Rohm and haas new product marketing strategy essay

On May 15, 1984, Joan Macey, Rohm and Haas marketplace manager pertaining to Metalworking Liquid Biocides, was reviewing supplier purchases of Kathon MWX, a new biocide that murdered microorganisms in metalworking essential fluids. She identified that total sales to distributors pertaining to the first five weeks were seventy four boxes against a first-year target of 1, 350 containers. “I have got a super item but I can’t sell it,  the lady said. “I am at the same time of looking at our procedure of currently taking this product to market, but now I was not convinced we have a better alternative.

 Macey was also responsible for the marketing of Kathon 886 MW, a liquid fongicide used in large metalworking substance tanks (above 1, 000-gallon capacity). Kathon 886 MW was a powerful biocide, and intensely small quantities were sufficient to treat large tanks.

Due to its low-use level, Kathon 886 MW was not suitable for smaller-capacity tanks, and Kathon MWX was developed particularly for use in storage containers with below 1, 000-gallon capacity. Kathon 886 MW had a revenue volume of.

some million in 1983; revenue for the first five months of 1984 were at the budgeted level of $2. 1 mil. Kathon MWX had been introduced in 12 , 1983, having a targeted sales volume of $0. 2 , 000, 000 in 1984; sales inside the first five months had been about $12, 000. Macey estimated the marketplace potential for Kathon 886 MW to be $18 million and Kathon MWX to be $20 million. Describing the poor product sales of Kathon MWX, your woman said: The whole usage of Kathon MWX and its particular substitutes is not the 20 dollars million possibility of this market. Many small users are possibly unaware or perhaps don’t view the need for biocides in their metalworking fluid treatment. We carry out poorly because we do not have enough competition to generate primary demand.

Company History

In 1906, Otto Rohm and Otto Haas founded the company in Germany to trade chemicals to this country’s household leather tanning industry. The U. S. branch opened in Philadelphia in 1909. By the end of World War My spouse and i, Otto Haas incorporatedthe American branch because an independent company. Over the years it has become a leader in chemical technology, especially in polymer emulsion polymers. 1 In 1983, the American business reported around the world sales of $2 billion derived from 4 business segments:

1Thetechnology consists of dispersing, or emulsifying, specific monomers within a fluid just like water. Then a monomers are “polymerized”linked collectively through a chemical reaction. The ensuing emulsion polymer bonded retains the viscosity of water. When ever exposed to air, the water evaporates and a consistent, tough film remains.

Professor V. Kasturi Rangan and Susan Lasley, MBA ’85, prepared this case as the basis for discussion in the classroom rather than to illustrate either effective or perhaps ineffective handling of an management situation. Every quantitative info not widely available have already been disguised. Copyright 1986 by the Director and Geniuses of Harvard College. To order clones or obtain permission to reproduce components, call 1-800-545-7685 or compose Harvard Organization School Posting, Boston, MUM 02163. Simply no part of this kind of publication can be reproduced, trapped in a retrieval system, utilized in a schedule, or sent in any type or by any means”electronic, mechanical, photocopying, recording, or perhaps otherwise”without the permission of Harvard Business School.

Polymers, resins, and monomers”for applications in paints, industrial finishes, attractive coatings, and construction items Plastics”for applications in symptoms, skylights, storage units, and motor vehicle components Agricultural chemicals”herbicides and fungicides for crop diseases. Industrial chemicals”for lubricants and energy sources, water treatment, and the formulation of a wide variety of industrial and consumer products

The company’s products consisted of over 500 diverse products. Exhibit 1 shows the trend of sales and profits by simply business segments. The Industrial Chemical substances business part consisted of three product organizations: Fluid Procedure Chemicals, Petroleum Chemicals, and Specialty Chemicals. The Kathon microbiocide goods with 1983 sales of $25 mil were portion of the Specialty Chemical compounds Group. Area active chemical substances (called surfactants) and water-disolvable polymers were the additional products promoted by the Specialized Chemicals Group (see Exhibit 2 intended for an organization chart). Joan Macey was market manager to get microbiocide applications in the metalworking fluid and latex/adhesives market segments. Latex/adhesives biocides (1983 revenue of $2 million) were sold immediately by the Specialized Chemicals sales team to about 50 compounders for use in emulsions, paints, sealants, and creams. The metalworking fluid biocides”Kathon 886 MW and Kathon MWX”were marketed through a network of formulator/ distributors.

