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CREDIT
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Differentiation through
collaborative action
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CASE SUMMARY
A manufacturer increased market share by
forming joint performance improvement teams with a key distributor
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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.
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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.
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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.
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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.
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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.
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