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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
*Thayer School of Engineering
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!!!
*Thayer School of Engineering
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
*Thayer School of Engineering
... 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
*Thayer School of Engineering
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%%
*Thayer School of Engineering
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
*Thayer School of Engineering
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
*Thayer School of Engineering
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
*Thayer School of Engineering
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%
*Thayer School of Engineering
End-User EVC of Kathon MWXThayer School of Engineering*Cost small machine shop is willing to pay per MWX packet11/4/2010
*Thayer School of Engineering
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
*Thayer School of Engineering
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
*Thayer School of Engineering
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
*Thayer School of Engineering
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
*Thayer School of Engineering
NPD ProcessThayer School of Engineering*Opportunity AnalysisProduct DesignMarketing MixLaunch11/4/2010
*Thayer School of Engineering
Errors in the NPD ProcessThayer School of Engineering*Marketing Strategy DevelopmentNo private branding for MWXLack of incentives for distributors
11/4/2010
*Thayer School of Engineering
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
*Thayer School of Engineering
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
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
*Thayer School of Engineering
*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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