FUNDAMENTALS OF CHEMICAL MARKETING N o . 5 in α Série:
Sales Development D O N A L D K. B A L L M A N , D o w Chemical Co., Midland,
Mich.
A newborn chemical is frequently a problem child—the job of the development group is to determine rapidly the infant's potential HE rise T, dominant,
gt the chemical industry as a creative force is one ot t h e least understood but most profoundly influential h a p p e n i n g s of the 20th century.
The
motto
of
the
AMEIIICVS
CIIKMICAL
SOCIETY'S D i a m o n d J u b i l e e , "Chemistry— k e y to Better Living," correctl> implies that w e a r e b u t on t h e brink ot o p e n i n g t h e door t o new discovery, productivity, a n d utilization of chemical products. The industry is still relatively y o u n g , higlily imaginative in its leadership, a n d extremely ambitions. Since it is a creative industry, t h e chemical p r o d u c t i o n field has attracted men w h o prefer to explore rather than exploit . . . men w h o have visions of producing low-cost useful things for every phase of h u m a n endeavor. As the industry m u s h r o o m e d in size, t h e problem of translating ideas into products b e c a m e c u m b e r s o m e l y complex a n d t h e expense b e c a m e t r e m e n d o u s . As a result, there were, of necessity, established groups charged with the job we have c o m e to know as commercial chemical development. A ni'w-bom chemical is frequently a problem child, with a personality of its own, requiring many g u i d i n g h a n d s until it readies the m a t u r i t y of volume sales. Development groups which may he located within the sales or research d e p a r t m e n t s o r which may h e s e p a r a t e entities have been established t o d e t e r m i n e rapidly t h e potential of the infant. Many profitable items in commerce at present probably have not appeared a t tractive at first g l a n c e . It is imperative that a critical examination b e made of t h e ι h a n t e s a n d r e w a r d s of success versus t h e t o s t of failure. T h e u s e of rose -colored classes is as b a d as u n w a r r a n t e d pessi mism, and it is t h e function of the devel opment team to provide management with sufficient facts to m a k e certain t h e r e wards are worth t h e risk involved. Company m a n a g e m e n t s h a v e projects of all types constantly before them for re5244
view. Our assumed chemical must com p e t e against t h e other projects lor t h e right to h a v e management put their a p proval; that is, risk money, on t h e project. Because of the very nature of t h e chemiK al business, t h e chemical entrepreneur must be more willing to t a k e risks t h a n t h e managers of many businesses. The suc cess rate of new products is lower—often h e is dealing with 100-to-l odds in t h e preliminary development stages—hut t h e r e w a r d is frequently greater since h e works so often with abundant materials a n d almost limitless markets. Coincidental with t h e factors studied in t h e laboratory, the sales development group is gathering data, preliminary in n a t u r e a t first, on t h e need and price* range of the proposed chemical tor the indicated e n d use, if one is apparent. Price determination for t h e new chemi cal is of great importance. Older chemi cals performing a similar function m a y limit the price and the relative efficiency ot the new and the old pioclucts must he known. W e are fortunate in this country to have so many sources upon which to draw tor our irifoim.itiot. on potential demand Sta tistics are becoming couimniipl.ice tor al most everv segment of our economy. The Tariff Commission reports are growing m o r e comprehensive evuy year and are hut one of several valuable references. Specific studies such as the one* recently prepared by Kuhn and Hutchison ( Kulm, W . K., and lliiti-hcsnii, ). \Y\, "Ethylene retro-Chemicals Today ami Tomorrow* Optimism and Caution," National Petro leum Association, Atlantic City, X. J.. Sept. 13, 1951 », appear with increasing frequency. If the market examination becomes suf ficiently involved, a market research group, if o n e is available, should b e called in by t h e development staff to a i d in the ap proximation. Many market researchers maintain files of articles, facts, a n d figures C H f M IC A1
