Jeff was frustrated
His approach to grow his firm’s share in the grease additives market, was failing. But, why?
He had used an approach that successfully grew share in other segments of the lubricating additives market.
- Gathered information on customers’ unmet needs from Sales’ reports of face-to-face meetings with lubricant manufacturers.
- To meet those needs, with low capital expense, Jeff modified products in his firm’s oil additive portfolio.
Prime need: Improve grease’s service life
Purchasing agents at grease manufacturers were the source of this need. Jeff directed some of his Dir. of Marketing budget to R&D. In two months they met the need. Sale’s contacts said: “Very nice, but we will only pay you 1¢/lb. more for the improvement.”
Jeff decided not to spend more on R&D until he understood what competitive advantages OEMs and end-users, the grease manufacturers’ customers, would pay for.
Engage a B2B customer researcher to:
- Uncover the complex, often hidden, buyer practices at OEMs and end-user.
- Provide a forecast of demand for a modified product meeting his firm’s rule for 80+% profit margin on a product
Jeff was familiar with my customer research work. He engaged me to do the project. He said: “I want you to concentrate on the heavy equipment market. It’s a major market for grease additives. Equipment users will pay if we create value for them.”
- Before Starting the Discovery Work
At a meeting with Jeff’s development team, we agreed:
- It would be a blind study. During the phone conversation, the respondent does not know who commissioned the study.During the conversation I say: “My client is developing a new family of additives. On a bench scale, they have been able to show the concept improves properties of greases.”
Customer Research Provider’s Work
My work followed the method of the Rule of 30 system
Gathered intelligence through 30 elicitation conversations with OEMs and end-users in the heavy equipment industry. They were from a random sample of 250 knowledgable individuals.
Used the Central Limit Theorem to analyze rate of adoption for an additive meeting OEMs’ and end-users’ unmet needs.
Customer Research Report: Executive Summary
1 Discovered a competitive advantage competitors don’t have
During my 19th random elicitation, the operator of an expensive excavating machine said:
“What is important to me is that I am paid only for the hours I’m excavating. I’m not paid for the half-hour I spend inspecting each joint for failure. Which includes the dirty, messy job of reapplying the right amount of grease so the joint won’t fail during the day.
George, what can your client do to cut down on unpaid time I spend as a grease monkey?”
… Equipment operator at major copper mine in Chile
After this call, Jeff and I huddled with Lyle (from R&D). Lyle said:
“Now that I know what operators’ problems are, we can cut down on their unpaid grease monkey time. If we do this, we will also meet our rule of 80+% profit margin on a product.
We have an additive in another lubrication market which I’m sure will cut down on the amount thickener needed in grease. This will makes the grease easier to apply and will cut thickener cost. We own the patent on the additive and the only plant to make it. The plant has excess capacity”
2 Buyer power in grease industry: Is held by the OEMs and end-users. They do this by exploiting the rivalry between grease manufacturers. Most of the 100+ grease manufacturers in the US are privately owned. They are driven to commodity pricing by the OEMs’ and end-users’ buyer power.
“See it so often. Account has a technical problem. Salesperson goes in with a grease directed at problem. Problem disappears. Six months later a competitor says: “Why are you paying that increase in price? I can do the job for half the increase.” Boom, we lose the account.”
… Dir. Marketing at major grease manufacturer
3 Forecast: With 95% certainty, within 3 years the average OEM and enduser will adopt the additive recommended by your R&D expert.
- Jeff released R&D funds for a project that verified Lyle’s forecast on use of the proprietary additive: a..To cut grease monkey time, b. Increase productive time of heavy equipment.
- Dir. of Sales built the business case for hiring a 3 person team of technical sales specialists to speed adoption of the additive.
- Within 4 years of launch, the firm’s market share of grease additives for heavy equipment jumped four places to #3.
- Additive’s profit margin was 95+%.