ENGM 181

Ga ur a ng De s a i
Ami r Gol na bi
Al l i e Mc Ke ndr y
J e ns Moe bi us
Ha r i na r ay a na n Ra nga na t ha n
Case Review:
Rohm and Haas
Thayer School of Engineering 11/4/2010
Background
1983: $2B worldwide sale from 4 segments
Kathon microbiocide products: $25M

Thayer School of Engineering
2
Polymers, resins,
and monomers
Plastics
Agricultural
chemicals
Industrial
chemicals
Fluid Process
chemicals
Petroleum
chemicals
Kathon 886 MW
Kathon MWX
Specialty
chemicals
11/4/2010
Background
Metalworking fluid: 60 million gallons in the US
Biocides kill microorganisms in metalworking fluids
Thayer School of Engineering
3
Product name K 886 MW K MWX
Treatment capacity 1,000 gal 50-100 gal reservoirs
Market potential $18M $20M
Sale Volume $5.4M (1983) $0.2M (target in 1984)
Actual sale during
1
st
five month
$2.1M $12,000!!!
11/4/2010
Optimistic Prospects for MWX
Great market potential ($38M)

Maintenance biocides likely to gain market share

Several advantages:
Easy to use
No maintenance
Safe
Higher effectiveness
Large customer surplus
Thayer School of Engineering
4
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 MWX
Thayer School of Engineering
5
11/4/2010
End-User EVC of Kathon MWX
Compare costs incurred by end-user who does and does
not use Kathon MWX
Thayer School of Engineering
6
Not Using MWX Using MWX
Fluid Concentrate Purchase $ $
Fluid Disposal $ $
Risk of Fluid Disposal % %
Value al Differenti Value Reference EVC
11/4/2010
End-User EVC of Kathon MWX
Assumptions
Maintenance biocides extend fluid life indefinitely
1 Gal Undiluted Fluid 25 Gal Diluted Fluid
1 Packet of MWX 50 Gal Diluted Fluid
Typical Small Machine Shop
22 Machines x 50 Gal Tank = 1,100 Gal/Cycle
4-week Cycle based Calculations
Shops not using MWX: Dispose Fluid
Shops using MWX: Add MWX
Other Variable and Fixed Costs Ignored
Thayer School of Engineering
7
11/4/2010
End-User EVC of Kathon MWX
Fluid Concentrate Purchase Cost Calculation
$5.68/Gal Concentrate
Thayer School of Engineering
8
cle $249.92/cy
cycle 1
dilute gal 1,100
dilute gal 25
e concentrat gal 1
e concentrat gal 1
$5.68

Fluid concentrate purchase cost per cycle for
small machine shop
11/4/2010
End-User EVC of Kathon MWX
Fluid Disposal Cost Calculation
$1.36/Gal Dilute
Thayer School of Engineering
9
Fluid disposal cost per cycle for
small machine shop
cycle $1,496.00/
cycle 1
dilute gal 1,100
dilute gal 1
$1.36

11/4/2010
End-User EVC of Kathon MWX
Thayer School of Engineering
10
Not Using Biocide Using Kathod MWX
Fluid Concentrate Purchase $249.92 $249.92
Fluid Disposal $1,496.00 $1,496.00
Risk of Needing Disposal 100% 0%
Value al Differenti Value Reference EVC
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%) = $1,496.00
11/4/2010
ket $79.36/pac
packet 1
diluted gal 50
diluted gal 1,100
cycle 1
cycle 1
$1,745.92

End-User EVC of Kathon MWX
Thayer School of Engineering
11
Cost small machine shop is willing to pay
per MWX packet
cycle $1,745.92/ $1,496.00 $249.92 EVC
11/4/2010
Compare revenues accrued by distributor which does and
does not sell Kathon MWX
Difference in revenues will be MWX break-even price
Break-Even Price for Distributor
Thayer School of Engineering
12
Only Concentrate Concentrate & MWX
Fluid Concentrate Sales $ $
MWX Sales $0.00 X
Total Sales $ $ + X
11/4/2010
Break-Even Price for Distributor
Thayer School of Engineering
13
Assumptions
Same as previous
Yearly Based Calculations
1 Distributor 1 Small Machine Shop
Distributor Revenues = Machine Shop Costs
Distributors only products for sale are fluid concentrate
and MWX
11/4/2010
Break-Even Price for Distributor
Selling Only Fluid Concentrate