o n almost every conceivable product o: group of products which are now, or migh b e , of interest to their company. Markei research d e p a r t m e n t s h a v e become increas ingly important within every industry and more recently, in the chemical industry T h e m e n in these departments are, in ef fect, trying to level our company fluctua tions i n t h e u p - a n d - d o w n cycles by fore casting the future. Analyses a n d interpretations of supply a n d d e m a n d and of t h e market trends are given t o m a n a g e m e n t periodically. Just as t h e s e m e n k e e p aware of the probable market for t h e " b r e a d and b u t t e r " items, they advise on potential for t h e n e w prod u c t b a s e d u p o n a k n o w n or presumed end use a n d make intelligent guesses o n factors involved in launching the product. T h e development group is m a d e u p ot men w h o a r e b o t h research a n d salesm i n d e d in outlook. M e m b e r s of t h e group must k n o w their products and b e able to discuss them with research personnel of other companies. T h e s e m e n should also b e well versed on the trends problems am' technology of t h e industry. T h e concen trât d background, acquired by individuals t h r o u g h contacts with the same industry or in development of a product series, forms t h e backbone of the group. D e v e l o p m e n t Staff Breakdown No set pattern for development staff b r e a k d o w n can hi* fived for t h e chemical industry. Kac h individual company has peculiarities which favor a particular developmental staff structure. T h e end re* suit is a development department composed of product or industrial specialists or both as found most convenient for a given c o m p a n y . Whatever the sv stent employed, the men must he aware of the progrès* made in all phase* tit the develop ment, both within and outside t h e company. A most impoitant function of the development staff is to furnish i m o n n i AND
ENGINFERING
NEWS
PRODUCTION PURCHASING
ENGINEERING
SALES
RESEARCH A N D DEVELOPMENT
MARKET RESEARCH FINANCE
Communications between all departments involved in a developmental program is the most important single factor . . . tion on the concurrent work to the various parties participating in the project. Although the response to a new product introduction is sometimes enthusiastic hecause o f obvious utility, it usually remains for the development department to seek out e n d uses and to convince the trade that t h e product has merit. T h e information acquired from customers through a sample follow-up program is oftentimes influential in directing attention to u n known end uses. In the process of convincing researchers that the product w i l l help t h e m , data on utility are, in many eases, necessary. It is wise to present this informât ion using the terminology and test conditions commonly accepted in the industry contacted. For example, a rubber research worker would wish to see preliminary data cm the protection offered to rubber by a new antioxidant before evaluation by him. This w o u l d call for tensile strength, elongation, and other aging test data. Normally, a use research laboratory, w i t h w h o m the development stall maintains close contact, furnishes such information. T h e degree to w h i c h the use research laboratory is specialized to study \arious functions of the chemical and to provide detailed use data is, of course, dependent upon the company size and previous participation in the specific- use field. H o w ever crude the form of inhumation gained in this work, it w i l l be of value in following initial contacts and carrying forward
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the development program to other customers. T h e main objective of the use research lalxmitory is to provide the data necessary lor the customer to \ isualize how the chemical w i l l serve h i m . T o accomplish this, the consumer's conditions of use are reproduced and studied on a small stale. At D o w , one such group is called an industrial applications research laboratory. This laboratory is equipped w i t h apparatus w i t h w h i c h to conduct realistic evaluations and the personnel are familiar w i t h consumer industry procedures. This group has been responsible for developing ingredients for hvdraulic brake fluid compositions w h i c h surpass the established standards. T h e D o w a n o l series of glycol ethers and the series of polypropylene g l \ cols became commercial products w h e n found useful in brake fluid formulations
DECEMBER
Research may also be undertaken in specialized research laboratories such as greenhouses for agricultural chemicals and in biochemistry laboratories for fungicides and bactericides. This screening, or product research, is carried out when uses for a product are unknown. Unless someone in the development sphere foresees a potential use, the product is given a general observation for specific activity with hundreds o f other compounds. Only compounds which show promise in specific fields are evaluated in comprehensive testing covering the indicated uses. Should no logical outlet b e uncovered in product research, t h e product is returned to the laboratory shelf t o await possible future investigation. In those cases "where novel and useful information is acquired in the use or product research