Every one of them manufactured and sold metalworking fluids and also any auxiliary products just like biocides and corrosion inhibitors. As industry manager, Macey was in charge of formulating the marketing strategies for the three products under her charge, all of these were sold by the Specialty Chemicals salesforce. Fourteen of the 40 sales agents employed by the Industrial Chemicals business unit worked for the Specialty Chemicals Group and were in charge of selling all the products of the group (surfactants, biocides, and polymers) to varied markets. Salesmen were given to exclusive territories and were supervised by three district managers who reported to a national field sales manager centered at the Phila. headquarters. Almost all members from the sales force had college degrees in biochemistry, chemical anatomist, or related fields.

The salesperson’s position was to provide help and advice towards the user in formulation or process design, for example , suggesting appropriate chemical levels for cooling tower system treatment or detergent preparations. Starting wages for students ranged from 20 dollars, 000 to $27, 1000 annually, as well as the experienced salesperson could gain $50, 500 to $70, 000. Salesmen were examined on a lot of objectives, including new accounts activity, industry penetration, and quantity sold in pounds. Half a dozen of the 18 salespeoplehad a lot of the biocide customers in their individual territories. Typically, they spent about twenty percent to 30% of their time about all fongicide customers; roughly one-third with this time was invested in metalworking liquid formulators (the primary clients for Kathon 886 MW and Kathon MWX). The rest of the time was put in visiting users. Many of these telephone calls were made with the formulators’ salespeople.

Metalworking Fluid Biocides

Metalworking liquid, as the name signifies, is used in operations such as turning, milling, grinding, focusing, and drilling. The substance is directed onto the top of metal becoming machined to lubricate and cool the job piece as well as the machine instrument and to take out chips and debris from your work area. In 1983 about 60 million gallons of metalworking smooth concentrate were produced in america. Nearly all of completely to be diluted with water by the user. Water was typically 90% to 95% of the blend after dilution. The diluted fluid was then placed in a reservoir and driven to a nozzle that aimed the smooth to the made piece (see Exhibit 3). A holder built into the workstation trapped chips, as well as the used smooth was blocked and came back to the tank for recycle.

Bacteria such as bacterias, fungi, and yeast flourish in the nice aqueous environment of material machining, and their growth improves with poor shop protection. They tenderize the metalworking fluids, so that as the microorganisms develop, that they multiply in long chains to clog filtration, flow lines, and canal. Their foul-smelling, metabolic by-products stain and corrode job pieces and pollute the job environment. Biocides are chemical compounds that kill the organisms in water-based metalworking liquids without influencing fluid overall performance. They have a large number of applications in manufacturing products just like cosmetics, newspaper detergents, and latex paints. They are used, as well, in water treatment and oilfield drilling. Chemical companies produce metalworking-fluid concentrates by blending emulsified natural oils andspecial chemicals.

Formulators often add biocides to the metalworking fluid completely focus to provide a few initial protection against contamination. The concentrate can now be sent to users who dilute it for their machining businesses. Metalworking liquids are used up by water evaporation and fluid damage and has to be replenished every day. As the fluid ages, the completely focus biocide no more adequately defends it, and a maintenance biocide it should be added to extend substance life. A metalworking program kept clear of bacteria, yeast, or fungi uses liquid for a considerably longer period of time”one or two weeks longer compared to the three to four several weeks for a fewer well-maintained program.

Regular treatment with routine service biocides and make-up metalworking fluid (every one or two weeks) extends liquid life practically indefinitely and does not require a complete flushing from the fluid tank. The focus biocide marketplace was believed to be $30 million in 1983. Market sources believed a downward sales tendency, however , as a result of growing usage of maintenance biocides. The maintenance fongicide market was estimated being about $38 million in 1983, but since industry forecasts were correct, it would exchange nearly all of the concentrate biocide market in 10 years.

Kathon Metalworking Smooth Biocides

Kathon 886 MW, a liquefied, was the main maintenance fongicide on the market. Too reactive to be used in the metalworking smooth concentrate, it extended the life of diluted fluids in central system reservoirs. Kathon 886 MW was a broad-spectrum biocide generally 10 times far better than competitive biocides. One particular gallon of Kathon 886 MW guarded 8, 000 to twelve, 000 gallons of metalworking fluid in a central water tank initially for three weeks. About 10-15 gallons of a competitive product will be required to the actual same work. In 1983, Kathon 886 MW had a 30% discuss of the $18 million repair biocide market for large systems. It was distributed by 12 major metalworking fluid formulators, who sold it as part of a substance maintenance package deal to their consumers.

