Specialty chemicals

Customer bonding strategy - "How to fully exploit customer potentials"

The issue

Our client was a leading supplier of polyurethane hard foam (PU foam) for the insulation of refrigerators. The situation of the market is characterized by the following factors:

• Oligopoly of the suppliers,
• Concentration of the customers,
• Growth and stagnation of the product usage,
• Multi-sourcing strategies of the refrigerator manufacturers,
• High level of replacement of the supplier from the customers' point of view.
• Goal of the Project

The strategic goal of the project was to investigate how to secure supply price stability and how price planning can be achieved in order to improve profits. Regarding the supply, the objectives were to build up exit barriers, which prevent a replacement of the supplier and lead to customer loyalty. Regarding improved planning and steering of the price, the pricing policy of the supplier had to be analyzed to reveal the potential for improvements. With this focus, the following factors were investigated within the framework of a market survey:

• the current market situation of the refrigerator manufacturers,
• the future demands of the market on refrigerator manufacturers,
• the customers' needs and requirements in working with their PU suppliers,
• the interest in extended business relationships, and
• the evaluation of the specific supplier from the customers' point of view.

Procedure

To answer these questions a market survey was carried out in Europe and in member countries of NAFTA. The market survey consisted of 50 personal interviews with customers and non-customers from 17 refrigerator manufacturers in 32 locations in 12 countries. The interviewees were specialists from the departments Technology, Production, and Purchasing. The interviews lasted two hours on average and were conducted using laptop computers.

Results

Based on the results of the market survey the following customer specific strategies were developed in order to build up exit barriers for the customers and to set guidelines for the pricing policy:

• The integration-strategy aims for single sourcing. The integration of the suppliers' and the customers' business processes are the focus of the strategy. Duplication of efforts are avoided and productivity improvement in product and in business processes are achieved. Business process teams are the basis for the organizational cooperation. A competitive price is guaranteed to the customer.
• The value-strategy is product- and technology-oriented. The team selling approach is the main issue to better provide the customer with the benefit of the suppliers' performance and achieve a price premium.
• The opportunity-strategy aims only for a pure customer-supply relationship. A standardized and existing product without services is delivered ("off the shelf").

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