laboratory, patents relating to end u s e are a means of preventing others from controlling the market exposed by your research. Compound patents are naturally a prize to he sought. Since t h e possibility of patent conflict always exists, a patent study should b e undertaken prior to pilot plant production. Many times a company has proceeded to bring a product along to semicommercial or commercial manufacture only to find that another possesses either compound or use patents which would seriously impair the economy of production or restrict the market available. It is the responsibility of the development group to keep the patent department advised of new product status during all stages of sales development. Soon after the synthesis of a compound, some information on the toxicology is necessary to avoid health hazards within the laboratory. When the chemical is more widely distributed to other laboratories and certainly when samples arc· sent outside t h e company, the toxicologica! information required for proper handling must be available for use on warning labels and for distribution. With trie limited quantity of product that the originating lalx>rator> has been abb· to provide, the sales development group has obtained an estimate of the potential market b y correlating the available information which has been obtained by the product research and use» research laboratories, by the market research personnel, b y patent and toxicological studies, and h> very limited sampling. Before the development group can shift into second «ear and become more aggressive, large·
Qoneldf K* tollman, grneral sules inntiager of the P a w Chemical Co*» joined the* company §mm after taking en M.S. degree i n elieroitfry from the University of Indian* tu I905. He find also studied at Butler University* Wis first position wm m β member of the Dowfcride sale* divfoiert» ami t w o yearxt later he was named irwiiftgtr nf tlutt dlvlsii»«» I n 1943 he formed the eo«n$ttny*$ teehnie»! m v i c e ftod development division, util! managed that' n w p until hvcominji assistant general #«le* manager to 1945*
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quantities ot the product will normally he required. It is at this stage that the pilot plant studies arc justified not only to provide larger quantities ot product, hut also to prove the process and obtain the engineering data necessary for the construction or a commercial plant. Here, for the first time in the life of our new product a considerable lump sum ot money will be required. All economic considerations must b e analyzed prior to management's review ot the new product. Information on processes, markets and uses are, ot course, the primary concerns in the économie· studv . but the patent and t->xicological data obtained during the development also are considered. Most chemical companies have set a lower limit for return on invested capital. In any study, it may he well to look upon the product in terms of full-scale production rather than pilot plant manufacture if t h e market appe.irs to justify the long term outlook. Λ sufficient sales demand mav make production of raw materials an attractive venture while smaller markets increase the incentive to purchase the intermédiares. Economic studies are normallv carried out by a special group within the organization. This production economics group must have much data on process costs for standard products of the company. Since most new products arc related in some manner to those already manufactured, this group can often translate these costs to the new process. Probable costs of manufacture by competition must be included in the information developed bv the group. A marked advantage in raw materials or location is a powerful persuader for management to produce a chemical, even though volume sales are currently being made by competition. If the economic studies are favorable, the development department requests the necessary funds to proceed with pilot plant studies and the manufacture of larger quantities. T h e request to management must include the best estimate of the potential market and profit incentive as well as appraisal of the accuracy of tin- data and the risk involved. If the facilities arc provided, more potential uses are investigated by the development group. T h e original cooperating customers are supplied with sufficient product to confirm their original evaluation on a semicoinmereial scale. All activities are aimed at obtaining the necessary assurances to justify commercial production. Care and discretion must h e exercised by t h e development men not to mislead the cooperating customers into making commitments fo/ future deliveries which cannot be backed up. W h e n sufficient data have been obtained t o predict accurately at least the immediate available market, when the process has been proved, and t h e economics confirmed, then sufficient momentum has been obtained to make the shift into third gear, commercial production, relatively easily. Again an economic study is made, a report
