A good portion of my career has been devoted to the chemical industry, first as marketing communications manager for two Houston-based chemical manufacturers, and later as an agency consultant for a dozen other chemical-related companies. I can’t think of any other industry, besides the stock market, where the term “commodity” comes up as much.
One reason is that chemicals are manufactured and sold to meet certain specifications. If your product is “off-spec,” you’re out of the game. On the other hand, anyone who can satisfy the required technical requirements is not only in the game, but considered on par with all other qualified suppliers.
Price isn’t even a differentiator because buyers will tell you what you need to charge in order to be “competitive.” Again, if you’re not competitive, you’re out of the game.
So how can you gain marketing leverage in an industry like that? Sometimes logistics can separate one supplier from the others–the ability to deliver or store product in ways that better serve a customer’s needs–but eventually these tactics can be copied and matched by other suppliers.
A better way to differentiate is through personal services like R&D support or on-site field services. Not only are service programs harder to duplicate, but they’re virtually impossible to compare on an apples-to-apples basis.
This is why becoming known as an innovative, service-oriented company is the ultimate differentiating strategy. Also, such a reputation connotes the anticipation of future services. If a customer thinks you are going to be more capable in a certain area, then you are. If he thinks you’re more innovative, you are.
Let’s go back 15 years to 1989. BASF AG, based in Ludwigshafen, Germany, was a second-tier chemical manufacturer with low awareness and a fuzzy image, even though it had annual sales in North America of $3.2 billion. Most people associated BASF with magnetic recording tape, because that was its most visible consumer product.
“Even though we had some very ambitious growth objectives,” says Terry O’Connor, former marketing services director, “being unknown put us at a serious disadvantage against larger and better-known competitors like DuPont and Dow.”
So O’Connor and his ad agency (the now-defunct Geer DuBois agency) did some market research to evaluate the situation and lay the groundwork for a branding campaign. They identified 10 attributes that could spell success over the long haul, from general associations with product quality and product diversity to more specific attributes, such as technical leadership and desirability as an alliance partner. They also wanted to track such factors as awareness and familiarity relative to major competitors, financial strength, efficiency and environmental responsibility.
Three possible communications strategies were developed and tested to determine which would be most effective with BASF’s target audience: BASF diversity, BASF innovation and BASF commitment.
Innovation was the clear winner. It made the company’s statements more relevant and believable, and through the enumeration of different innovative examples, it also gave the audience a sense of the diversity and breadth of BASF’s product range.
A long and thoughtfully different tag line was proposed by the agency to use primarily in TV ads: “We don’t make a lot of the products you buy. We make a lot of the products you buy better.” Another unusual touch was the use of a female announcer to deliver the line at a time when booming “voice of God” narrators were standard operating procedure.
Each TV spot featured four examples in which BASF products contributed to an improved end product. For example, the announcer might say, “We don’t make the carpet fiber, we make the carpet fiber stronger.”
O’Connor reports that, over the long life of this campaign, they have been able to give promotional emphasis to virtually all the value-added products and services the sales department wanted to tout and still maintain the same highly focused creative approach. It even survived the closing of the original agency and the shift of responsibilities to the current firm, Tucker Hampel Stefanides & Partners in New York–not to mention the fact that the magnetic tape division was sold many years ago.
Today, BASF is the world’s largest chemical company, with global sales of $33.8 billion and North American sales of $8 billion. In Fortune Magazine’s “2003 Most Admired Global Companies,” BASF is ranked No. 1 in every chemical industry category, including “innovativeness,” which used to be the sole property of DuPont.
The annual tracking studies conducted by BASF show its scores have doubled or tripled in every attribute category since the program began, while the DuPont and Dow scores have stayed the same or gone down slightly. What was once a two-horse race is now a three-horse race. Or you might say that BASF has resized the playing field to make room for a third major competitor.
“To me, the word ‘commodity’ is an open admission of marketing bankruptcy,” says O’Connor. “Raising the BASF profile has put us on the bid list for things people didn’t know we made 10 years ago, and in many cases, it gives us the inside track, because customer expectations are higher.”
“We have conducted numerous customer satisfaction studies over the years, and one finding is consistently clear,” adds Tony Graetzer, partner with BASF’s ad agency, Tucker Hampel Stefanides. “Companies are frequently viewed as equal in product quality, but they are never viewed as equal in the quality of their services.
“On-time delivery, technical assistance, ease of ordering and other service aspects never result in tied scores,” O’Connor confirms. “Here we find clear winners, trailers and losers. Products may be at parity, but services never are. This is the area where winning companies do differentiate and can dominate.”
BASF has built its brand to stand for service and technology leadership. By steadfastly emphasizing the way it helps make its customers’ products better, the BASF image has become synonymous with partnering.
And in a market where commodity mindsets rule, you’d be hard-pressed to find anything more valuable than to be known as an innovative partner that helps make products better. That’s what brand power is all about, and that’s why BASF is No. 1 in the commodity world of industrial chemicals.