Memorandum To Chris Lemley Date September 5 2002 From M3 Consulting Re Request for Marketing Audit on The Home Depot for Mold Remediation Services by yqc43112


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To:     Chris Lemley                               Date: September 5, 2002

From: M3 Consulting

Re:    Request for Marketing Audit on The Home Depot for Mold Remediation Services

The Firm:
The Home Depot (HD) is the world's largest home improvement retailer currently operating
1,437 stores, including 1,296 Home Depot stores, 50 EXPO Design Centers and one Floor Store
in the United States, 83 Home Depot stores in seven Canadian provinces, seven Home Depot
stores in Puerto Rico and eight in Mexico. The Home Depot is credited as being the innovator of
the home improvement industry, as well as offering a level of service unprecedented among
warehouse professionals.

Home Depot stores cater to do-it-yourselfers, as well as home improvement, construction and
building maintenance professionals. Each store stocks approximately 40,000 to 50,000 different
kinds of building materials, home improvement supplies and lawn and garden products.

The Situation:
Mold contamination has become a huge issue in residential and commercial construction as well
as building ownership and maintenance. Almost every building has a structural mold exposure.
Mold can also be the result of inappropriate HVAC design, inadequate dehumidification, poor
building design, a failure to ventilate, unsuitable mixing of the supply air, or a failure to
adequately maintain the building envelope. Some of the health affects of a mold-contaminated
environment include respiratory problems, mucous membrane irritation, dry cough and eye
irritation, bronchitis and chronic pulmonary disease, allergic rhinitis and asthma particularly
among those who are predisposed to allergies, whose immune systems are compromised, or who
are of a sensitive age. Medical research is conflicting on the direct relationship between mold and
many of the serious diseases it is claimed to cause, but there is enough medical evidence to
prompt a growing number of successful litigations. Contractors, building owners, material
suppliers and insurers are scared. Cases like the one brought by a Texas family in June 2001 who
suffered from alleged personal injuries and property damage associated with toxic mold found in
their home, resulted in a $32 million judgement including $12 million in punitive damages. In
2000, a group of parents in Toronto sought upwards of $1 billion in a class-action lawsuit against
a local school board for exposing the children to “toxic mold.” Two apartment owners in New
York were hit by a $8 billion suit alleging that mold and fungus contamination in the buildings
caused by water leaks had resulted in personal injuries ranging from chronic fatigue syndrome to
wrongful death. The number of cases resulting from Mold exposure continues to grow with over
10,000 new cases in the U.S. and Canada in the last two years. With this new public awareness
and fear regarding mold, comes the need for a new service…Mold Remediation.

Market for Remediation Services
Many institutions, contractors, hotels, schools, etc don't have the staff, time, or expertise to want
to deal with the health and safety issues involved in cleaning up mold in contaminated buildings.
So, they hire outside recovery firms to provide this service. Additionally, mold remediation does
not qualify as a „do-it-yourself‟ project in residential buildings given the health and safety issues
Yet, the process of mold remediation is relatively simple. With few proven techniques of
physically removing mold from most residential surfaces, the remediation process focuses on
finding the source of the mold (often a leaking pipe, broken seal or faulty HVAC system), fixing
it, and then replacing all of the mold-infected items (carpet, wallboard, floor tile, ceiling tile.)
Home Depot is in the perfect position to provide this service to a specific target market of
residential contractors and small commercial sites.

Why The Home Depot?
Given The Home Depot‟s accessibility to residential home developers, contractors, owners,
renters and associations as well as to clean-up and replacement materials, we believe Mold
Remediation/Clean-up services would be a profitable investment for the world‟s largest home
improvement retailer because:
- No other remediation contractor sells the products that it is installing (new wallboard, carpet,
    paint, etc);
- To our knowledge, no other home improvement retailer offers mold remediation services;
- Home Depot can become the one-stop-shop for residential and small- commercial mold
    remediation projects.

In addition, The Home Depot currently offers the following environment-based consumer
education programs:
- Before you Renovate, Investigate
    Through a partnership with the Department of Housing and Urban Development, The Home
    Depot has launched a program about the proper ways to renovate homes that may contain
    lead- based paint.

-   Environmental Greenprint Series
    Since 1990, The Home Depot's Environmental Greenprint Series has provided guidance about
    simple choices consumers can make in his or her home to improve everything from energy
    efficiency to indoor air quality.

Marketing Budget
The Home Depot reported net sales for fiscal year 2001 of $53.6 billion and employs
approximately 250,000 people. For eight consecutive years, the company has been ranked by
Fortune magazine as America's Most Admired Specialty Retailer. It is highly probable that The
Home Depot has funds to support a nationwide rollout of this service, but an in-depth financial
analysis, coupled with market research, would determine exactly how much is required to fund a
rollout of this service.

The Home Depot is currently committed to environmental soundness and has staff with expertise
in various areas of environmental clean up. HD values the environment and is capable of offering
the highly skilled technical training to its employees required for Mold remediation while using
environmentally friendly products throughout the remediation.

For example, HD supports efforts to provide accurate, informative product labeling of
environmental claims and impact, recycles and encourages the use of materials and products with
recycled content strives to comply with all environmental laws and will maintain programs and
procedures to ensure compliance. In additions, HD is committed to minimizing environmental
health and safety risk for our employees and our customers and encourages customers to become
environmentally conscious shoppers.

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