Loctite Corporation

Executive Summary

This case analysis is to recommend the initiation of a marketing plan for the Bond-A-Matic 2000 (BAM) in 1979. The objective of the plan will be to support the capture of 35% market share for SuperBonder by increasing the Loctite brand awareness, educating non-current users of the advantages of CA adhesives (SuperBond) and the advantages of dispensing equipment. The plan will utilize direct mail and media that will be reinforced by future SuperBonder advertising.

Company Analysis

Loctite Corporation is a market leader in development and marketing of adhesives and sealants with a clearly stated objective to become a premier worldwide marketer of instant adhesives for industrial use by 1985. To reach this objective Loctite uses a high quality, high price strategy. It maintains a clear company structure by dividing the market under three profit centers and faces no internal competition between divisions. (See Exhibit 1)

70% of IPG sales are from newer technologies (anaerobic and CA) which share no severe problems (contrary to mature technologies in adhesives market). Loctite is enjoying the patent in the anaerobic market with 85% share of the market having limited customers who have not quite accepted the obvious advantages. On the other hand, Loctite looks forward to participate in the forecasted industrial market growth of 26.42% next year in the CA market. The company maintains clear differentiation and adjusted pricing strategy between 2 of its CA products by using market penetration to increase purchase volume of SuperBonder users and on the other hand by using market skimming to maintain the brand loyal users of QuickSet404.

Customer Analysis

The BAM should be positioned not as a stand alone product but as a complementary product to Super Bond adhesives. SuperBonder adhesives will be used with Bond-A-Matic emphasizing connection when advertised, positioning of Bond-A-Matic as additional tool for the SuperBonder adhesives not vice versa.

The focus of the plan is to use the BAM as a method of introducing new users to instant adhesives and to react to the expressed interest of current CA users in improved dispensing techniques.

The target audiences for the plan are small to midsized companies that are non users and companies that are CA users that will benefit from using the BAM; the industries within SIC 36 through 39. The industries in this classification range are characterized by smaller usage, their products are subject to frequent design changes and hence are best suited for BAM (with Gluematic tip) which works with any Loctite Adhesive.

Moreover, the Systems Division's applicators cater to the need of larger firms which cannot be met by BAM. Thus Loctite would be focusing on its customer based on their needs increasing the purchase volume and avoid the product line cannibalization.

Further, based on the Pricing Strategy, discussed ahead in the case we can avoid the design engineers and purchasing staff from getting involved in the buying decision. Plant and Production engineers can make the purchase decision about the dispensing equipment independently up to the cost of $250 making them our target audience. This helps in maintaining the differences in decision making process with other dispensers.

Recognizable differences between Bond-A-Matic and other dispensers in price, adhesives to be used with and precision makes it attractive for different customers of Loctite which loops in with the its Strategic objective of expanding new customer base. More than 60% of firms using more than 3 grams and less than 9 pounds of instant adhesives are the target customer of BAM.

Product Strategy

Gluematic Tip will be used in Bond-A-Matic for hard surfaces. Vari Drop needle in combination of Vari Drop applicator will be used for soft surfaces and free falling drops. Thus to satisfy the suggested customers (SICs 35-39) who are very heterogeneous concerning their industries we would provide them with both the heads. Loctite incurs low cost for providing both heads.

BAM was developed according to the needs of assembly workers and hence share no internal rivalry with Gluematic Pen due to the different size. BAM not only inherits all the pros of Gluematic pen but also solves the problem of clogging and cumbersome 1 oz bottles (See Exhibit 3). With the successful inception of BAM only 1 lb or 150 g bottles will be used for customers needing more than 3 grams of adhesive annually, declining the sales of 1 oz. and smaller bottles among the 51% population who expressed interest in dispensing technology. Gluematic Pen in turn would be enjoyed by the household customer with usage less than a pound.

We recommend introducing BAM with its Low Pressure and High Pressure model. The suggested sales price for BAM low pressure and high pressure models are the same. Low pressure models are cheaper resulting in higher margins (See Exhibit 4). Moreover, Low pressure models can be used with two respectively four of five SuperBonder adhesives (See Exhibit 2). Adhesives 420 and 495 can only be used with low-pressure model and account for 50% of existing sales. Adhesive 416 used for irregular and porous surfaces can be used with only the high pressure model. Thus the options within the product will be perfect fit for our disparate target customer needs.

Pricing Strategy

Loctite's strategy calls for high prices and not for low-price market penetration. Thus we recommend to increase the price of the BAM + 1 Gluematic Tip + Vari Drop Needle + Vari Drop Applicator to $250 for end user and $ 195 for distributor (See Exhibit 5).

The price of the BAM needs to position the product as durable and effective while remaining under the generally accepted $250 discretionary purchasing cap. With this price Plant and production engineers, our target customers, can decide independently about purchasing equipment including accessories. If we higher the prices, design engineers and purchasing staff gets involved leaving no differences in decision making process with other dispensers. Thus price be increased not be higher than 250 $ for recognizable difference. This does pose a limitation to increase price for future ($ 250 barrier).

The 28% margin to distributors as against 25% margin over adhesives can provide them incentive to stock these equipments over their tendency of avoiding equipment stock up with require service. Loctite would in return enjoy a margin of 12 % from distributors and 26 % from end users.

Promotion Strategy

It is recommended that the direct mail