Is Kathon Mwx a Good Product?

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5. Perform consumer analyses using “value pricing” and “competition‐based” pricing.

There were 4 major players in the biocide market, each holding approximately a 15‐20% share. Comparative tests were done by Rohm and Haas which showed that Kathon 886 MW was still the most cost‐effective biocide for central systems. In comparison studies of the cost of treating a 10,000 gallon system with biocide for one cycle, Dowicil 75 (Dow Chemical) =$269.64, Grotan (Lehn and Fink) =$151.20, and Kathon 886 MW =$71.40. Savings per 10,000 gallons ​over​ Dow Chemical were $198.24 and Lehn and Fink $79.80.

‐Dowicil 75 was only able to treat tanks greater than 500 gallons

$25 retail price treated 500 gallons of fluid

Effective against bacteria and fungi but released a heavy ammonia odor and released formaldehyde

Not a strong competitor in the market for Kathon MWX

‐​Tris Nitro “Sump Saver” tablets​ (Angus Chemical) were widely known tablets that were dissolved in metalworking fluid. The sump savers were ineffective against fungi and less effective against bacteria.

$7.75/pound, 8 tablets/pound = $0.97/tablet (Consumer pricing)

$4/pound, 8 tablets/pound = $0.50/tablet (Distributor pricing)

Tablets effective for 3 days =7‐9 tablets *2 [to treat 50 gallons] =14‐18 tablets

14‐18 tablets * $0.97 = $13.58‐$17.46/50 gallons treated (consumer price)

‐​Kathon MWX​ sold in boxes of 144

Distributor pricing:

1‐2 boxes $180 ($1.25/packet)

3‐4 boxes $165 ($1.14/packet)

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5+ boxes $145 ($1.01/packet)

Replacement packets required every 2‐4 weeks (average 21 days), one packet treated 25‐75 gallons

If using typical retail price of $2/packet, total cost to a consumer would be $2/50 gallons treated although some consumers were buying it at a price of $6/50 gallons since end‐user pricing was not fixed

The average small machine shop had 22 machines, each with approx 50 gallons tanks:

22 machines x 50 gallons =1100 gallons

Metalworking fluid concentrate $5.68/24 gallons = $0.24/gallon (diluted to 1:24)

Discard fluid every 4 weeks = $264 (fluid) + $1496 (disposal) =$1760

They could extend the life of the metalworking fluid by 2‐5 weeks by adding $44 of Kathon MWX to treat, saving $880‐$1760 during that time

From a competitor‐based pricing viewpoint, Kathon MWX and Tris Nitro Sump Saver tablets would be competing products. However, since the Sump Saver tablets need to be replaced every 3 days, Kathon MWX could theoretically be priced 3.5x higher (based on consumer pricing of $2/packet) since each packet’s average lifespan falls into the 3 week range. Distributor pricing for sump saver tablets is $0.50/tablet, for Kathon MWX ~$1/packet. If Kathon MWX was to be priced according to sump saver, price could be raised to $3.50/packet. Since end‐user pricing varied depending on the formulator’s distribution network, pricing varied from $2‐$6/packet to treat 50 gallons. Sump saver cost end‐users $13.58‐17.46 for every 50 gallons.

From a value‐based pricing standpoint, Kathon MWX was a superior product that touted ease of use, longevity, increased effectiveness and safety. It was priced well below the direct competition when it had the potential to command a much higher price. Since it decreased time to treat the metalworking fluid, value to a consumer increased. As a end‐user, reservation price should be elevated given competing product advantages vs Kathon MWX advantages. A higher price point would also allow distributors to recoup money from lost sales of metalworking fluid

6. Critically evaluate Rohm and Haas’s strategy, including the price to the distributor. Discuss the short and long runs.

Rohm and haas made the mistake of relying too heavily on distributors to sell products while offering no incentive for distributors to market or sell Kathon MWX (cannibalizing their other competing products, or the value of selling more metalworking fluids). The large scale

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kathon MW is properly managed by distributors as it is already bundled with the formulator products, so does not require independent labeling/branding.

Also, the pricing model is arbitrary, based only on the price set as precedent by formulators.

Additionally , a lack of brand and product recognition means that end users are not conscious of the product’s association with its advanced benefits, and, generally, the market is not aware of the existence or efficiency of the biocide.

Though there is informative material provided in conjunction with purchase, it is the initial purchase that hasn't been targeted or achieved. Uninformed consumers are using household products to clean fluids, which are ineffective and often detrimental.

More importantly, the entire previous marketing strategy from Kathon MW was done in conjunction with the formulator. Independently, kathon has no brand or name recognition on its own.

If kathon mwx would like to distinguish itself to end users (especially as kathon mw is tied to the formulators), it should distance itself from formulators and target end users directly.

However, it may also want to use a similar strategy with MWX, aka piggyback off of formulator, or another complementary product. Rohm and Haas could approach metalworking fluids companies and work out a bundling option with one of these companies (or multiple). Improving the product quality of the fluids by reduction of rancidity and bacteria/fungi would allow for mutually beneficial brand reputation and improve the sales of both products.

Alternatively, the company needs to make end users aware of the benefits