doing this outsourcing business from scratch.
Because of the specialized knowledge of the design and manufacturing of different parts, Apex
Inc. leveraged this engineering specialty to introduce and promote the latest curtain treatments
in fashion from overseas for Taiwanese customers. After the OEM business’s closure, Apex Inc.
began to offer different blinds, shades, and panels in the window treatment besides the part and
transferred the Apex Inc. from an OEM company to a complete manufacturing and marketing
firm of the window treatment in Taiwan. Since then, Apex Inc. has supplied complete window
treatments in Taiwan and exported some mechanical parts to foreign purchasers.

The Improvement of Product Quality

Yen-Ping Lin is one of the founders of Apex Inc. and specializes in research and
development for the mechanical parts of window treatments. In the early years of his career in
the window treatment industry, he observed that the low-end parts of the business dominated
the market. These low-quality mechanical devices cause a high failure rate of window
treatments, forcing manufacturers or retailers to send technicians to fix the issue. These costly
post-purchase services eroded the profit and generated an inferior brand image for their
products and services. The ill user experience issue is another trouble that consumers confront.
For example, some window treatments can only be used or controlled in specific postures.

Mr. Lin noticed these issues and dedicated himself to improving the quality and
upgrading the functionality by offering a new mechanical part design when they launched new
curtain treatments. Lin’s new designs are durable and hardly receive any maintenance requests.
In 2001, after noticing barely any maintenance requests for their high-quality parts for more
than 20 years, this successful experience encouraged Apex Inc. to offer a five-year warranty
for all their window treatments. That was the longest and first-ever five-year warranty for
window treatments in Taiwan.

The Product Positioning and the Market Segmentation

When Lin first launched the new first-grade mechanical window treatment part to the
market, no retailer was interested in selling his expensive product, which is almost three times
more expensive than its competitive low-end counterparts. Most retailers were stereotyped by
the ubiquitous low-end parts and believed the inexperienced customer would not be interested
in the new high-quality part. Most retailers were not concerned about the quality of the parts.
The cost is low enough, which they are most concerned about.
 When Lin found they could not make retailers sell their high-end products, appealing
to the final customers directly for their high-quality products became their alternative
marketing strategy. For example, they upgraded the design of the blind and the blind material
of the horizontal blind material to attract more consumers to purchase the high-end parts.
However, consumers are ignorant of this direct-to-consumer promotion. Besides upgrading
their product quality, they implemented various promotion strategies like placing
advertisements, offering promotional giveaways, or even giving product discounts. All these
efforts were found in vain.

Horizontal Blinds

The failure of the marketing strategy targeted the final consumers, as the major
customers switched Apex Inc. back to the retailers and again treated them as the target
customers. When Apex Inc. started the business, horizontal blinds were one of the most popular
window treatments in the market. Apex Inc. noticed that, compared to retailers selling low-
quality cloth curtains, retailers selling high-end cloth curtains had greater interest in purchasing
their high-end mechanical parts. Sometimes, the following financial appeal helps when the
retailers hesitate.

At that time, the average profit of a curtain retailer was about $3,000 NTD after
installing a low-end horizontal window treatment containing the low-end window treatment
part for its customers. However, the average profit after installing Apex Inc. horizontal blinds
set was $2,000, including the high-end blind and high-end part. The lower profit makes Apex
Inc.’s product less competitive. However, the calculation above does not consider the post-
purchase service into consideration. The average cost of labour and materials for each trip to
repair the blinds is about $1,600. When the curtain company chooses to install low-end
aluminium blinds, as long as the customer requests follow-up service, the profit will be reduced
from $3,000 to $1,400. From this perspective, the profit of $2,000 from using Apex Inc.’s high-
end products are greater than $1,400 from using window treatments with lower-end window
parts.

