Case Review: Rohm and Haas

1. Case Review:Rohm and Haas ENGM 181 Gaurang Desai Amir Golnabi Allie McKendry Jens Moebius Harinarayanan Ranganathan 11/4/2010 Thayer School of Engineering

2. Polymers, resins, and monomers Plastics Industrial chemicals Agricultural chemicals Fluid Process chemicals Specialty chemicals Petroleum chemicals Kathon MWX Kathon 886 MW Background • 1983: $2B worldwide sale from 4 segments • Kathon microbiocide products: $25M 11/4/2010 Thayer School of Engineering

3. Background • Metalworking fluid: 60 million gallons in the US • Biocides kill microorganisms in metalworking fluids 11/4/2010 Thayer School of Engineering

4. 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 11/4/2010 Thayer School of Engineering

5. ... But it doesn‘t 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 11/4/2010 Thayer School of Engineering

6. End-User EVC of Kathon MWX • Compare costs incurred by end-user who does and does not use Kathon MWX 11/4/2010 Thayer School of Engineering

7. 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 11/4/2010 Thayer School of Engineering

8. End-User EVC of Kathon MWX Fluid Concentrate Purchase Cost Calculation • $5.68/Gal Concentrate Fluid concentrate purchase cost per cycle for small machine shop 11/4/2010 Thayer School of Engineering

9. End-User EVC of Kathon MWX Fluid Disposal Cost Calculation • $1.36/Gal Dilute Fluid disposal cost per cycle for small machine shop 11/4/2010 Thayer School of Engineering

10. End-User EVC of Kathon MWX 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 Thayer School of Engineering

11. End-User EVC of Kathon MWX 11 Cost small machine shop is willing to pay per MWX packet 11/4/2010 Thayer School of Engineering

12. Break-Even Price for Distributor • Compare revenues accrued by distributor which does and does not sell Kathon MWX • Difference in revenues will be MWX break-even price 11/4/2010 Thayer School of Engineering

13. Break-Even Price for Distributor Assumptions • Same as previous • Yearly Based Calculations • 1 Distributor  1 Small Machine Shop • Distributor Revenues = Machine Shop Costs • Distributor’s only products for sale are fluid concentrate and MWX 11/4/2010 Thayer School of Engineering

14. Break-Even Price for Distributor 14 Selling Only Fluid Concentrate Selling Fluid Concentrate and MWX Revenue per year for distributor selling only fluid to small machine shop Revenue per year for distributor selling fluid & MWX to small machine shop 11/4/2010 Thayer School of Engineering

15. Break-Even Price for Distributor 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 Thayer School of Engineering

16. NPD Process 1. Idea Generation Is the Idea worth considering? 2. Idea screening Is the product idea compatible with company’s 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 Launch Product Design Marketing Mix 11/4/2010 Thayer School of Engineering

17. Errors in the NPD Process • Marketing Strategy Development • No private branding for MWX • Lack of incentives for distributors 4. Marketing Strategy Development Can we find a cost-effective affordable marketing strategy? 2. Idea screening Is the product idea compatible with company’s objectives, strategies, and resources? 3.Concept development and testing Can we find a good concept consumers say they would try? 6. Product Development Have we got a technically and commercially sound product? 7.Market Testing Have product sales met expectations? 1. Idea Generation Is the Idea worth considering? 5. Business analysis Will this product meet out profit goal? 8. Commercialization Are product sales meeting expectations? 11/4/2010 Thayer School of Engineering

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

19. 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 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 Thayer School of Engineering