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Rohm and Haas - Pricing and 3P


In order to support R&H pricing decisions, Macey might adopt market-skimming pricing strategy.  The objective of this strategy was to earn short-run profits by skimming maximum revenues from the segments willing to pay the high price.  Although the company might make fewer sales, it could generate more profitable sales and hence, it was risk aversion due to fewer price pressures.  It was also compatible to the demand for its price inelasticity and especially there was a latent demand for huge growth potential.  If this strategy could be successful, it would attract new competitors.  However, there was high barrier to entry due to high R&D costs and short product life cycle because continuous innovation was required to sustain competitive advantage.

The other elements of the marketing mix could be managed as following:

Product

A prestige image should be used to support the high pricing decision.  There was no wonder that Kathon MWX was a superior product comparing to the competitors¡¦ products and the substitutes.  The only problems were that the customers were either unaware of this new product or did not see the need for maintenance biocides.  There were two root causes.  Firstly, there was no branding strategy to support the high-quality image of the product so customers could not be able to remember the existence of Kathon MWX.  Secondly, the customers were lack of experience and knowledge about the benefits of Kathon MWX, or simply the maintenance biocide, which would be discussed in promotion section.

Branding strategy was important because it embraced a specific set of values and attributes that differentiate Kathon MWX from competitors which determine customer¡¦s preference and loyalty.  It could also obtain price premium and achieve a high market share.  Line extension could be used in this case.  Macey should use Kathon 886 MW to introduce Kathon MWX.  By doing this way, it could recognize that there was a latent customer want and need.  It could also take the advantage of Kathon 886 MW to build customers¡¦ awareness. 

The attributes, benefits and values of Kathon MWX (convenient, safe-to-use, compatibility) could be used as part of the brand.  In addition, it could also add values through user experience of proven reliability and familiarity, customers¡¦ belief in efficacy (by comparative product ratings), etc.

Promotion

The challenges of latent demand was to develop communication strategies to inform, educate and demonstrate the advantages of Kathon MWX to customers other than first and fast time to market.  It could be done through advertising, sales promotion and personal selling in order to accelerate the production diffusion.

The main purpose of advertising was to build product awareness among early adopters and dealers.  The tools included trade magazines, televisions and newspaper to meet business and end-users.  The differential advantages of Kathon MWX had to be communicated to the customers.  It had to make sure that the advertising was compatible with the price and brand image, which was high-price and high-quality.  It was also required to educate the customers of the need of maintenance biocide.  The benefits (convenient and safe-to-use) should be clearly explained with comparative product rating. 

Heavy sales promotions were crucial to entice trial.  It would be a good idea to allow customers to try on a limited basis before a purchase was made.  There should be demonstration and training package to educate customers of how to use the product.  The number of sales persons should be increased to assist the sales promotions and follow-up with leads instead of relying totally on dealers.

Distribution

Except the current channels of distribution, Macey might consider the other options such as the Internet marketing.  The Internet marketing could be used as relationship building and promotion tools.  The customers could get most of the information they needed and place orders through the Internet.  Hence, there was no time and place constraints to some of the customers who were busy and located very far away.


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