Overall, Dominite seems better suited for the ceramic tile market than the paint market. Within the ceramic tile market, Dominite is most marketable to newer, smaller firms that do not yet have large capital investments in their dies, since switching from talc requires the purchase of new dies. For the 4 largest tile makers, this cost would be approximately $1.5 million. The product offers a 16% savings on COGS and less breakage of tiles. Some warping issues were discovered, but could be fixed with further tests. Tests in the paint market proved to be more troublesome. The customer had difficulty suspending the particles of Dominite in solution, and the cost savings proved to be substantially less—3 cents as opposed to the projected 12 to 18 cents per gallon.
Harper Chemical does not seem to have performed thorough market research and segmentation. HCC assumed that one of the top four tile manufacturers would quickly adopt Dominite, an assumption that either underestimated the switching costs of purchasing new dies or overestimated the effectiveness of HCC’s sales force. There is little strategic marketing supporting sales staff. HCC could have taken a much more consultative approach by working with customers to find the best ways for Dominite to improve their product lines. Instead, HCC seemed to engage in an unfocused R&D effort that ballooned costs without yielding specific product innovations that would help their customers sell more product.
Further, while their forecasts were aggressive, they assigned small sales force to these new markets. HCC’s forecasting generally seems unrealistic and to assume that they will land at least one major client in paint or in tile, and sell them a premium grad ...