Case Review:
Rohm and Haas
ENGM 181
Gaurang Desai
Amir Golnabi
Allie McKendry
Jens Moebius
Harinarayanan Ranganathan
Thayer School of Engineering
11/4/2010
Background
2
 1983: $2B worldwide sale from 4 segments
 Kathon microbiocide products: $25M
Polymers, resins,
and monomers
Industrial
chemicals
Plastics
Fluid Process
chemicals
Specialty
chemicals
Kathon 886 MW
Thayer School of Engineering
Agricultural
chemicals
Petroleum
chemicals
Kathon MWX
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
Thayer School of Engineering
K 886 MW
K MWX
1,000 gal
50-100 gal reservoirs
$18M
$20M
$5.4M (1983)
$0.2M (target in 1984)
$2.1M
$12,000!!!
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
Using MWX
Fluid Concentrate Purchase
$
$
Fluid Disposal
$
$
Risk of Fluid Disposal
%
%
EVC  Reference Value  Differenti al 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 Ignored
Thayer School of Engineering
11/4/2010
End-User EVC of Kathon MWX
8
Fluid Concentrate Purchase Cost Calculation
 $5.68/Gal Concentrate
$5.68
1 galconcentrate 1,100galdilute


 $249.92/cycle
1 galconcentrate
25 galdilute
1 cycle
Fluid concentrate purchase cost per cycle for
small machine shop
Thayer School of Engineering
11/4/2010
End-User EVC of Kathon MWX
9
Fluid Disposal Cost Calculation
 $1.36/Gal Dilute
$1.36
1,100galdilute

 $1,496.00/cycle
1 galdilute
1 cycle
Fluid disposal cost per cycle for
small machine shop
Thayer School of Engineering
11/4/2010
End-User EVC of Kathon MWX
10
EVC  Reference Value  Differenti al Value
Not Using Biocide Using Kathod MWX
Fluid Concentrate Purchase
$249.92
$249.92
Fluid Disposal
$1,496.00
$1,496.00
Risk of Needing Disposal
100%
0%
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
Thayer School of Engineering
11/4/2010
End-User EVC of Kathon MWX
11
EVC  $249.92 $1,496.00 $1,745.92/cycle
$1,745.92
1 cycle
50 galdiluted


 $79.36/packet
1 cycle 1,100galdiluted
1 packet
Cost small machine shop is willing to pay
per MWX packet
Thayer School of Engineering
11/4/2010
Break-Even Price for Distributor
12
 Compare revenues accrued by distributor which does and
does not sell Kathon MWX
 Difference in revenues will be MWX break-even price
Only Concentrate Concentrate & MWX
Fluid Concentrate Sales
$
$
MWX Sales
$0.00
X
Total Sales
$
$+X
Thayer School of Engineering
11/4/2010
Break-Even Price for Distributor
13
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
Thayer School of Engineering
11/4/2010
Break-Even Price for Distributor
14
Selling Only Fluid Concentrate
$249.92 13 cycles

 $3,248/year
1 cycle
1 year
Revenue per year for distributor selling only fluid to small machine shop
Selling Fluid Concentrate and MWX
$249.92
$x
13 cycles


 $249.92 (13x)/year
1 year 1 cycle 1 year
Revenue per year for distributor selling fluid & MWX to small machine shop
Thayer School of Engineering
11/4/2010
Break-Even Price for Distributor
15
Only Concentrate Concentrate & MWX
Fluid Concentrate Sales
$3,248.00
$249.92
MWX Sales
$0.00
13X
Total Sales
$3,248.00
$249.92 + 13X
X  $230.62/cycle
Revenue distributor will earn for selling MWX to small machine shop per cycle
$230.62
1 cycle
50 galdilute


 $10.48/packet
1 cycle 1,100galdilute 1 packet
Break-even price a distributor will charge per MWX packet sold to small machine shop
Thayer School of Engineering
11/4/2010
NPD Process
16
1. Idea
Generation
2. Idea
screening
Is the Idea
worth
considering?
Is the product
idea
compatible
with
company’s
objectives,
strategies, and
resources?
Opportunity
Analysis
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3.Concept
development
and testing
4. Marketing
Strategy
development
Can we find a
good concept
consumers say
they would
try?
Can we find a
cost-effective
affordable
marketing
strategy?
5. Business
analysis
6. Product
Development
7.Market
Testing
Will this
product
meet out
profit goal?
Have we got a
technically and
commercially
sound product?
Have product
sales met
expectations?
8.
Commercialization
Are product sales
meeting
expectations?
Launch
Product Design
Marketing Mix
11/4/2010
Errors in the NPD Process
17
 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
1. Idea
Generation
Is the Idea
worth
considering?
Is the product
idea
compatible
with
company’s
objectives,
strategies, and
resources?
Thayer School of Engineering
3.Concept
development
and testing
Can we find a
good concept
consumers say
they would
try?
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?
11/4/2010
Errors in the NPD Process
18
 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
1. Idea
Generation
Is the Idea
worth
considering?
Is the product
idea
compatible
with
company’s
objectives,
strategies, and
resources?
Thayer School of Engineering
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?
8.
Commercialization
Are product sales
meeting
expectations?
11/4/2010
Recommendations for Increased Sales
19
 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
Thayer School of Engineering
11/4/2010
Thank you!
20
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.
Thayer School of Engineering
11/4/2010