From an acceptable standpoint, due to the low make use of level and toxic homes, it could not be used in metalworking smooth reservoirs less space-consuming than 1, 500 gallons without creating improper use problems and safety hazards. Customers who were satisfied with the performance of Kathon 886 MW had asked for a convenient, safe-to-use version for his or her smaller (50- to 100-gallon) reservoirs. A market survey says this was themost common reservoir size to get small devices. Rohm and Haas technicians responded with an intense application effort that led to the development of Kathon MWX. After tries to formulate a water-disolvable solid item had failed, a unique product packaging design to deliver liquid biocide was developed (Exhibit 4).

It had been a a few. 5 x 7. 5-inch water-permeable plastic packet that contains two oz . of diatomaceous earth2 drenched with Kathon 886 MW. The box was designed to suspend into the metalworking fluid tank by a band suspended on the plastic catch and could deal with 25-75 gallons of metalworking fluid pertaining to 2-4 weeks. The customer basically placed the packet inside the metalworking liquid; water in that case flowed through the packet and graduallytransferred the biocide from the diatomaceous the planet to the substance. The employed packet could be removed from the reservoir to get disposal with the first signal of failure (odor) or in one month. No routine service was required, and the bundle was safe to handle and dispense.

In expanding the fluid protection market to add small equipment applications, it was estimated the potential been around for 20 dollars million in added product sales volume. Even though Kathon 886 MW and MWX were maintenance biocides, they could be employed in only 70% of the metalworking fluids. Incompatibility with the completely focus biocide in the original ingredients rendered these people ineffective while using other 30%. By comparison, nevertheless , competitive repair biocides had been compatible in only about 45% of commercial metalworking fluids.

Customers

In 1983, there were about 325 potential clients for Kathon 886 MW or comparable products, and an estimated one hundred and fifty, 000 prospective customers for Kathon MWX. Table A stops working the metalworking industry simply by machine size. Biocideusers worked with either nonferrous metals just like aluminum, copper mineral, tungsten, and titanium or perhaps ferrous alloys such as straightener and metal. Nonferrous alloys In the home market, non-ferrous metals were used mainly to make aluminum sheet, foil, and can lids in considerable, fully computerized, high-speed production facilities. Central systems utilized metalworking liquid in reservoirs as large as one hundred and fifty, 000 gallons. non-ferrous operations required the metalworking substance to be held completely free of bacteria due to sensitivity from the metal to staining, and microbiologists and chemists had been often utilized to develop fongicide treatments and monitor systems closely.

Kathon 886 MW was the popular biocide of countless of these corporations and kept about 70%-80% of a $3 million-$5 , 000, 000 market. Metallic metals The ferrous steel industries ranged broadly in the large-scale computerized manufacture of products such as vehicle and farm building equipment to the smaller-scale creation of pushes, instruments, airplane parts, and nuts and bolts. Customers with large scale manufacturing services had central systems just like those inside the non-ferrous companies, but bacterias levels inside the metalworking substance were not since critical to ferrous metals as they would have been to non-ferrous alloys. 3 Nevertheless Kathon 886 MW was adopted by many for its cost effectiveness, its general share from the $12 million$16 million ferrous market (only central systems) was simply 15%-20%.

Table A Metalworking Sector Fluid Systems

Metalworking Fluid Program Central program Central system Individual system Reservoir Capability (gallons) 60, 000 to 250, 000 8, 500 to 31, 000 40 to 1, 1000

Volume of Metalworking Equipment 170 you, 530 you, 701, 1000 Number of Plants 25 three hundred 150, 000

Competition

Stand B data the major competition in the biocide market. In 1983 Rohm and Haas, Lehn and Fink, Dow Chemical, and Angus Chemical each acquired approximately a 15%-20% share of the repair biocide marketplace. It was thought that Lehn and Fink and Angus Chemical every employed three salespersons intended for metalworking biocides. Lehn and Fink sold directly to suppliers and clients, and vendors were delivered at 10% off list price. Angus Chemical purcahased by distributors and end-users exact same price. Olin Corporation’s Triadine-10, introduced in 1983, was well-received by the market. Two other main chemical businesses were preparing entries into the maintenance biocide market: Union Carbide with Gluteraldehyde and ICI with Proxel, equally for central systems. Rohm and Haas chemists conducted comparative testing (see Display 5) to demonstrate that Kathon 886 MW was still the most cost-effective biocide for central systems.

The most widely known item for individual devices was Tris Nitro “Sump Saver tablets, an Angus product. A single two-ounce tablet treated twenty-five gallons of metalworking substance. Macey believed that marketers paid $4. 00/pound (eight tablets) and sold them to customers to get $7. 75/pound. Unlike Kathon MWX, these kinds of tablets blended in the metalworking fluid. They were generally regarded less effective against bacteria and ineffective against fungi, plus they worked for only about three days. One other product, Dowicil 75, arrived water-soluble packages that were dropped into the tank. Each 2 . 5-pound bundle treated 500 gallons of fluid. Macey estimated the cost to suppliers at $2. 34/pound and a reselling price of $10/pound.

