Business-to-Business (B2B)
B2B is a growing term as businesses deal with other organizations more frequently. The idea is important for the promotion of goods and services. The communications sent during business-to-business interactions should be pertinent, clear, target-oriented, and emphasize a dedication to excellence. As more clients are eager to make purchases online, B2B marketing is embracing e-commerce and online business. This assignment's goal is to investigate B2B marketing ideas using a case study. The case study is the Dow Corning Corporation's Xiameter. the following questions will be addressed in the case study;
a) What factors, internal or external, were responsible for Dow Corning’s poor performance between 1995 to 2001 as shown in case Exhibit 3?
b) What did the new segmentation reveal about customer beyond that which the company already knew? In what ways were need-based segmentation scheme and improvement over the previous end-user segment?
c) Trace the development of Xiameter from its beginnings; what was in your opinion, key decisions that shaped its successful business model and marketing strategy?
Before answering the questions related to the case study, a brief company history of Dow Corning will be explored. The major issue in this case study is whether Dow Corning should sell Xiameter or identify methods to make it more sustainable in the future.
Brief Company Profile
Dow Corning is a multinational corporation established in 1943 with headquarters in Midlands, in the state of Michigan. The foundation of the organization was a result of a joint venture with equal controlling stakes between Dow Chemical and Corning Glass Works (Inna 2011, p.2). The firm’s primary products are specialty chemicals and silicon and employ approximately two thousand people. The product range of chemicals and silicones exceeds 7,000. The current Chief Executive Officer and President is Mauro Gregorio. Dow Corning offered silicon-based products ranging from cosmetics to aerospace and managed to establish itself as a market leader with a global market share of 40% in 2006 (Inna 2011, p.2).
The primary competitor for the company in the silicone business is General Electric Silicones. Dow Corning sells products in more than 80 countries, has 29 manufacturing facilities spread across Europe, America, and Asia; its regional offices are in Japan and Belgium to serve its Asian and European customers respectively (Inna 2011, p.2).
The company has distinguished itself as a pioneer of innovative silicone products courtesy of its massive investment in Research and Development (R&D). According to Dow Corning (2017), the silicone applications products are for automobiles, personal care, aerospace, household use, textiles, construction, healthcare, and Computers & Electronics. R&D has helped to establish Corning’s competitive advantage over rivals leading to the increased market share. According to Inna 2011(p.2), the organization reported sales revenue amounting to US$3.87 billion in 2005 of which over 60% came from selling to customers outside the US.
The firm has an excellent organizational structure and business model that is the foundation of the company’s growth and success in a highly competitive business environment. Dow Corning provides products and services under six industry segments that include Healthcare, Buildings, Xiameter, Automobiles & Aerospace, Electronics, Specialized Applications and Household products (Inna 2011, p.2). The industry segments are managed by four corporate functions namely Administration, Science & Technology, Product Line Management, and Manufacturing & Engineering (Inna 2011, p.2). The firm enjoys high customer loyalty and strong brand equity despite its high premium pricing of its products. What sets the company apart from its rivals is excellent customer service that is enhanced by innovative and high-quality products (Inna 2011, p.2).
Causes of Dow Corning’s poor performance
Growing a company and making it successful is not difficult, the challenge is ensuring that the growth and success of the business are sustainable. Dow Corning was a successful organization reporting billions of dollars in revenues, but they started to decline in the mid-1990’s leading to stagnated growth that worried shareholders and investors of the company. According to Inna 2011(p.16), as indicated by Exhibit 3, the company reported sales revenues of $2.49 billion in 1995 and $2.43 billion in 2001. The net income for the company during that period was also significantly less. The inability of the firm to re-invent itself and demonstrate flexibility in its business model and marketing strategy amid changing business environment led to drop in sales and profitability (Inna 2011, p.3).
The poor financial performance was caused by various factors that were both internal and external. The first internal factors for Corning’s poor performance were its pricing strategy. Customers were no longer finding the firm’s high premium pricing as justified because they thought some of the services offered were unnecessary. Therefore, clients resorted to purchasing products at lower prices than those provided by the company, hence losses in sales revenues (Inna 2011, p.3). Other organizations were liaising with their supply chain partners to lower their economies of scale. Supply chain collaboration between business can lead to reducing costs, enabling the firm’s to sell their products at meager prices and still maintain profitability (Cao & Zhang 2010, p.363).
External factors included competition, legal implications, and customer preferences. The silicone and chemical industry were becoming more competitive due to low barriers to entry. The sector had become more fragmented thus making differentiation very difficult for Corning. Customer preferring was also shifting to low price suppliers without the technical, training and recycling services offered by Corning (Inna 2011, p.3). However, the greatest external factor was the multiple lawsuits against the company resulting from the breast implants. The lawsuits made the company settle for over $4 billion that not only destroyed the brand image but also reduced profit margins (Inna 2011, p.5).
