Rohm and Haas

Rohm & Haas

Marketing plan for Kathon MWX (1984)

1. EXECUTIVE SUMMARY

Rohm & Haas is a diversified chemicals company. Its industrial chemicals division manufactures maintenance biocide products to the metal working industry. The company enjoys a healthy 30% market share with its Kathon 886 MW in the Central Systems segment. Rohm & Haas has recently launched Kathon MWX to target 150,000 customers in the Individual systems segment where the market for biocides is underdeveloped and has little competition. A large part of the customers use substitute products such as deodorants and bleaches with little effect on microorganisms.

The company estimates the market size for the individual segment to be at $20 million and aims to achieve $0.2 Million revenues from this segment in the first year. Despite a superior product, the sales of Kathon MWX reached a meager 6 % of the annual plan in first five months. Rohm and Haas wishes to re-evaluate its strategy in order to tap this huge segment to significantly increase sales volume and market share of Kathon MWX.

Rohm and Haas plans to enhance its allocation for distribution and marketing spend of the Kathon MWX. This would result in additional revenue of 0.1 million.

This target would be achieved by a combination of a revamped distribution network for Kathon MWX, focused promotion campaign and sampling.

2. PROBLEM STATEMENT

Can Rohm & Haas increase its market share and revenues in the maintenance biocide market with its current product line? The sales of Kathon MWX have barely touched 6% of the annual targeted sales for 1984. Is this the right product to target the Individual Systems segment? Can the current marketing strategy for this product help achieve the company's objectives in the long run?

3. SITUATION ANALYSIS

3.1. Context

The product sales of the company's newly launched product Kathon MWX are well below the target set in the marketing plan for 1984. Despite its superior quality, the consumers have shown little inclination to adopt this product.

3.2. Company

Rohm and Haas is a strong player in the maintenance biocide market for Central systems. The product Kathon 886 MW has a 30% share of the 18 million market. The company enjoys 70-80% market share in the non-ferrous metals segment and about 20% share in the ferrous metals market.

The company has launched its new product Kathon MWX, a biocide targeted at Individual systems consumers. The company estimates that there are 150,000 customers in this segment, which has a potential value of $20 million and little competition. Kathon MWX prolongs the life of the metalworking fluid by a period of 4 weeks on an average in comparison with only 3 days to 2 weeks if the competitor biocides are used. Hence, Kathon MWX is 2 to 10 times as effective as the substitutes offered by Rohm and Hass' competitors. Despite these noteworthy distinguishing factors, the sales of Kathon MWX in the first 5 months of its launch have been far below the target sales.

Separately, Rohm & Haas does not enjoy good brand awareness in the US metalworking fluid market, since its products are sold to customers as "Private Label products".

3.3. Collaborators

Metalworking fluid formulators have been the primary distributors for Kathon 886 MW. Though 90% of the formulators business is generated by the sales of their own products, they distribute the biocide primarily in order to service the maintenance needs of the Central Systems customers. Besides this product is private branded by formulators and there is low brand awareness of Rohm & Haas. Further, a few of the formulators use Industrial supply houses and machine tools shops as

sub-distributors for their products.

Though Rohm and Haas has tied up with the formulators for the distribution of Kathon MWX, the main target segment for this product, the Individual Systems customers, rely on industrial supply houses and machine tool shops entirely for all their metalworking fluid requirements. This is confounding and is potentially resulting in distribution failure due to the following reasons -

* Formulators mainly deal with users of large central metalworking fluid systems and not with users of small individual metalworking fluid systems, which are the target market segment for Kathon MWX.

* Rohm & Haas has disallowed private branding of Kathon MWX and that can be disincentive for the formulators to promote the product.

* Kathon MWX potentially increases the life of metalworking fluid by 2-4 weeks; this resultantly reduces the revenues of the formulators as the individual systems customers would have otherwise purchased more of the metalworking fluid in the absence of Kathon MWX

(refer Table 3.3).

* The formulators lack the incentive to sell Kathon MWX due to lower dealer margins as compared to the margins earned from competitors.

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Table 3.3 Loss to formulators by selling Kathon MWX

Particulars Without

Kathon MWX With

Kathon MWX

For a typical small machine shop for a year

No of gallons of metalworking fluid used in a year

[22 machines * 50 gallons * 12 times a year] 13,200

[22 machines * 50 gallons * 6 times a year] 6,600

No of gallon of metalworking fluid concentrate sold by formulators 528 264

[Dilution ratio = 1:24]

Sales