Selling Fluid Concentrate and MWX
Thayer School of Engineering
14
r $3,248/yea
year 1
cycles 13
cycle 1
$249.92

Revenue per year for distributor selling only fluid to small machine shop
Revenue per year for distributor selling fluid & MWX to small machine shop
(13x)/year $249.92
year 1
cycles 13
cycle 1
$x
year 1
$249.92

11/4/2010
ket $10.48/pac
packet 1
dilute gal 50
dilute gal 1,100
cycle 1
cycle 1
$230.62

Break-Even Price for Distributor
Thayer School of Engineering
15
Only Concentrate Concentrate & MWX
Fluid Concentrate Sales $3,248.00 $249.92
MWX Sales $0.00 13X
Total Sales $3,248.00 $249.92 + 13X
cle $230.62/cy X
Revenue distributor will earn for selling MWX to small machine shop per cycle
Break-even price a distributor will charge per MWX packet sold to small machine shop
11/4/2010
NPD Process
Thayer School of Engineering
16
1. Idea
Generation
Is the Idea
worth
considering?
2. Idea
screening
Is the product
idea
compatible
with
companys
objectives,
strategies, and
resources?
3.Concept
development
and testing
Can we find a
good concept
consumers say
they would
try?
4. Marketing
Strategy
development
Can we find a
cost-effective
affordable
marketing
strategy?
5. Business
analysis
Will this
product
meet out
profit goal?
6. Product
Development
Have we got a
technically and
commercially
sound product?
7.Market
Testing
Have product
sales met
expectations?
8.
Commercialization
Are product sales
meeting
expectations?
Opportunity
Analysis
Product Design Marketing Mix
Launch
11/4/2010
Errors in the NPD Process
Thayer School of Engineering
17
1. Idea
Generation
Is the Idea
worth
considering?
2. Idea
screening
Is the product
idea
compatible
with
companys
objectives,
strategies, and
resources?
3.Concept
development
and testing
Can we find a
good concept
consumers say
they would
try?
4. Marketing
Strategy
Development
Can we find a
cost-effective
affordable
marketing
strategy?
5. Business
analysis
Will this
product
meet out
profit goal?
6. Product
Development
Have we got a
technically and
commercially
sound product?
7.Market
Testing
Have product
sales met
expectations?
8.
Commercialization
Are product sales
meeting
expectations?
Marketing Strategy Development
No private branding for MWX
Lack of incentives for distributors






11/4/2010
Errors in the NPD Process
Thayer School of Engineering
18
1. Idea
Generation
Is the Idea
worth
considering?
2. Idea
screening
Is the product
idea
compatible
with
companys
objectives,
strategies, and
resources?
3.Concept
development
and testing
Can we find a
good concept
consumers say
they would
try?
4. Marketing
Strategy
development
Can we find a
cost-effective
affordable
marketing
strategy?
5. Business
analysis
Will this
product
meet out
profit goal?
6. Product
Development
Have we got a
technically and
commercially
sound product?
7.Market
Testing
Have product
sales met
expectations?
8.
Commercialization
Are product sales
meeting
expectations?
Lack of Market Testing
Did not know how distributors perceived the product
Did not know how end users reacted to the product



11/4/2010
Recommendations for Increased Sales
Allow private branding
Can produce good results in the near future
Does not have a long term perspective

Market cost effectiveness of Kathon-MWX
can be cost intensive

Emphasize safety features
Removes a major barrier about the product

Increase incentive for distributors
Can reduce unit profit but has potential for a sales volume upsurge
Thayer School of Engineering
19
11/4/2010
Thayer School of Engineering
20
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