Case Review: Rohm and Haas
Case Review: Rohm and Haas
Thayer School of Engineering
11/4/2010
Background
2
1983: $2B worldwide sale from 4 segments Kathon microbiocide products: $25M
Polymers, resins, and monomers Plastics Industrial chemicals Agricultural chemicals
Fluid Process chemicals
Specialty chemicals
Petroleum chemicals
Kathon 886 MW
Kathon MWX
Thayer School of Engineering
11/4/2010
Background
3
Metalworking fluid: 60 million gallons in the US Biocides kill microorganisms in metalworking fluids
Product name Treatment capacity Market potential Sale Volume Actual sale during 1st five month K 886 MW 1,000 gal $18M $5.4M (1983) $2.1M K MWX 50-100 gal reservoirs $20M $0.2M (target in 1984) $12,000!!!
Thayer School of Engineering
11/4/2010
Optimistic Prospects for MWX
4
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
11/4/2010
... But it doesn‘t sell!
5
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 11/4/2010
End-User EVC of Kathon MWX
6
Compare costs incurred by end-user who does and does not use Kathon MWX
Not Using MWX Fluid Concentrate Purchase Fluid Disposal Risk of Fluid Disposal $ $ % Using MWX $ $ %
EVC = Reference Value + Differential Value
Thayer School of Engineering 11/4/2010
End-User EVC of Kathon MWX
7
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
Thayer School of Engineering
11/4/2010
Background
2
1983: $2B worldwide sale from 4 segments Kathon microbiocide products: $25M
Polymers, resins, and monomers Plastics Industrial chemicals Agricultural chemicals
Fluid Process chemicals
Specialty chemicals
Petroleum chemicals
Kathon 886 MW
Kathon MWX
Thayer School of Engineering
11/4/2010
Background
3
Metalworking fluid: 60 million gallons in the US Biocides kill microorganisms in metalworking fluids
Product name Treatment capacity Market potential Sale Volume Actual sale during 1st five month K 886 MW 1,000 gal $18M $5.4M (1983) $2.1M K MWX 50-100 gal reservoirs $20M $0.2M (target in 1984) $12,000!!!
Thayer School of Engineering
11/4/2010
Optimistic Prospects for MWX
4
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
11/4/2010
... But it doesn‘t sell!
5
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 11/4/2010
End-User EVC of Kathon MWX
6
Compare costs incurred by end-user who does and does not use Kathon MWX
Not Using MWX Fluid Concentrate Purchase Fluid Disposal Risk of Fluid Disposal $ $ % Using MWX $ $ %
EVC = Reference Value + Differential Value
Thayer School of Engineering 11/4/2010
End-User EVC of Kathon MWX
7
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
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