Old Dogs – New Tricks

Volume 2 Letter 4

Every business leader eagerly examines their R&D pipeline for the next
wonder product that will blast their company into orbit. Sometimes,
however, great opportunities are sitting on our doorsteps; great products,
already launched but poorly marketed.

Loctite Corporation had such a product. The product, called RC 601, was
technically very good. RC 601 could bond together broken metal parts,
even parts used in harsh environments (oil baths, underwater etc.). The
product could bond together broken machine parts effectively enough that
factory machinery could keep operating until the new parts arrived. RC
601 sold for $11.50 per 6oz tube, distributors took a 33% margin on the
product and it cost the company approximately $2.33 per tube to
manufacture. This was such a revolutionary product that it should have
“sold itself” but, as is often the case, it didn’t. Instead, after seven
years RC 601 was a failing product in the Loctite portfolio and was about
to be pulled from the shelf.

Before pulling the product off the shelf an astute manager questioned
whether the product was a technical failure or a commercial failure.
Realizing that the product was technically superior to anything in the
market the next step was to investigate why it was failing. Only then
could they determine if it was worthwhile to re-launch the product or
remove the product from the market.

Market research showed that even though this was a minor purchase, any new
product used on a million dollar piece of machinery (including $11.50
tubes of glue) needed approval from several different groups within an
organization. The Engineering Group wanted proof that the glue would not
screw up the machinery. This group expected charts, graphs and scientific
evidence. The Production Managers wanted to get the machinery back on line
‘NOW’ and wanted a product they could rely on. Finally, the Maintenance
Workers wanted a quick fix, as it was this group that bore the brunt of
the blame when the machinery broke down. This group however, was very
leery of people dressed in suits armed with charts and graphs.

A campaign was developed to re-launch RC 601 targeting the maintenance
workers. First, the name was changed to “Quick Metal” to better describe
what the product does. An advertising campaign was developed promoting
Quick Metal to factory maintenance workers using the theme “Quick Metal
keeps the machinery running while the new part arrives.” Additionally, a
free tube of Quick Metal was sent to target customers in industrial postal
or zip codes.

Loctite raised the price from $11.50 per tube to $18.50 per tube as market
researched showed that maintenance workers didn’t need a purchase order
for items less than $20 – $25. The higher price also communicated the
higher value of the product to the customer.

Companies spend millions looking for their next great commercial success
when often times it is already developed and being sold in the market
place but no one has taken the time to properly launch or promote the
product.

The payoff of re-examining opportunities for existing products or services
can be huge. In Loctite’s case sales increased six times over the
previous best year. Additionally, they doubled their previous unit
contribution margin. The job of all managers is to see past the obvious –
“to see what everyone else has seen before and to think what no one else
has thought before”. For each product or service in your portfolio ask
yourself:

1. Is this product or service reaching its full potential?
2. What criteria do customers’ in my market use to choose one product over
another?
3. How do customers rank my product(s) and service(s) on the various
criteria when compared to my competitors?
4. If our product or service is not the market leader is it because the
product or service is technically inferior or is it a marketing problem?

Managed properly, some old dogs can do new tricks.

Recent Posts