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written, and the m a n a g e m e n t is asked for funds for a commercial plant. This is the culmination of at least several years' effort of the development men and t h e cooperating departments a n d often m a n y more years of effort on t h e part of t h e research department. In arriving at this point, t h e development department h a s used many devices to augment personal contacts. At an early stage in the d e v e l o p m e n t of a new chemical, advertising is advantageously employed to stimulate general interest and inquiry. T h e typical advertisement which presents physical properties a n d in effect asks, "Will this p r o d u c t help y o u ? " is familiar to everyone. Most companies try to avoid this type by assembling d a t a on end uses, even t h o u g h nonspecific in nature, which will h e l p t h e research m a n to see how the p r o d u c t will serve him. Preparation of Sales L i t e r a t u r e The preparation of sales literature is another means of b r i n g i n g a new product to the attention of potential consumers. Such literature in t h e beginning may consist ot a data sheet furnishing t h e chemical properties and describing, in generalities, the proposed uses for the c o m p o u n d . As more is learned a b o u t the product, the literature may be e x p a n d e d to p a m p h l e t or booklet form, d e p e n d e n t upon the market established for t h e product. If t h e new product is associated with other products of the company line, t h e booklet form of literature is preferable. Information on related glycols, for example, can b e compressed in this w a y to permit selection of the more efficient p r o d u c t . T h e a d v a n t a g e of an integrated booklet over scattered brochures or data sheets is obvious. After the product development appears reasonably certain of success and capital has been committed to the manufacturing project, the sales d e p a r t m e n t should b e given information on t h e progress of the new product. Salesmen are, of necessity, concerned with t h e over-all company product line or w i t h segments of t h e line. As siK-h, they are not normally specific in their knowledge r e g a r d i n g any one product. T h e development group bears the responsibility of instructing t h e sales department on the general introduction of the material to industry. A development p r o g r a m never stops. It may seemingly slow down for awhile, but it development p e o p l e are alert, growth may b e realized in a new direction. T h e large scale advances of tonnage chemicals in the years following World W a r II are, in part, d u e to diversification of e n d use. To illustrate several of t h e principles we have discussed, let's take a look at the development of p r o p y l e n e glycol by D o w Chemical Co. D o w began manufacturing the ethylene glycol series b u t w a s not utilizing by-product propylene gas resulting from the process. Propylene glycol was a material which w o u l d reduce this waste. They began work o n a process for propylene glycol and a short time later informed the development d e p a r t m e n t that idle equipment could b e used for small scale
CHEMICAL
manufacture. " H o w much could be sold?' they asked. T h e development staff succeeded in marketing increasingly greater quantities of propylene glycol for industrial uses. However, as is often t h e case, actual production capacity was somewhat higher than originally estimated. We found our inventory growing at an alarming rate. Something had t o be done. Propylene glycol was advertised m u c h as a new chemical would be. T h e attention of a large number of p e o p l e w a s gained and samples furnished to t h e m . The low toxicity of propylene glycol as found in the biochemical research laboratory was prominently featured in this p u b licity and, as a result, m a n y inquiries w e r e received from food chemists after t h e promotion campaign. In following these inquiries by personal contacts, a large po-^ tential market was found to exist—if o u r quality could b e improved. W e r e d e signed and rebuilt portions of our p l a n t to provide t h e extra quality necessary. T h i s was followed by an advertising p r o g r a m directed to a selective audience in food and pharmaceutical journals. D u r i n g the same period D o w personnel was visiting with the National F o r m u l a r y Specifications Committee. This work, which was coordinated w i t h much analytical testing by Dow, resulted in a p p r o v a l of specifications for propylene glycol. T