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M&Ms and Chemicals?
Posted on February 1st, 2016 by Michael D. Brown in Chemical R&D
To be clear –this post is NOT about red dye #40 and artificial preservatives for chocolate candies. Rather it is intended to pass along a few observations and comments on the state of marketing in the chemical industry.
Thirty-six years of participation in the chemical industry has led me to believe that the chemical industry generally does a poor job of marketing. Too many companies consider the full extent of their marketing effort to be tactical spending on trade show booths, brochures, web page design and advertising, which I refer to as “Little m” or marketing communications. Poorly executed is the classical “Big M” marketing which should be a business’s comprehensive strategy as it relates to the market – integrated planning related to products, distribution (placement), pricing and promotion – the so-called “four P’s” classically taught in business schools. “Little m”, while important, is just one element (promotion) of “Big M.”
To be fair, most chemical companies do at least some of the 4Ps, but the planning is not integrated and is piecemeal and disjointed. Examples include poorly executed product development that has no market connection and/or no connection to the company’s manufacturing competencies, pricing that leaves margin on the table, distribution that is unfocused and in conflict, and advertising and trade events that are expensive and don’t bring good return on investment.
One size does not fit all and marketing efforts should vary across the industry with commodity chemical markets requiring substantially less “Big M” than the specialty chemical markets. For instance, commodity products seldom require significant advertising and branding efforts. On the other hand, specialty chemicals require substantial “Big M” in the form of sophisticated pricing, distribution and promotional efforts.
So what is the ideal state? Below are some key elements of an ideal “Big M” plan:
Product planning requires a disciplined understanding of the markets being served including a strong understanding of current product positioning and future products needs including:
- What are the needs and unmet needs of the target customer segment?
- What attributes can we (as seller) design into our offering to meet these customer needs and most differentiate us for a competitive advantage?
- How can we use our unique manufacturing assets and know-how to gain a competitive advantage?
- How well do our products augment or conflict with our other offerings?
Distribution planning requires well-thought ways to optimize the delivery of the product and support services to customers including:
- What is the appropriate channel(s) to market for our products(e.g. direct field sales, inside sales, manufacturers agencies, independent specialist distribution)?
- Where should we locate our manufacturing relative to our customers and our channel partners?
- How will we train our sales force and those sales forces of our agencies and distributors?
- How will we use technology (Internet, ERP, e-commerce) in the distribution of our offering?
Pricing must focus on maximizing margin with a deep understanding of market conditions and customer value-in-use. Key considerations include:
- How does the price affect the relative and competitive positioning of our products?
- What will be our price mechanism and is it legal (cost-plus, value In-use, competitive/market, formula based)?
- What is the cost of the product and how much profit will this deliver?
- How will we price by distribution channel?
- How will pricing be managed with time (competitive actions, change in cost structure, across the product life cycle) and who has the authority?
“Little m” is certainly important and is developed lock-step the other 3P’s . Fundamental planning questions include:
- What is our value proposition and how do we communicate it to our customers?
- How do we position our business and its offering(s) against competition and increase our awareness among our target customers?
- What support materials and collateral are needed by the sales force and distributors?
- What is our branding plan (if any)? What must be done to support and improve our brand?
- How do we interact with others (non-customers) in the marketplace (trade groups, media, etc.)?
Here are four takeaways to improve Big “M”:
- Accept that successful marketing should be “Big M” and goes well beyond trade shows and brochures. Make sure there is an integrated approach that addresses ALL of the 4P’s and that the pieces fit and are consistent with the overall business plan. For example, a new premium performance product with a strong competitive advantage should be value-priced, prominently promoted at industry events (perhaps with strong branding)and heavily supported by sales and distributors.
- Do your homework – “Big M” is data intensive and requires researching the market to develop knowledge that is applied in all of the 4P’s. Do not rely on hunches and assumptions. Make sure key learnings about the market are considered and incorporated into EACH of the 4P’s.
- Unlike consumer products, there is no need to organizationally build a “Big M” empire in the average chemicals producer. It is quite acceptable to have each of the 4P’s matrixed across the business, but incorporated with strong managerial checks and balances to assure that the planning is integrated and consistent with overall business strategy. For instance, pricing might be managed within the financial group but with close collaboration and input from the sales and product management organizations.
- Assign one business leader the responsibility for compiling the final “Big M” plan and reconciling any issues or disconnects among the 4Ps.
The chemical certainly has its challenges today and marketing should not be one of them. Good luck and keep your “M” big!
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Michael D. Brown
President, StrategyMark Inc
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