Chemicals Companies Miss Margin Potential Due to Poor Customer Segmentation, Accenture Survey Finds
Lack of customer visibility results in over servicing and missed opportunities for premium priced services
NEW YORK; Oct. 6, 2010 – Chemicals companies are not reaching their margin potential because they are over servicing customers and missing opportunities to offer premium priced services, according to global research undertaken by Accenture (NYSE: ACN) in association with the American Chemicals Council (ACC). The survey of 1,100 respondents shows that a lack of customer understanding is preventing chemicals suppliers from segmenting their market and identifying the factors their customers most value.
Buyers and suppliers of chemicals agree that the most important factor when choosing suppliers is Product Quality and Performance. However, suppliers rate its importance 40 percent higher than their customers. Suppliers also overrate the value customers put on their Breadth of Technical Knowledge by 53 percent and Customer Support by 44 percent.
Only a quarter of customers (26 percent) are very satisfied with their suppliers despite the surplus investments that suppliers are making in a range of service areas. Almost third (31 percent) say that chemicals suppliers fail to differentiate themselves. This figure rises to 55 percent of customers in North America.
“Chemicals companies are making incorrect assumptions about their clients’ needs due to their lack of customer visibility,” said Mike Scimo, Managing Director, Chemicals and Natural Resources, Accenture. “They therefore treat all customers in similar ways and over service them in the hope they will remain satisfied. But this blunt approach wastes resources in marketing, research and production. And it prevents suppliers from charging premium prices for attributes that customers really do value.”
Disconnect on Sustainability and Innovation
Buyers of chemicals think sustainability factors are important, but are not prepared to pay a premium for good performance, reflecting customers’ preferred focus on complying with regulations. Chemicals suppliers place too much effort on sustainability factors, such as Social and Safety, which they rate 39 percent more important than their customers. They also overrate the importance customers place on Product Stewardship and Materials Efficiency by 33 percent each.
Chemicals companies also misunderstand the value clients place on innovation. Customers prioritise innovation that Reduces Costs or improves Reliability and Quality. But suppliers incorrectly assume that they will pay a premium for innovation that improves Functions and Features and overestimate the importance customers place on this factor by 57 percent.
Accenture concludes with two key recommendations for companies that pursue customer segmentation:
Chemicals companies should break with tradition by creating distinct channels: new online channels for commoditized products, which reduce the cost to serve, allowing greater investment in high value channels that require more specialized support of senior sales people and value chain partners.
2. Suppliers should work more closely with customers and partners throughout the value chain to anticipate demand and jointly develop solutions. This is particularly the case in mature markets where research and development spend needs to be better aligned to customer needs.
“The global chemicals industry spends over $60bn in research and development each year, most of it on functions and features, but it is clear that much of this is misdirected,” said Scimo. “Not only must chemicals companies improve customer segmentation and analytics to more accurately identify different customer needs, they also need to work more closely with customers and partners to make product development more relevant. Unless suppliers change their ways, they’ll continue to leave money on the table.”
North American chemicals companies appear to be most misaligned with their customers’ needs. They over estimate the value customers place on Breadth of Technology by 77 percent, Delivery and Speed by 70 percent and Product Quality and Performance by 63 percent.
Chinese and Indian buyers of chemicals place a higher value on Reliability than other regions, reflecting the immaturity of supply chains and logistics in those markets. Only 15 percent of Chinese customers are very satisfied with their supplier, compared to 89 percent in North America.
Whereas customers around the world prefer a small range of suppliers to serve them, customers in China prefer a multi-partner approach and rank this 68 percent higher than the global average. This may reflect greater price sensitivity and concerns about product quality and reliability in China.
Chinese customers are prepared to pay a higher premium on a greater range of factors than in any other market. European customers are prepared to pay the smallest premiums and only on a small range of product and service factors.
About the research
The Accenture Customer Preferences Study or Chemicals involved more than 1,200 respondents who participated in an online survey between March and June 2010.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 204,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.6 billion for the fiscal year ended Aug. 31, 2010. Its home page is www.accenture.com.
+ 44 77 400 38921
Christine Yee Fields
+1 330 234 6406