Politicians, particularly from the EU, lecture us about the Schumpeterian economic remedy of innovation as the solution to the financial revival. The solution has merit in the medium term but the chemical industry knows that product innovations take 10-15 years and new plants take three to four years to build. Shareholders will not wait that long for innovation. So what can individual chemical firms do to attract customers now?
The time is ripe to look for extra business and some signs are good. The US has seen an uplift in ethylene, polyolefins, bio intermediates and fertilisers. Having a couple of new contracts makes one feel better about survival.
Just as in 2002, when a chemicals recovery was already under way, it is possible that some new clients are around but the industry is not aware of them. Understandably, given such uncertainty, firms are still reluctant to destroy their marketing teams, even if volumes are down by between 20% and 30% in Europe.
Part of the problem appears to be that chemicals sales and marketing structures in 2009 are still geared to the period 2005-2007, when ‘difficult’ and price sensitive customers were discouraged and many firms set targets for accounts sizes or volumes/ salesperson – for example, not less than 10 kt/year/ commodity. The mantra that 80% of sales come from just 20 large customers meant that smaller customers were handed to distributors, who often could not or would not support their needs. Surely it was better to ignore that Indian trading house and concentrate on firms like Lyondell, General Motors or Woolworths? Now, senior directors phone these core customers, asking ‘What do we need to do to get your business this year?’.
Another problem was an anti-marketing attitude reinforced by rampant Asian demand for mature products like polyethylene. Who needs market research in a boom? The industry often is its own customer, with products being sold down a defined value chain to reach consumer products or services, and these consumers are seeking value for money, often via new suppliers.
Clearly, however, new customers are vital and in time, small innovative firms may grow to become medium or even large clients. The marketing challenge is to find these customers but this requires a new mindset. In 2009, it is not safe to assume that unusual enquiries from different regions or relatively new firms are not worth pursuing.
Firstly, many ‘new firms’ have recruited recently redundant but experienced staff from the petrochemical aristocracy, as agents, traders, consultants, ‘field forces’ and temporary managers, to solve problems like REACH or to source materials. These firms may not be obvious – we note, for example, a Kibbutz that has diversified into artificial marble and buys thousands of tons of resin.
Many of these ‘new clients’ know the chemical suppliers better than we know them. Years of cutbacks in marketing intelligence, reliance on internet information and on concentrating on those key or top 20 clients means it is difficult to know which converter is a future key account.