While Dowicil 75 performed well against the two bacteria and fungi, completely a heavy phosphate odor, produced formaldehyde, and may not be safely used in reservoirs with capacities lower than 500 gallons. Some metalworking operators in small retailers, in a makeshift effort to control the scent released simply by bacteria, poured household bleaches, disinfectants, deodorants, and related materials into their smaller reservoirs. The odors of these materials usually combined with bacterial odor to make the office even worse pertaining to the workers. These substitute materials also interfered with the air conditioning andlubricating performance of the metalworking fluid.

Table B Competitors’ Goods

Routine service Biocide Business 1 . Lehn and Fink 2 . Dow Chemical three or more. Angus Chemical 4. Olin Corporation 5. Millmaster Onyx 6. RT Vanderbilt several. Merck Onyxide 200 Vancide TH Tektamer 38 A. D. Put emphasis Biocide Grotan Bioban P-1487 Triadine-10 Central Systems Grotan Dowicil seventy five DBNPA Tris Nitro Triadine-10 Dowicil seventy five Tris Nitro Stand-Alone Systems

Distribution Channels

The 1st level of suppliers in this market were the metalworking liquid formulators. They will purchased biocides, both focus and protection, directly from the. The focus biocide was incorporated in the metalworking substance at the time of it is formulation. The formulators then simply sold the metalworking substance directly to huge companies also to other traders who sold again it to smaller accounts. Metalworking liquid generally made up more than 90% of a formulator’s business. As a service to buyers with large central water tank systems, marketers provided a maintenance package deal that usually included delivery, fluid preparation, each week monitoring to get microorganisms, and maintenance biocide treatments. Other special-purpose chemical substances such as ph level adjusters and corrosion inhibitors were provided as necessary. Many of these products were marketed under the formulators’ private brands. Most formulators engaged in R&D, acceptance assessment of manufacturers’ additives, and systems monitoring. In 1983 the total revenue of 15 large countrywide formulators were roughly $200 million.

An additional 20-30 formulators had a mixed sales amount of some hundred buck million. Several hundred small formulators had revenue of $0. 5 to $1 million every. Because of the quantity and partage of the metallic metalworking industries, large formulators distributed many through a secondarydistribution network, consisting primarily of business supply residences and machine tool retailers. Industrial source houses went from small , family-managed companies in rural areas to large, professionally been able companies in urban areas. A lot of specialized in providing particular industry sectors. These were “supermarkets for customers. A supply home servicing a ferrous metalworking industry, for instance , might bring several brands of biocides, protection accessories, uniforms, small general-purpose tools, shop cleaning and maintenance supplies, worktables, hand trucks, concrete floor blocks, leak absorbents, and hand soaps.

The 1982 Census of Wholesale Control listed 13, 327 professional supply homes in the United States. A serious metropolitan region might have above 100 supply houses offering a variety of sectors. Industrial supply house sales in 1982 amounted to about $40 billion. Inside salespeople took phone orders from regular customers and over-the-counter orders from walk-in consumers. Outside salespeople generated new accounts and called about regular customers. Machine device shops specializing in distributing and servicing equipment tools and items used with them like spare parts, tool bits, metalworking fluids, and biocides. A few also dished up as options for metals. There have been 3, 654 such businesses in the United States, and 1982 their particular sales were $8. 7 billion.

Typically, significant industrial firms (e. g., General Motor, Caterpillar Tractor) purchased biocides directly from suppliers or from other distributors (formulators). They used the secondary network of business supply residences and machine tool outlets for assorted items (such as basic safety equipment or paper towels) that were not critical to their line of business. Little companies, nevertheless , often relied exclusively in industrial source houses and machine tool shops for all of thier needs.

Online marketing strategy for Kathon MWX

10 of Rohm and Haas’s 12 marketers (formulators of metalworking fluid) agreed to distribute Kathon MWX in addition to Kathon 886 MW. The company offered personal branding on Kathon 886 MW, but is not on Kathon MWX. Even though many formulators asked for non-public branding, only 1 distributor declined to carry Kathon MWX when turned down over a request for its ownbrand product. Explaining the explanation for this insurance plan, a company supervisor said: Kathon MWX may be the industrial comparable of a buyer packaged great; it is a “baggie product packaged at the manufacturing plant. We need a lot of uniformity in package style.

