CREDIT

Differentiation through collaborative action

CASE SUMMARY  A manufacturer increased market share by forming joint performance improvement teams with a key distributor

During an economic downturn industry sales declined as end-users delayed new purchases and resellers consumed existing stock. A large manufacturer wanted to spur demand and increase its market share without sacrificing margins. Feedback from a market research study showed that buyers who preferred the company’s products were interested in quality, but those who purchased competitors’ brands based their selections on price and availability.

Approach

Internal programs were launched to improve product availability. Problem solving teams addressed operational issues, and new reporting systems tracked daily performance. Organizational changes complemented the effort by establishing clear ownership of responsibilities. The manufacturer also teamed up with a large distributor to address inter-company challenges. Senior management from the companies worked together to improve the order fulfillment process and to create joint marketing campaigns.

Results

The internal initiatives produced a significant improvement in on-time delivery performance. Over six months the gap between actual shipping dates and customers’ requested shipping dates decreased by 90% (Figure 2). This reduction was achieved without an increase in gross inventory.

Collaborating with a key customer also generated positive results. Sales to the distributor rose 14% during a period when industry sales were down by over 9% (Figure 3). The manufacturer increased its share of the distributor’s purchases by seven points and became the top supplier in the segment. At the same time total company standard margin increased 3.7 points.

Insight

Customer interactions were more meaningful when supported by actions. Sales representatives historically relied on brand image and traditional relationship-based selling techniques. The collaborative effort between manufacturer and distributor was a different approach that focused on helping customers achieve business objectives. Subsequent operational changes improved the flow of product and reduced the risk of lost sales. Pricing policy amendments and joint marketing campaigns positioned the products more competitively. Customer relations improved when discussions and commitments were reinforced with actions and results.

Although the manufacturer’s internal initiatives focused on an important customer need (i.e. product availability), the resulting improvement alone did not change purchasing patterns; during the same period sales to two other large distributors decreased while the market contracted. Including external issues in the problem solving effort enabled the manufacturer to identify opportunities, strengthen relationships, and create competitive advantage. The company was able to differentiate itself and increase market share through action-oriented collaboration.