h e Food and D r u g Administration, m e a n while, relied heavily on toxicological d a t a supplied by the biochemical research l a b o ratory in tlieir study of t h e compound. It is interesting to note that even today p r o pylene glycol is the only glycol accepted as safe for h u m a n consumption. T h e quality problems previously m e n tioned required approximately one year to solve. Precautions w e r e not only neees» sary in plant m a n u f a c t u r e b u t also in packaging to avoid contamination of t h e finished product. This entailed t h e development of special resin-lined d r u m s . Yeoman service by D o w salesmen w a s responsible for large volume sales of propylene glycol as a now common solvent, preservative, h u m e c t a n t , a n d coolant in foods, flavors, pharmaceuticals, a n d cosmetics. T h e example cited w a s a primary p r o d uct which reached t o n n a g e sales relatively easily. Perhaps we should look at a product which really caused some consternation at Dow—Dowtherm A, a p r o d uct that became a success t h e hard w a y . D o w has long been one of t h e foremost phenol manufacturers. Phenol has been a major product in the c o m p a n y economy but diphenyl oxide, a by-product in t h e process, was troublesome from the beginning. Everyone was aware of t h e p r o b l e m , but it took Herbert H . D o w a n d J o h n Grebe to come u p with t h e answer. T h e material was known t o h a v e great s t a bility at high t e m p e r a t u r e s so they p r o posed its use as an organic heat transfer medium. T h e r e was o n e drawback—a high freezing point. D o w laboratories b e g u n a search for compounds with which to dilute d i p h e n y l oxide a n d , consequently lower t h e freez-
AND
ENGINEERING
NEWS
pig point. After testing hundreds c( com pounds, naphthalene and diphenyl were found to accomplish successfully this ac tion. Although naphthalene was used in jibe initial commercial trials, a diphenylUiphenyl oxide eutectic mixture was sub sequently discovered to possess outstand ing properties in the continuing laboratory nvestigation. This mixture became k n o w n p.s Dowtherm A, a product which m a d e available a low-pressure, high-temperature ,ieat transfer system with better control ^.nd simpler operation than the direct-fired ί η mace or high pressure steam. The physical research laboratory and engineering department gave much time :o the development of Dowthern A, but -ve soon learned that this tremendous iinount of work did not bring in many sales dollars. The diphenyl oxide problem was upon is before the present technical service and development department got a good start. [t is doubtful that the product w o u l d lave risen to prominence at a faster rate ?ven then. W e had to sell a customer and hen engineer his heating unit. Our pres ent organization would have the same problems that faced us in those days. Dutside consultants were called in to lend issistance and remove a burden from our engineering department as development progressed. The sales department did enter t h e pict ure w h e n asked to prepare a brochure o n Dowtherm A use. Only engineers could iave read that mass of tables and figures *nd understood the contents. It w a s a p parent in our initial work that an educa:ion program aimed at engineering firms md equipment manufacturers was the >nly way to establish Dowtherm A in •videspread use. W e had to convince these people that our heating medium had a slace in the field. This sales attack took ?ight to 10 years before it paid off. T h e s e ;ame firms n o w are cooperating wholeicartedly by providing the equipment îecessary for Dowtherm A use. i d l i n g a System As equipment manufacturers gradually ook over the technical service function )f this development, the sales brochure prepared by D o w became less technical. Today w e continue our Dowtherm A pronotion campaign with a booklet designed or executives and advertisements which idvance a system rather than a product. In conclusion perhaps I should emphasize o n e phase of the entire operation of Ihcmical development which must In· luite apparent, and that is the necessity or the establishment and maintenance of xcellent communications on the part of 11 people involved in a developmental •rograin. Nothing can be more important f\ pointing towards success nor can there »e anything which can cause the slowing lawn or the failure of a development pro;ram more than lack of proper commun iation. MB fifth in a series hfiiiitut Marketing Mmn AN CIIKMICAL ty, X. J.. Sept. 16,
OLUME
A visit to California's historic
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DECEMBER
R. M . W A R R E N A M E R I C A N C H E M I C A L SOCIETY I ISS SIXTEENTH ST.» N . W . W A S H I N G T O N 6 . D» C .
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