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Customer Relationship Management II

A wake-up call
Why marketing became
a top priority for the
chemicals industry
By R. John Aalbregtse and James G. Bogues

With little room left for further cuts in manufacturing


costs, chemicals companies are looking to drive and sustain
operational excellence from other parts of their business—
which is why marketing suddenly came into focus.

Marketing doesn’t come naturally to the chemicals industry. Like other maturing, commodity-
based businesses, chemicals companies tend to think in terms of volume. The margin boost
that comes when a company is able to more effectively match the prices it charges with
what its customers really want—one of the great benefits of the integrated approach that
distinguishes high-performance marketing—has been largely overlooked.

All that, however, looks set to change. The top of the current chemicals business cycle is rapidly
approaching, as supplies are constrained and raw material prices are soaring. With little room
left for further cuts in manufacturing costs, these companies are looking to drive and sustain
operational excellence from other parts of their business before the next downturn. Marketing,
along with improved supply chain management, is suddenly coming into focus.

To be sure, the chemicals industry entering new markets and increasing marketing as a top priority, and they
has some way to go. Accenture’s the profitability of existing business predicted that investments in market-
cross-industry research into the role with current customers to be much ing, sales and customer care will
of marketing in achieving high per- more important marketing goals drive business value for their organi-
formance identified chemicals as a than generating customer loyalty, zations over the next five years or
laggard. And our survey into chemi- which is the cornerstone of prof- longer. What’s more, very few felt
cals companies’ attitudes toward itable organic growth, according to they wouldn’t be able to achieve the
marketing (see “About the research,” our research. (For a related article, marketing capabilities they want.
page 72) found that most industry see page 60.)
executives rate their current market- How, then, should chemicals com-
ing capabilities as no more than Yet more than two-thirds of the same panies go about trying to achieve
average. Many of them still consider respondents also said they now view marketing mastery?
Outlook 2006, Number 2 69
Customer Relationship Management II

Most of these companies fail to survey and our experience with


execute successful marketing strate- high-performance businesses in the
gies because they focus on the chemicals industry, suggests that
wrong things. Accenture’s cross- three key pillars of capability
industry research, coupled with the should be the focus of attention.
findings of our industry-specific

1. Business intelligence
High-performance businesses in all tomer segmentation and, as a result,
industries leverage their IT systems superior marketing. And unlike man-
as key strategic assets to gain agement by spreadsheet, ERP sys-
important customer and competitive tems, supplemented by a new breed
insights. In the past five years or so, of business intelligence tools, sup-
chemicals companies have invested port the standardization of decision
significantly in enterprise resource making and thus help to create and
planning systems. These investments shape demand, as well as enhance
were largely designed to consolidate delivery of the brand promise.
finances and help improve supply
chain and manufacturing perfor- The Dow Chemical Company, for
mance. But there is a wealth of example, has built a global strategic
other data in ERP systems. data network that presents informa-
tion by product, customer, business
The information they provide can and region. The company can moni-
shed light on performance trends, on tor trends in customer profitability
product and customer profitability, and swiftly see which products are
and on changing patterns of selling fast and which are lagging,
demand—the sort of business intelli- thereby creating a complete picture
gence that underpins successful cus- of sales trends in its various markets.

2. Integrated decision making


supported by business rules
High-performance businesses use the ments. High performers have recon-
business intelligence gained through figured their business processes,
their ERP systems to optimize decision supply chain networks and organi-
making and ensure that they deliver zations to support the flawless exe-
what individual customers want—the cution of these rules. They also have
hallmark of superior execution. established systems of metrics to
manage compliance by exception.
To this end, they develop clearly
defined business rules about the The rules establish clear roles, respon-
decisions that must be made on ser- sibilities and accountabilities, and
vices and lead times, specifying how they are reviewed continuously in
a customer is to be served and the light of evolving market conditions.
occasions when exceptions should The upshot: consistent treatment of
be made for different customer seg- individual customer segments.
70 www.accenture.com/Outlook
For instance, another global chemi- to order quantities, lead times, pack-
cals company developed a set of aging and technical service. Many
processes for decision making about of the rules are common to the
pricing as well as about customer company’s distinct businesses. But
segmentation and customer service— the criteria for each rule are tailored
and then defined business rules that to specific customer segments within
address specific service levels relative each business.

