Loctite Corporation
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Written case analysis ÐŽV LOCTITE CORPORATION
Marketing Management
Product Policy Issues
a. Positioning: Should the BAM be promoted as a dispenser for instant adhesives, anaerobic, or both?
At the initial launch of the product BAM should focus more on anaerobic market as this market is the one that caters to the industrial users. Only 30% of the users are industrial users in the instant adhesives market and the product features and the cost of the product will suggest to the consumer that BAM is for industrial users and not for the occasional consumers.
However, the industrial users of instant adhesives market are growing in a rapid pace where it will overtake the consumer market growth soon. Therefore BAM should be introduced in both instant adhesives and anaerobic markets.
b. Name: Should the name ÐŽ§Bond-A-MaticÐŽÐ or an alternative such as the Model 206ÐŽÐ be used?
The name ÐŽ§Bond-A-MaticÐŽÐ suggests to the market that it is a new product with added and better features as it differentiates from other products of the company which have names like Model 200, Model 205 etc. This will give BAM a unique selling proposition from the companyÐŽ¦s other similar products.
The name ÐŽ§Bond-A-MaticÐŽÐ will also help with the introduction to the instant adhesives market as it will stimulate SuperBonder sales by association.
By choosing a name like ÐŽ§Bond-A-MaticÐŽÐ will also help to avoid market cannibalization of the existing products of the company as it gives product differentiation to the market.(At least by name)
Should the Loctite name the prominently displayed on the BAM?
The Loctite name should be prominently displayed on the brand for it to get brand recognition from the market. It helps for a new product to have a popular brand name at the initial launch stage for it to grab the market quickly as a reputed brand will give customer some mental assurance of the product quality.
c. Models: Should both high – and low ÐŽV pressure models be made available?
Both high and low pressure models should be made available as they serve different purposes. High pressure model for more viscous adhesives and low pressure model for less viscous adhesives. Both the models will be used in different industrial purposes as the consumer will have the choice to choose the best option suited for their purpose.
d. Assembly: Should BAM models be assembled internally or externally?
BAM models should be assembled internally as the cost saving for 500 units is only $875. {($17.50-$15.75)*500}. This cost saving when compared with the control the company has in assembling the units in-house is negligible as close supervision can be done about the quality of the product as the company reputation is online.
The second factor to be considered is whether the company has idle capacity to do this production. If the company is running at full capacity on their production lines, there will be an opportunity cost of producing these units in-house.
e. Needles: Should the Vari-Drop needle as well as the Gluematic tip be included with each unit?
The Vari-Drop applicator was designed for soft surfaces, where the Gluematic tip was especially suited to dispensing adhesives onto hard surfaces. As these components serve different purposes for different needs of the customers, both should be included with each unit with the option of buying the Vari-Drop applicator separately as this is 12.5% ($22.00) of the total cost. If the customer requirement was to dispense adhesives onto hard surfaces, the customer should have the option of only buying the Gluematic tip as it serves the required purpose.
f. Warranties and Trial Offers: Should Loctite offer either or both of these with the BAM
Since the main customers of BAM are going to be plant and production engineers of manufacturing companies, and at the moment they are reluctant to use ÐŽÒchemical solution to a mechanical problemÐŽ¦ (Case page 3 second paragraph) it would be a good idea to give them a trial offer to impress them on this new technology to solve their gluing problems.
Since BAM is going to be introduced under the Loctite brand name, the quality of the product is assured. Hence no need of further warranty.
2. Pricing Policy Issues
a. BAM Price: Should the BAM price be higher or lower than the suggested $175
End-user price
Since the BAM has additional features (Exhibit 8) than the existing products available, the price of BAM should be higher than $175. If the price is low as $175, it appears to the consumer as an inferior product, even though this may not be the case.
Secondly, the target market for BAM users being plant and production engineers of manufacturing companies and often they had discretionary purchasing authority on capital equipment of up to $250, (Case page 8 second paragraph) The BAM should be priced at $249.95 like most productsÐŽ¦ pricing in the USA.
Third issue to be considered would be that these consumers can influence the management to make a decision on the BAM once they purchase one unit of BAM and to prove the efficiency and the effectiveness of Bam on their production line to include more BAMs to their production.
b. Price by Model: Should the price structure vary between the high- and low-pressure BAM models because the variable cost differs?
Since the variable material cost of high pressure BAM higher than the low pressure BAM model, it should be priced higher. There should be product variation between the two models for the customers to choose from and to choose for their specifications required of the product. Two different prices will also avoid any confusion of the two models and to differentiate the features of the two products as well.