INDUSTRIAL CHEMICALS
Offer multiple service levels: Rather than bundling the same service with all product purchases, chemical companies could offer multiple service levels at different price points based on customer needs. For example, chemical companies could start by including only essential services with their standard products. To lower costs, technology could be used to automate and standardize business processes such as delivery and payment terms. However, in addition to basic services, chemical companies also offer additional layers of services if a customer wants to upgrade and pay for it. Data analytics can help provide direction as to which level of service would be most appealing to which customers. From an IT perspective, this requires customer segmentation supported by a thorough price waterfall analysis, along with real-time insights into prices and margins at customer and product level.
Product-only pricing: Some customers view chemical products as pure commodities. To accommodate this mindset, chemical companies could unbundle services from their products. With this model, customers can purchase products only online. Digital technologies with artificial intelligence help determine the rules. Dow Corning adopted this approach in 2002 when it launched Xiameter, an online, low-cost sales channel for its silicone products. Through this online channel, Dow can meet the low-pricing demands of customers willing to buy in bulk that does not need support services. Seven years later, Dow Corning reported the new sales model resulted in five times the number of products sold and sales continue to grow (McKinsey & Company, May 2011). This is an ideal application for the IoT, where chemicals may be ordered machine-to-machine, and many sales may proceed entirely without human intervention.
Separate business units: Developing a separate business unit often is an effective strategy to compete in situations with intensely competitive pricing pressure. In this way, companies can be low-cost providers without the risk of “cross-contamination” with services they still provide to customers who are paying high prices for chemicals that retain specialty status. Using a separate business unit is clear cut and eliminates confusion in both customers and employees about the services provided as well as the processes used.