This report has been written as part of the academic requirements of the Master of Business Administration.
A small part ($5.4 million) of Rohm and Haas' $1.9 billion sales (1983) is derived from the sale of metal working fluids. Currently these sales are realized through the product Kathon 886MW (886MW), which is mainly used as a maintenance biocide in central metal working systems fluid reservoirs.
Because of suggestions from the current end-users and the limitations of 886 MW in terms of minimum reservoir size, recently a new product was developed for use in smaller individual reservoir systems, namely Kathon MWX (MWX).
The main problem stated in the case is the disappointing amount of sales of Kathon MWX. Although sales revenue of $20 million per year was estimated and the estimated sales in the first year of launch had been predicted to be $0.2 million, the realized sales for the first 5 months have only amounted to 12 thousand dollars, thereby falling short of the envisaged target.
Although the product has some excellent features, there are some factors that seem to be at the basis of the current failure. First of all the distributors seem not to co-operate, evidence of this was that 20% of packets of MWX reached the end users as part of the launch promotion. Secondly, the targeted end-users have low level of experience with the use of biocides in their metal working machines. Finally, the targeted end-users do apparently not realize that MWX could solve current problems of odor and dermatitis.
These issues will be taken into account in the subsequent analysis of the case and proposed modification of the current marketing plan.
Based on our analysis of we recommend the following marketing strategy for the Kathon MWX:
First of all we recommend using the existing distribution channels for biocide, which include the formulators and subsequently industrial suppliers and machine tool shops. The rationale behind this decision stems from the fact that these distribution channels already exist and we do not want to upset the formulators, the latter point also in light of increased competition on the Kathon 886 MW products.
Since MWX is cannibalizing the formulators' sales of metal working fluid, we recommend that the price the formulators charge to the end users or industrial suppliers/machine tool shops needs to be increased at least to $5.68 per packet. This price increase can be justified, as the value of MWX for the customer is estimated to be at least $40 per packet and the value to the customers of the products of our competitors is much lower than that of our product.
Next, through promotion and advertising, we need to create awareness among our customer about the benefits of our product to them in terms of cost savings in terms of metal working fluid concentrate costs as well as reduced disposal costs. Additionally customers can benefit from a reduction of rancidity and dermatitis. This awareness can be created through direct mailings and point-of-sale displays. Instruction on the proper use of the biocide and metal working fluids should be a part of the information provided.
Finally, the branding issue as raised in the case will probably vanish as the formulators have an increase in revenues from the MWX and Rohm & Haas carry the promotion costs. However if it still turns out to be an issue, a possible solution could be to have a kind of "co-branding" initiative like "Intel"-inside.
Above plan is expected to result in an increase of $3.96 million in revenues.
In this alternative MWX is sold through the formulators as is current done with the 886MW. In this alternative MWX can be sold with the metalworking fluid concentrate as a bundle. A promotion program of MWX should be implemented and focused towards the end users. An...
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