3. A performance workforce
Successful execution hinges critically product and service offerings—the
on the support of the workforce. key to high performance in this
High-performance businesses make industry (see “Driven to differenti-
sure their workforces are equipped ate,”Outlook, February 2005).
with the marketing skills to under-
stand and distill business intelligence. This means putting the right people
They also ensure that their employees with the right skills in the right
have the capability to implement the jobs—and giving them clearly defined
processes, business rules and routes roles and responsibilities. It also
to market for clearly differentiated requires establishing disciplined per-

Marketing goals
Accenture asked leading companies in the chemicals industry to list their highest marketing priorities.

24%
Entering new markets
76%

36
Increasing profitability of current customers
67

9
Acquiring new customers in existing markets
55

15
Increasing revenues from current customers
52

12
Increasing customer loyalty and retention #1 priority
45 In top 3 priorities

Source: Accenture research

Outlook 2006, Number 2 71


Customer Relationship Management II

formance measurement procedures Every member of the organization’s


and a comprehensive and inclusive global sales and marketing workforce
performance review process. participates in a comprehensive and
continuous program that is designed
The support of top management to instill its marketing principles
is essential to this process. So is throughout the company and that is
the sharing of knowledge and best endorsed at the most senior levels of
practices across businesses and geog- management. Training, projects and
raphies. Rather than rewarding indi- knowledge sharing drive a common
vidual “heroes,” high-performance vocabulary. And on-the-job learning
businesses encourage team players helps realign the organization around
motivated to serve the company as a value and the customer, and away
whole. The approach builds superior from the volume mentality that has
sales and marketing capabilities at so hampered the development of an
all levels of the organization. effective marketing function in the
chemicals industry.
Take the example of a leading global
producer of chemicals and flexible The ability to differentiate along
plastics without which such common- multiple dimensions—product,
place consumer products as tooth- application, process, price and
brushes and disposable razors would service—is what really distinguishes
be impossibly awkward to use. the chemicals industry’s high per-

About the research


Our survey was designed to probe more deeply into why the chemicals industry
is a laggard when it comes to marketing mastery—a key finding of Accenture’s
cross-industry research into the components of high-performance marketing and
its impact on business performance (see story).

We surveyed 34 senior executives from across the chemicals industry. Their companies
range in size from well over $10 billion in annual revenues to less than $30 million,
and represent all industry segments and all geographies.

We asked these executives how important marketing is to their organizations


and to identify their company’s main marketing focus. They were asked to rank the
following goals in order of importance.

• Entering new markets


• Acquiring new customers in existing markets
• Increasing customer loyalty and retention
• Increasing revenues from current customers
• Increasing profitability of current customers

In addition, we asked them to rank the five core capabilities that, according to our
cross-industry research, account for 60 percent of customer loyalty, and to explain
the importance of each capability as a means of outperforming the competition. We
also asked them to correlate their level of excellence in each of the five with their
company’s business performance.

72 www.accenture.com/Outlook
formers from their peers. And tives and the impact of new business
marketing plainly plays a key role models on the global chemicals industry.
in that accomplishment. He is based in Chicago.

Strong marketing capabilities and r.john.aalbregtse@accenture.com


an integrated approach to market-
ing, sales and supply chain deliver James G. Bogues heads the Accenture
many benefits—not the least of which Chemicals Marketing & Sales practice,
is rigorous processes to manage and specializing in business process-led
improve pricing and margins. Indeed, performance improvement programs.
the benefits of achieving marketing With extensive experience in market-
mastery in terms of market position ing, sales and finance, Mr. Bogues, who
and premium pricing are striking— is based in Houston, has led measur-
a sustainable, bottom-line impact able, value-creating work in business-
equal, at a minimum, to 1 percent to-business marketing, supply chain,
to 2 percent of sales in the first year, sales strategy and process development
according to Accenture research. in large, complex businesses. His
expertise provides the foundation for
Our research has also shown that targeting and extracting value through
marketing efforts that harness cus- both customers and products.
tomer insight and significantly
reduce delivery and operating costs james.g.bogues@accenture.com
can double return on sales, as well as
simplify business models and boost
both asset turnover and customer
satisfaction. The secret is successful
execution—and that, in turn, hinges
on mastery of the three pillars of
capability described here.

To date, only a handful of chemicals


companies have achieved that mas-
tery, leveraging consistent delivery of
the brand promise to deliver superior
returns to their shareholders. But
plenty of others seek to join their
ranks. It may be only a matter of
time before they do so.

About the authors


R. John Aalbregtse heads the Accenture
Chemicals Strategy practice. With more
than 20 years' consulting experience,
he has helped major chemicals clients
create business strategies ranging from
developing new channels to market to
constructing completely new business
models focusing on aggressive growth.
Mr. Aalbregtse has also led industry
studies on creating shareholder value,
CRM capabilities, e-commerce perspec-