Vertical Blinds

Since consumers have few opportunities to purchase window treatments in their

lifetime, it is difficult to recognize the quality of curtain parts. In the early days, ordinary blind
parts were about $60 new Taiwan dollars, and better grades were between $120 and $160.
However, all these parts have a high failure rate, poor stability in use, very easy to tilt, and
tangled threads when in use. In contrast, costs of good quality parts with a low failure rate are
often priced between $300 and $400. This high-priced mechanical part makes Apex Inc.
vulnerable to promote their high-end part, even though Apex Inc. initially made some curtain
retailers willing to accept the use of its high-end parts. For example, with an obvious price drop
in the horizontal aluminium blind, Apex Inc.’s high-end part increased the cost composition of
the part in the complete window treatment. The impact is it raised the relative price of the whole
window treatment between the high-end blind and the low-end blind, which caused serious
obstacles to the sales of the high-end window treatment with the high-end part.

The perception that outdated blinds or shades would make selling high-end parts
difficult pushes Apex Inc. to get involved in the blinds and shades business. The direct
substitute for the horizontal blind is the launch and introduction of the vertical blind. In contrast
with the horizontal blind, vertical blinds have more operational options. For example, they can
be open on the left, right, or middle. There also are more material options than horizontal blinds,
such as various colours and materials of fabric. Apex Inc. has excellent design and
manufacturing capabilities, making it easier to launch high-quality mechanical parts and
promote new window treatments.

When horizontal blinds are oversupplied, newly launched vertical blinds are relatively
rare and sold at high prices. The high-priced new blind makes the cost of the high-end
mechanical part in the whole window treatment relatively lower again. This lets retailers who
intend to offer high-end products and services easily promote the newly launched blind and
high-quality mechanical parts together. The various fabrics for the vertical blind also offer
retailers more flexible pricing options. With those retailers wishing to pursue novelty and offer
high-quality products and services, Apex Inc.’s high-end blinds and parts become popular in
the market. In the end, vertical blinds are sold in all retailers.

Roman Shades and Roller Shades

The rapid development of the economy in Taiwan tremendously changed the lifestyles
and living environment. Urbanization causes more people to stay in apartments with
diminishing window areas, which makes them value the limited windows more. Split curtains
or vertical blinds prevent people from contacting the outdoors because they occupy a
percentage of the window area when closed. This makes Roman shades and roller shades
popular.
Roman shades are fabric window coverings that raise into an even stack when raised. They
provide a clean, tailored look. Different colours and patterns on fabrics in Roman shades
improve the aesthetic features of the interior design of the indoor environment. Raising the
shade prevents too much of the window area from being occupied.

When Apex Inc. initially launched Roman shades, some traditional window treatment
retailers resisted sales and promotions. The main reason is that Roman shades use less fabric,
which decreases the profit of the split-cloth curtain retailers if they sell more Roman shades.
Apex Inc. reacted to resistance, especially from dealers, by selling the entire set of Roman
shades to retailers, and the curtains of the Roman shade were provided by cloth factories. In
this way, Apex Inc. took over sixty percent of the market share in the sales of Roman shades,
making Apex Inc., the retailers, and the cloth factories better off all together. The Roman
Shades’ successful introduction and promotion established a strong brand image for Apex Inc.
among retailers and interior designers.

After the Roman shade, Apex Inc. selects the roller shade as its succeeding product.
Roller shades’ main features are the simplified fabric and design. In comparison with other
products that use cloth as shades or blinds for window treatments, roller blinds have the
convenience of cleaning without washing, are easy to organize, and can do another cleaning.
In addition, roller blinds can also be combined with the implementation of waterproof, flame,
blackout, antibacterial, and other functions. Choosing good quality fabrics can make the roller
blinds last longer than other products. All these features make roller shades suitable for
installation both in office buildings and common apartments.

Product Fashions and Replacements

After accumulating decades of experience, Vice President Lee has summarized the
relationship between popularity and profitability in the window treatment industry as follows.