Corning’s new market segmentation
The low financial performance meant that Corning had to rethink its marketing strategies. This was achieved by an elaborate market orientation to respond to the changing customer needs. Customer focus and market intelligence are central to implementing a new marketing concept during market orientation (Kohli & Jaworski 1990, p.6). Corning conducted a new marketing segmentation. The new segmentation offered useful insights of turning the company back to profitability. For instance, it emerged that there are customers who bought goods in bulk at high prices but didn’t need the technical and training services offered by the company (Inna 2011, p.4). Moreover, it also became apparent that some customers valued the firm’s innovative products in healthcare and electronics and still relied on customer relationships to have their demands satisfied; but the company was not targeting them appropriately (Inna 2011, p.4). Customer interviews also revealed the changing attitudes towards an organization’s products that were useful in developing new marketing strategies (Kohli & Jaworski 1990, p. 15). The marketing orientation done by Corning led to the development of a needs-based segmentation of the six industries under which the company operates. The new segments were entirely different from the previous ones because they provided a narrower customer focus. According to Inna 2011(p.5), the following were the new segments that the company came up with to mitigate the poor financial results;
- Price seekers: This segment represented buyers who valued ease of doing business and the lowest price possible
- Innovative solutions: The segment includes multinational companies who were early adopters of new and innovative products that could solve their operational problems
- Cost-effective solutions: This included customers who needed silicone products that could cut their operational costs.
- Proven solutions: The segment included clients who didn’t have their R&D, and so were looking for advice on proven products from the company.
The needs-based segmentation allowed Dow Corning to re-evaluate its previous business model and market strategies. It helped to identify customer preference gaps and marketing policies that didn’t work anymore.
Xiameter’s development
The new segments required new business models and strategies to target customers in those particular segments. However, the company was faced with a challenge of meeting the customer needs of the price seekers because it would contradict the firm’s value of premium pricing (Inna 2011, p. 6). Therefore, a decision was made to form a new separate business unit within Corning to provide products at lower prices but should be web-based only (Inna 2011, p.6). The new unit was called Xiameter making Corning be an organization with two brands separate from each other but with no competing interests. However, some people within the organization were worried that Xiameter would destroy the brand image of Corning. Brand image is very crucial to brand equity, brand loyalty, and brand identity for the business (Keller 1993, p.4).
The dual brand strategy adopted was resisted on the basis that customers will be confused; hence reducing sales even further (Inna 2011, p.7). The assertions that Xiameter will reduce the corporate identity of the company were misplaced. The brand identity of Xiameter was facilitated by awareness and benefits associated with the brand knowledge to developed a strong brand equity based on customer needs (Keller 2003, p.597).
The dual brand strategy enabled the company to report sales revenues of $3.87 billion in 2005, with 1,400 orders daily on Xiameter of which $1Billion sales were generated from price seekers (Inna 2011, p.10). This exceptional performance is because of key decisions in the organization and operation of Xiameter. The fact that Xiameter had a light management structure and supply chain derived from Corning as a result of being an autonomous unit was key to its success (Inna 2011, p.8). Furthermore, superior sales force and state of the art IT infrastructure. Moreover, also the small product range of 350 silicone products helped the business to develop an online niche market of fewer selected products as opposed to many products being handled by Corning (Inna 2011, p.8). The dedicated sales force provided 24-hour customer service that speeded up delivery while ensuring that the prices of Xiameter’s products remained at 15% of the premium price charged by Dow Corning (Inna 2011, p.7).
Conclusion
Business-to-business marketing is highly dependent on focused customer brand. The dual strategy brand by Dow Corning was very useful in regaining market share, reducing competition in a highly fragmented industry and increasing client base. However, not many companies can pull such a strategy effectively in fear of 'diluting' their brand and having competing business interests. Xiameter is sustainable in my opinion, due to its competitive advantage of IT infrastructure and supply chain networks from Corning. Therefore, the company should not sell Xiameter.
References
Cao, M., & Zhang, Q. (2010). Supply chain collaborative advantage: A firm’s perspective. International Journal of production Economics, 128, pp.358-367.Inna, F. (2006). Xiameter: The past and future of a “Disruptive innovation”. IMD, pp.1-21Keller, K. L. (1993). Conceptualizing, Measuring, and Managing Customer-Based Brand Equity. The Journal of Marketing, Vol. 57, No. 1, pp. 1-22.Keller, K. L.(2003). Brand Synthesis: The Multidimensionality of Brand Knowledge. Journal of Consumer Research, Vol. 29, No. 4, pp. 595-600.Kohli, A. K., & Jaworski, B.J. (1990). Market Orientation: The Construct, Research Propositions, and Managerial Implications. Journal of Marketing, Vol. 54, No. 2, pp. 1-18.AppendixExhibit 3Source :( Inna 2011)
