Rohm and Haas New Product Marketing in B2B

Ghanta

Venkata

1. What factors have led to the failure of Kathon MWX?

Kathon MWX: A biocide that can kill microorganisms in metal working fluids,
tailor made to be used in tanks with less than 1000 gals capacity. The
product/its substiutes didnt farewell as they hardly were able to capture any
of the expected $20 million market share (MWX sales have been $12,000
against targeted $200,000 ~6%). Total market size was around 150,000 small
end consumers. Water permeable plastic packet sachets of was used in small
tanks. The failure of the product can be largely attributed to:

The marketing campaign hasnt addressed the safety concerns

raised by the competitive products in the <1,000 gallons
segment: Participants in the survey were apprehensive about safety and
handling systems. Addressing the concerns would have been a better
strategy along with explaining the cost-benefit details
Distribution network for MWX was in nascent stage/non-existent:
Rohms 886 MW relied extensively on primary formulation distribution as it
catered to medium/large businesses, whereas MWX that primarily targets
small business customers has no hold on the secondary distribution
channel from whom the consumers typically buy the product/service from.
Without the availability of product at right place, a half-baked campaign
alone cant generate the envisaged sales.
The pull marketing strategy wasnt effectively implemented: Out
of ~150,000 small businesses, interest in trying out a free sample was
received only from 200 (~0.1%) and even in those who expressed interest
only 20% remember receiving the samples.
Low awareness of product and its uses: Participants in the survey
revealed using regular household disinfectants and none were aware of
MWX. The customers dont feel the need and arent aware of the benefits
provided by this/substitutes.

2. In contrast to Kathon MWX, why is Kathon 886 MW so

successful?
Kathon 886 MW: A biocide that can kill microorganisms in metal working
fluids, tailor made to be used in tanks with more than 1000 gals capacity. The
product has fared extremely well often beating the targets and was able to
garner a market share of 30% in $18 Million market. Distributed by 12 major
metalworking fluid formulators. Total market size was around 325 large and
medium end consumers. The success of this product contrary to the one that
is targeted at smaller capacity tanks can be largely attributed to:

Product is widely available to consumers via primary distribution

channels of formulators mostly under private labels.
Effectiveness: Powerful product, only need small quantities to treat large
tanks, so the perceived value of consumers is high. (10 times more
effective than competing products)

Rohm and Haas New Product Marketing in B2B

Ghanta

Venkata

Extended the life of diluted fluids in central system reservoirs:

Reduced the replacement cost of diluted fluids which also increased the
economic value to the end customer
Sold as a part of bundled maintenance package by major
suppliers to the end customers
Compatible with 70% of metal working fluids contrary to
competitors 45%
Favored product in the non-ferrous metals industry (~70% market share)
Comparative cost, least among the competitive products (less than half)

3. How competitive is the market for Kathon MWX? Can this

product be successful?
Competition need not always be counterproductive for the company, there
are lot of instances in the real world, when we need to work with the
competitors for mutual benefit. In this particular instance lack of sufficient
competition makes it difficult for the company to spread the cost of
awareness of product and breaking into secondary distribution network
across the entire market on Rohm.
Competition for MWX is lackluster, even though there are competing products
in the market. None of them were taken seriously by the consumer as their
drawbacks seem to outweigh the benefits provided:
Tris Nitro Sump Saver tablets - Angus: Costed $194/10,000 Gallon
(7.75*10000/400), Less effective against microorganisms and lasted only for
3 days.
Dowicil 75: Costed $500/10,000 Gallon (10,000*10/(500/2.5)), safety
concerns with heavy ammonia order ad release of formaldehyde. The
substitute materials used to offset the side effects also interfered chemically
with metals and produced undesirable safety concerns.
The market is very fragmented unlike 886 MW where the end consumers as
well as the distributors are concentrated. The product doesnt have any major
side effects unlike their competitors, but the brand awareness and placement
of product is minimal. The company needs to focus on penetrating into the
secondary distribution channel and effectively pursue a push market strategy
for effective placement across the diverse market. Though this seems an
uphill task in the short term, the company can constantly pursue to break into
the secondary distribution network and create demand for the product to be
successful.

4. What role do the formulators play in taking this product to

customers? Industrial supply houses? Machine tool shops?
What role can the supplier play in developing this market?

Rohm and Haas New Product Marketing in B2B

Ghanta

Venkata

MWX product is mainly targeted towards individual systems with less

capacity and hence the end users are the fragmented small plants who relied
majorly on Industry supply houses and machine tool supplies for their
maintenance needs. But the industry supply houses and machine tools shops
purchased their supplies primarily from formulators for whom maintenance
supplies/services is an add-on product/differentiator and contributed very less
to the overall topline (~10%). Supplier plays a crucial role in development of
the market, the end users arent very concerned about the standalone
maintenance fluids and often get the service/product as a bundled package.
So both formulators and the secondary distribution network partners both
play a key role in taking this product to consumers.

5. What is the appropriate marketing strategy for Kathon MWX?

What should each of the 4Ps look like?
Product/Place/Promotion: The product is relatively superior compared to
the competitors in safety and efficacy aspects/ It needs buy in from both the
primary and secondary distribution players, even though the company has
tied up with majority of primary distributors, they probably doesnt seem
enthusiastic about promoting Rohms product over their existing line of
products. Also as the customer awareness regarding the brand/company is
very low (as evidenced in the survey) it is better-off to allow private labeling
so that it can easily move to the secondary distribution channel members. IN
terms of promotion the company should initial place emphasis on developing
the distribution network at primary and secondary level, i.e pursue a push
marketing strategy initially and then once the product is available it can focus
on generating primary demand through a pull marketing strategy.
Price: Currently most competitors are selling at least $200/10,000
gallons/run as discussed above and from survey we got to know that only few
consumers are aware of the fluids away cost. Even though the product is
currently offering more benefits at lower price compared to the competition
(as discussed in the initial sections), very few consumers are aware of its
benefits and the costs associated with the side effects of using competitor
products. So in the initial one year, the target should be to penetrate the
market, possibly my inducing more discounts to the distribution partners and
rise price later when the customers are fully aware of EVC created by MWX
and pursue a skimming strategy later.