When a brand-new product is developed and launched in the market, because retailers
do not understand what the product is, it will be very difficult to create a good sales
volume. But when the retailers are highly interested in selling the new product, the
manufacturers’ profit will be the best. However, once final consumers become familiar
with the product and know where to purchase it, the manufacturer may no longer earn
a profit.
 In other words, Lee found that the change in the fashion of window treatments would
affect the sales of Apex Inc.’s products. From the perspective of the sales price, window
treatments are too expensive in the introduction stage and consumers have little incentive to
purchase them. However, when the general consumers know and feel that they can afford to
buy some specific window treatments, it implies the product can be found everywhere and the
price will be too low. The optimal time to generate profit is when retailers acknowledge and
express interest in selling Apex Inc.’s products. Observing changes in market demand allows
Apex Inc. to follow popularity trends. Detecting market demand also helps determine the best
timing to launch new window treatments.

New Marketing Practices for the Coming Year

In November and December every year is the season when window treatment
manufacturers release their new product catalogues for the coming year. Specifically,
manufacturers compete for the business between November and the coming of the lunar new
year by means of new product catalogues. At the end of 2009, the market might still be in the
aftermath of the financial tsunami, and some manufacturers had lowered the prices of their
products. Lin and Lee discussed the possible strategies to cope with this unpleasant situation.
Lin asked, “Wow! Why is everyone lowering their prices?” Mr. Lee replied, “Don’t worry
about that. Our sales department doesn’t feel anything wrong. We feel Okay.” Lee believes that
retailers selling high-quality window curtains are aware that there is only limited room for price
reduction. The designers select window treatments based on on quality and aesthetics while
reducing the price mainly attracts inexperienced final customers.

In fact, Lee and his marketing department have a bold marketing project for the coming
new year. Their customers, the retailers of window treatments, have to pay 3,000 New Taiwan
Dollars to get a copy of the latest product catalogue, which was free before. They will also
record the information of their customers and try to understand how Apex Inc. can help them.
However, Lee and his marketing team feel a little bit uncertain about this new policy. Will this
practice cause resentment from customers? Will the new product catalogues be sold out? Will
Apex Inc.’s new customers also like to buy the latest catalogue? Who are they? Mr. Lee and
his marketing team are actively engaging in this new annual marketing project...

Appendix 1: Terms of Window Treatments

Here is a comprehensive list of different types of window treatments in English, along with
their explanations:
1. Curtains: Curtains are fabric panels that are typically sold in pairs. They are mounted on
a rod above the window and can be opened and closed using a sliding mechanism or by
hand.
2. Drapes: Drapes are similar to curtains but are usually made of heavier, more opaque
fabrics. They are also hung on a rod and can be opened and closed.
3. Drapery: Drapery is a general term that encompasses both curtains and drapes.
4. Blinds: Blinds are hard window coverings made of slats or vanes that can be tilted to
control light and privacy. They come in various materials such as wood, plastic, or metal.
5. Shades: Shades are soft window coverings that can be raised or lowered to cover the
window. They are usually made of fabric, woven wood, or other natural materials.
6. Shutters: Shutters are hard window coverings with hinged panels that can be opened and
closed. They are mounted on the window frame and provide a more permanent window
treatment solution.
7. Valances: Valances are short, decorative pieces of fabric that cover the top portion of a
window. They are often used in conjunction with curtains or drapes.
8. Cornices: Cornices are hard, decorative boxes that cover the top of a window. They can
be made of wood, plastic, or fabric-wrapped boards.
9. Sheers: Sheers are lightweight, translucent curtains that allow light to filter through while
still providing some privacy.
10. Blackout curtains: Blackout curtains are designed to block out all outside light, making
them ideal for bedrooms or media rooms.
11. Roman shades: Roman shades are fabric window coverings that fold up into even pleats
when raised. They provide a clean, tailored look.
12. Roller shades: Roller shades are window coverings that roll up into a cylinder when
raised. They are usually made of fabric, vinyl, or woven materials.
13. Cellular shades: Also known as honeycomb shades, cellular shades are made of two or
more layers of pleated fabric with air pockets in between for insulation.
14. Skylight shades: Skylight shades are designed specifically for skylight windows and can
help control light and heat.
15. Motorized shades: Motorized shades are window coverings that can be opened and closed
using a remote control or smart home system for added convenience.