rom and hass case

ENGM 181

Gaurang DesaiAmir GolnabiAllie McKendryJens MoebiusHarinarayanan RanganathanCase Review:Rohm and HaasThayer School of Engineering11/4/2010

*Thayer School of Engineering

Background1983: $2B worldwide sale from 4 segmentsKathon microbiocide products: $25M

Thayer School of Engineering*11/4/2010


BackgroundMetalworking fluid: 60 million gallons in the USBiocides kill microorganisms in metalworking fluidsThayer School of Engineering*11/4/2010

Product nameK 886 MW K MWXTreatment capacity1,000 gal 50-100 gal reservoirs Market potential$18M$20MSale Volume$5.4M (1983)$0.2M (target in 1984)Actual sale during 1st five month$2.1M$12,000!!!


Optimistic Prospects for MWXGreat market potential ($38M)

Maintenance biocides likely to gain market share

Several advantages:Easy to useNo maintenance SafeHigher effectiveness Large customer surplusThayer School of Engineering*11/4/2010


... But it doesnt sell!Lack of need recognition for biocides

Lack of brand awareness among end consumers

Lack of MWX awareness

Lack of awareness of the benefits of MWX

Lack of incentives for distributors to sell MWXThayer School of Engineering*11/4/2010


End-User EVC of Kathon MWXCompare costs incurred by end-user who does and does not use Kathon MWXThayer School of Engineering*11/4/2010

Not Using MWXUsing MWXFluid Concentrate Purchase$$Fluid Disposal$$Risk of Fluid Disposal%%


End-User EVC of Kathon MWXAssumptionsMaintenance biocides extend fluid life indefinitely1 Gal Undiluted Fluid 25 Gal Diluted Fluid1 Packet of MWX 50 Gal Diluted FluidTypical Small Machine Shop22 Machines x 50 Gal Tank = 1,100 Gal/Cycle4-week Cycle based CalculationsShops not using MWX: Dispose FluidShops using MWX: Add MWXOther Variable and Fixed Costs IgnoredThayer School of Engineering*11/4/2010


End-User EVC of Kathon MWXFluid Concentrate Purchase Cost Calculation$5.68/Gal ConcentrateThayer School of Engineering*Fluid concentrate purchase cost per cycle for small machine shop11/4/2010


End-User EVC of Kathon MWXFluid Disposal Cost Calculation$1.36/Gal DiluteThayer School of Engineering*Fluid disposal cost per cycle for small machine shop11/4/2010


End-User EVC of Kathon MWXThayer School of Engineering*Reference Value (Price of Not Using MWX) = $249.92/cycle

Differential Value (Savings from MWX Use) =($1,496.00 x 100%) - ($1,496.00 x 0%) = $1,496.0011/4/2010

Not Using BiocideUsing Kathod MWXFluid Concentrate Purchase$249.92$249.92Fluid Disposal$1,496.00$1,496.00Risk of Needing Disposal100%0%


End-User EVC of Kathon MWXThayer School of Engineering*Cost small machine shop is willing to pay per MWX packet11/4/2010


Compare revenues accrued by distributor which does and does not sell Kathon MWXDifference in revenues will be MWX break-even priceBreak-Even Price for DistributorThayer School of Engineering*11/4/2010

Only ConcentrateConcentrate & MWXFluid Concentrate Sales$$MWX Sales$0.00XTotal Sales$$ + X


Break-Even Price for DistributorThayer School of Engineering*AssumptionsSame as previousYearly Based Calculations1 Distributor 1 Small Machine ShopDistributor Revenues = Machine Shop Costs Distributors only products for sale are fluid concentrate and MWX11/4/2010


Break-Even Price for DistributorSelling Only Fluid Concentrate

Selling Fluid Concentrate and MWXThayer School of Engineering*Revenue per year for distributor selling only fluid to small machine shopRevenue per year for distributor selling fluid & MWX to small machine shop11/4/2010


Break-Even Price for DistributorThayer School of Engineering*Revenue distributor will earn for selling MWX to small machine shop per cycleBreak-even price a distributor will charge per MWX packet sold to small machine shop11/4/2010

Only ConcentrateConcentrate & MWXFluid Concentrate Sales$3,248.00$249.92MWX Sales$0.0013XTotal Sales$3,248.00$249.92 + 13X


NPD ProcessThayer School of Engineering*Opportunity AnalysisProduct DesignMarketing MixLaunch11/4/2010


Errors in the NPD ProcessThayer School of Engineering*Marketing Strategy DevelopmentNo private branding for MWXLack of incentives for distributors

11/4/2010


Errors in the NPD ProcessThayer School of Engineering*Lack of Market TestingDid not know how distributors perceived the product Did not know how end users reacted to the product

11/4/2010


Recommendations for Increased SalesAllow private brandingCan produce good results in the near futureDoes not have a long term perspective

Market cost effectiveness of Kathon-MWXcan be cost intensive

Emphasize safety featuresRemoves a major barrier about the product

Increase incentive for distributorsCan reduce unit profit but has potential for a sales volume upsurgeThayer School of Engineering*11/4/2010


Thayer School of Engineering*Thank you!

References

Kotler, Philip, and Kevin Keller. Marketing Management. 13th ed. Upper Saddle River, NJ: Prentice Hall, 2009. 574. Print.

Rangan, V. Kasturi; Lasley, Susan; Rohm and Haas (A): New Product Marketing Strategy, HBS No. 9-587-055. Boston: Harvard Business School Publishing, 1993.11/4/2010


*Problems:Distributors /formulators could responsible to follow up on the leads and generate orders

*Lack of Market Testing ( Pilot testing and simulated testing)How end users would react ---- specially targeted towards end user who are expected to do the maintenance themselves

*

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