Loctite Case Study
Case #4
Zac Palet
MKT 460
1:00pm
1. Should IPG introduce the BAM? Why or why not?
I do not think Loctite should launch the Bond-O-Matic 2000 (BAM). Loctite manufactures high quality equipment and adhesives and the BAM would dilute this quality. Consumers are willing to pay a premium price for Loctite’s products because they know they are getting a high quality product. The BAM could damage the company’s image because it is priced well below the company’s normal pricing at $175. This could corrode customers’ relationships with all of Loctite’s products, especially their SuperBonder adhesive which would share the Loctite name and a similar brand name. Loctite’s other pieces equipment all have a profit margin around 25% when selling through a distributor and 33% when selling directly to the end user (Exhibit 9). However, the aluminum BAM would have profit margins as low as 12.5% and 22% respectively while also having the cheapest sales price of Loctite’s line of equipment.
72% of purchasers from distributors and manufacturers stated that technical service was important in their choice of an instant adhesive supplier. The large amount of account maintenance is already a headache for the systems division. Introducing the BAM would expand this problem and Loctite may not be able to effectively provide the technical service that their customers value. The tip to the BAM, if used properly, would be good for only 12,000 dot applications while the BAM contains enough SuperBonder for 13,600 dot applications ($850/per ounce*16). This is a factor that will surely draw complaints for the maintenance division and corrode Loctite’s image of quality.
The sales force would not respond well to the BAM. They are highly specialized adhesive experts. However, they are not well versed in selling equipment. Additionally, they make a smaller commission percentage on equipment. It is unlikely that the sales force will sacrifice valuable time to educate them selves on a
Zac Palet
MKT 460
1:00pm
1. Should IPG introduce the BAM? Why or why not?
I do not think Loctite should launch the Bond-O-Matic 2000 (BAM). Loctite manufactures high quality equipment and adhesives and the BAM would dilute this quality. Consumers are willing to pay a premium price for Loctite’s products because they know they are getting a high quality product. The BAM could damage the company’s image because it is priced well below the company’s normal pricing at $175. This could corrode customers’ relationships with all of Loctite’s products, especially their SuperBonder adhesive which would share the Loctite name and a similar brand name. Loctite’s other pieces equipment all have a profit margin around 25% when selling through a distributor and 33% when selling directly to the end user (Exhibit 9). However, the aluminum BAM would have profit margins as low as 12.5% and 22% respectively while also having the cheapest sales price of Loctite’s line of equipment.
72% of purchasers from distributors and manufacturers stated that technical service was important in their choice of an instant adhesive supplier. The large amount of account maintenance is already a headache for the systems division. Introducing the BAM would expand this problem and Loctite may not be able to effectively provide the technical service that their customers value. The tip to the BAM, if used properly, would be good for only 12,000 dot applications while the BAM contains enough SuperBonder for 13,600 dot applications ($850/per ounce*16). This is a factor that will surely draw complaints for the maintenance division and corrode Loctite’s image of quality.
The sales force would not respond well to the BAM. They are highly specialized adhesive experts. However, they are not well versed in selling equipment. Additionally, they make a smaller commission percentage on equipment. It is unlikely that the sales force will sacrifice valuable time to educate them selves on a