Moreover, we want the end-user to know 2 weeks . Rohm and Haas merchandise. Our clients hardly view the Kathon 886 MW trommel because our formulators include the product as an element of their routine service service. Nevertheless Kathon MWX is different; we expect the end-users to perform the maintenance themselves. Kathon MWX was jam-packed in containers containing 144 packets, every packet weighing two oz .. Quantity rates to marketers per package of 144 packets were as follows: 1-2 boxes three to four boxes 5+ boxes $180. 00 one hundred sixty five. 00 145. 00

Mary Macey predicted the developing cost per packet being about 55 cents. The business did not stipulate a price to end-users, although most formulators charged clients and other dealers $2/packet. Several formulators a new strong second distribution network consisting of 200-300 industrial source houses, and in such occasions, the secondary level of circulation was known to add a 10% margin. One of the company’s suppliers with a sales force of seven hundred commissioned repetitions claimed that he can sell every single packet for $6 for the end-users. The merchandise launch (December 1983) was accompanied by a press release in 40 metalworking industry journals announcing the availability of Kathon MWX.

The story included details about characteristics of Kathon MWX and its benefits. Full-page advertisements costing $3, 800 every were put in five concerns of American Machinist between Feb and Summer 1984. Interested readers might get further information and a two-packet sample by filling out a reader services coupon. Above 200 this sort of inquiries were received through the February, Drive, and 04 advertisements. Almost all inquiries were forwarded to distributors. Rohm and Haas responded directly with a replicate of the very multi-colored ad, a material protection data sheet, a set of specialized notes, and a “howto-use booklet (see Exhibit 4). Distributors had been expected to follow up on the potential clients and make orders. In spite of all theseefforts, the sales in the initially five a few months of the release period scarcely touched $12, 000.

Joan Macey’s Problem

Disappointed with Kathon MWX’s sales efficiency, Macey began a review of her marketing intend to take any kind of necessary corrective steps. In addition, she sought viewpoints from a pair of her acquaintances in the Specialised Chemicals division who had effectively launched and established new items. Her initial colleague suggested:

You are too very yourself, Joan. New products don’t succeed immediately. It takes years for the item to receive market acceptance and much longer still to get seller support. If you believe comfortable with regards to your original promoting plan, it can worthwhile giving it a chance. Were in the business of specialty chemical compounds, we offer strategies to customers’ problems. We are certainly not in the fashion business! Her second colleague felt differently; he arranged that Kathon MWX’s first marketing way was not likely best suited to get the product. This individual encouraged Macey to review the marketing strategy, saying, “The only great news on Kathon MWX is that you know we have a problem; therefore you can repair it.  Regardless of the she may well ultimately perform about her strategy for marketing the product, Macey thought it could be a good idea to speak to the two hundred prospects who responded to the reader service coupon codes. Macey utilized a summer season trainee who was working toward an MBA to execute a mobile phone survey.

Describing her explanation for the survey, the girl said: If only I could thoroughly research the industry, but that isn’t possible. Honestly, what else can I perform with the limited budget I possess for support activities? Kathon MWX must show a lot of initial motion before even more resources are justified. It really is imperative that I make a simple decision. After all, I have various other products to handle and my personal boss gets the entire fongicide business tomanage. One has to position Kathon MWX in its right perspective. A quick survey have to do that. The survey uncovered several major facts: 1 . On average, buyers discarded utilized metalworking substance after three weeks. Rancidity and dermatitis4 were the primary reasons for this, and most customers believed that bacteria, not really metal allergens or harsh chemicals, caused the dermatitis.

Although most survey participants acquired their utilized fluids hauled away, handful of knew how much this support cost. People who did find out gave statistics of $0. 29, $0. 55, $1. 80, and $2. 00 per gallon of utilized fluid. No more than 20% in the participants appreciated receiving the Kathon MWX data packet. When ever asked about the of the product conveyed by promotional materials, many stated that the product was worth striving. Despite their very own inclination to work with Kathon MWX, they stated some pressure about the safety. Evidence of the correct handling technique usually changed these concerns. Users attained metalworking essential fluids from tool shops, olive oil companies, formulators, and professional supply retailers.

The majority found from several small , neighborhood tool or supply shops within 31 miles of their businesses, along with one of the huge national formulators. Users sometimes found it necessary to create to a huge national distributor for supplies that were not locally obtainable. About fifty percent of the users used items ranging from household disinfectants to metalworking substance biocides to kill odor-causing bacteria inside their machine sumps. The majority of the products did not manage to work, the end-user commonly continued to use the product. Simply half of the individuals who had tried a biocide could keep in mind its name. non-e had tried out Kathon MWX.

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