Customer Loyalty Case Study in Manufacturing

Case Study: Growth in a Mature Industry

BACKGROUND

The U.S. division of a well-known multinational manufacturing company (Company X) was interested in growing sales in a limited resource industry. The company worked primarily with manufacturers in the United States that used their chemicals to produce other products. The challenge in the industry is while there is little competition, the other firms are strong and well-established. The company contacted the Loyalty Research Center to develop an innovative approach to enhance growth in an already mature industry.

SITUATION

Company X has been conducting customer relationship assessment research for three years, focusing their efforts on improving their customer relationships to retain vulnerable customers. While their effort was very successful, Company X wanted to use this type of research to enhance sales. While there are few growth opportunities in this industry, Company X’s strategy calls for growth. As a result they turned to the Loyalty Research Center, their research partner, to ask: Could this research help identify growth opportunities?

Most of Company X’s competitors use relatively young sales personnel and employ large numbers of them. Their sales strategy is to overwhelm their customers and targets with attention. Company X is unique in that they employ a highly technical sales force with significantly greater industry experience. This enables them to use a highly consultative sales effort. However, the limited number of sales personnel translates into selecting sales targets carefully. Company X has roughly 300 prospects that are currently customers of competitors. The question was: Which of these competitor customers should be allocated valuable sales effort?

IMPLEMENTATION

Three criteria were developed to help make that decision:

Which customers were unhappy with their current suppliers?
How did these customers evaluate the current business model employed by Company X?
When the identity of Company X was revealed (the first two parts of the research was conducted blindly – not revealing the identity of the sponsoring firm), were there any hurdles to doing business?

All 300 prospect firms were called, with multiple respondents being interviewed at many of the firms. The cooperation rate was 63%. The results broke out as depicted in the following graphic.

Note that while prospective customers were located in all quadrants of the grid, those that were most appealing to Company X were located in the HIGH/HIGH quadrant. These prospects possess both a high vulnerability regarding the relationship with their current supplier AND an attraction to the key elements of the Company X business model.

An index was developed which enabled Company X to have a single numeric score for each prospect, and a minimum score was determined which was the cut-off line for receiving sales effort. This resulted in approximately 50 of these prospects receiving a concentrated sales effort.

Company X stated at the beginning of the program that a total sales increase of 500,000 pounds from these targeted prospects would have demonstrated the success of the program. After 14 months, they were able to claim 13 million pounds of new sales from these prospects. They consider this program to have been a resounding success.

KEY FINDINGS

Going on the offensive using the right marketing intelligence will lead to more efficient target sales which decrease unproductive efforts and increase the opportunities to find the “right customer.”
In industries with limited resources, finding sales by building customer loyalty is essential in company growth.
Locating customers who are dissatisfied with competitors and fitting them into your business model can be achieved through survey research. This knowledge opens the door to finding competitor’s vulnerable customers and presenting them with the ability to meet their expected level of satisfaction.

For more information contact:
Loyalty Research Center
931 East 86th Street, Suite 120
Indianapolis, IN 46240
Tel: (317) 465-1990
Fax: (317) 465-1991
Email: LSeibert@loyaltyresearch.com
web: www.loyaltyresearch.com