Northern Chemical Company

Marketing executives at Northern Chemical Company—headquartered in Minneapolis and a world

leader in the manufacture and sale of chemicals, metals, plastics, pharmaceuticals, and consumer
products—were wrestling with the marketing introduction plans for a new material in building roofs on
industrial and commercial buildings. Whatever marketing efforts they decided on would have to be
consistent with the attitudes of a complex array of contractors, roofers, and architects.

In the past, Northern had manufactured only plastic foam insulation for roofing. This insulation was
prefabricated into rectangular board stock of two-by-four feet and of variable thicknesses necessary to
meet the customers' desired insulating requirements. The product had not been very profitable for
Northern.

THE BUYING PROCESS

On new construction or total roof replacement, the owners of the building play no essential role. They
hire architects and give them certain guiding parameters—size, height, site, purpose, and operating
conditions. The architect then develops the design and material specifications for the roof. Even
subsequent management reviews rarely concern the roof itself unless there is a question of overall
building shape or a necessity to reduce costs.

A third party, the general contractor, also has little knowledge regarding roofing and has little influence
on design or materials. Such matters are turned over to the fourth party, the roofing subcontractor,
whose workers actually build the roof. The subcontractor influences the architect directly and indirectly
through feedback on the ease and success of the architect's plans and is the only party to influence the
architect substantially.

Experimentation and innovation on roofing are not really in the architect's best interest.
Experimentation is usually expensive, since worker unfamiliarity slows installation. Experimentation also
requires a trust in manufacturers’ products that architects do not have. Unfavorable past experiences
with new products have resulted in a deep-seated mistrust of new products and the firms producing
them. Architects question laboratory research results because some past results did not correctly
identify product deficiencies or simulate the realities of application.

Subcontractors are even more resistant to change than architects. Their conservatism is based primarily
on roofing labor conditions. New products often require extensive applicator retraining: and since
retraining influences an applicator's productive time, it reduces a subcontractor's income. Furthermore,
worker reeducation is an arduous task; roofing workers are not usually receptive to change. In addition
subcontractors also equate new products with increased callbacks. Some products have been
introduced prematurely in the past, and unanticipated repairs and adjustments have been necessary.
Finally, the manufacturer lacks field experience in application and, consequently, tends to
underestimate application costs. If roofers rely on the manufacturer's projections, their profits may be
reduced. Yet, roofers haven't had the experience to make their own estimates.
At the same time, few subcontractors have actually blocked introduction of new roofing products or
designs, since they are rarely asked for advice during the writing of specifications. Most roofers bid for
every job for which they can compete and their strongest urge is to keep the work force busy even if it
requires using new materials or design. Once the bid is won, only minor changes are permitted.

NORTHERN'S VIEW OF THE MARKET

In addition to the normal problems of entering a new market, Northern was considered a newcomer
that did not understand the market. Architects and roofing contractors pointed to their plastic foam, a
roofing product marketed many years before a need was established. Comments from architects and
roofing contractors regarding Northern’s sales force ranged from “unexceptional” to “technically
incompetent in roofing.”

On the positive side, nonresidential roofing was a large market, totaling over $2500 million in the United
States alone. Northern also noted that firms competing for this market did not do so effectively.
Manufacturers had a strong product orientation and failed to base their plans on market needs. Lack of
marketing skill was demonstrated by their weak sales efforts and limited services. Finally, the roofing
market was plagued with poor workmanship, poor quality of materials, and high liability. Fifteen percent
of all roofs failed within five-years.

Northern's new roofing material was expected to perform much better than the conventional roofing
materials/ systems. Even though Northern did not make any roofing materials other than insulation, the
new material allowed it to assure a good job because the insulation took most of the abuse in a properly
installed roofing system. The cost of producing the new roofing material to Northern was expected to be
higher than the earlier plastic insulation foam.

MARKETING RESEARCH

Northern's marketing research yielded several conclusions about the typical roof installation procedures
with which the new material would compete: (I) the workmanship of roofing crews was the worst of all
the construction trades; (2) materials used in roofing had no product specifications at all and varied from
job to job; (3) no special instructions or supervision had been provided to the roofers for the proper
application of the plastic foam insulation; (4) owners and general contractors were generally apathetic -
they wanted the roof on first and fast so all the other trades could work – and thus roofing jobs were
rushed and quality fell accordingly; (5) competition among the suppliers and the applicators was so
intense that products were introduced with very little research and development. Quality was poor
because the low prices wouldn't permit otherwise.