Rohm & Haas is currently the market leader in metalworking fluid biocides for large scale centralized systems. In order to expand the company's domain expertise to the smaller individual systems used by independent and small scale shops, Rohm & Haas introduced the Kathon MWX product this year. The first five months of the roll out of this product has been a dismal failure given a first year target of 1,350 boxes (approx. $220,000 revenue ) - - the company has sold 74 boxes in five months ($12,000 revenue). However, the market for biocides for smaller individual fluid systems is significant and unsatisfied by existing products. Kathon MWX offers a compelling value proposition to end-consumers, but the current marketing strategy did not accurately predict the buying behaviors of these consumers, their knowledge of biocides in general, and the misaligned incentives within the current distribution chain.
Since Rohm and Hass were familiar with marketing strategies appropriate for large industrial buyers, the company has tried to push its new product through the same distribution channels, even though its target consumers were different and have smaller-scale operations. Also their distribution strategy was ineffective as the formulators have a conflict of interest. So the main problem here is that Rohm & Haas chose the wrong channel structure for the Kathon MWX.
The following alternatives solutions to successfully market the new product are made in the area of distribution channel (place).
Kathon MWX is distributed to the market through a two-level distribution network. The first level is composed of the metalworking fluid formulators. These distributors often offer a maintenance package wherein the products of this package are sold under their private brand names. However, the end-user should know the name "Kathon MWX" as the consumer is supposed to do the maintenance by himself. Also, there was a conflict of interest - - longer life of fluid means less fluid sales. Rohm and Hass observed that the strategy of involving the formulators as the main distributors is not appropriate and is the reason for the low sales levels of Kathon MWX. The metalfluid formulators are not only selling their products to large companies but also to a second distribution level made of industrial supply houses and machine tool shops. Most small firms which are the potential targets for Kathon MWX buy their products from the industrial supply houses and machine tool shops.
A main problem of this distribution network is the lack of sharing sales information between Rohm and Haas and its distributors. Rohm and Haas doesn't have sale information or numbers of small shops where Kathon MWX were sold and at what price. The potential market for Kathon MWX is fragmented which causes big problems of distribution.
The first solution would be to sell Kathon MWX directly to the industrial supply houses and machine tool shops (secondary distribution network). We should mention here that this alternative will make managing the channel very hard for Rohm and Hass knowing their existing size of the company's