Competing with yourself: The Dow Corning Story

My book, The Case For B2B Branding, released by AMA and Thomson Texere in 2005, contains an interesting story about how one company preserved its premium brand reputation by creating a low price brand to compete against itself.

This particular story is about Dow Corning Corp. of Midland, Mich., established in 1943 as a joint venture between Dow Chemical Co. and Corning Glass (now Corning Inc.). Dow Corning has worked hard to earn a reputation as the world’s most innovative supplier of silicone products.

And because silicones are such a diverse family of materials, the future looked very bright indeed for this well-regarded innovator. Until the late ’90s that is, when small, regional competitors started taking market share away from Dow Corning by selling low-priced silicone products with little or no technical support.

“Hold on,” they said, “you can’t compare Dow Corning silicones to these cheap imitators. They don’t offer new product development assistance. They have no quality assurance program. They have no commitment to safety and the environment. And who knows when their deliveries will arrive?

But to some customers, those issues didn’t matter. All they wanted was a lower price, and if the price was low enough, they were willing to take a chance on everything else.

So Dow Corning managers took a deep breath and a step back to analyze what was happening. Working with their counterparts in purchasing, they quickly undertook a needs-based market segmentation study to evaluate their business model as it appealed to various types of customers.

Of the four customer types that were ultimately identified, Dow Corning decided to concentrate on the “market-driven, low-cost” type of buyer. With the booming growth of e-commerce and the comfort and convenience of ordering materials via the Internet, Dow Corning elected to create a no-frills, Web-based business model for high-volume customers who used standard products and did not require tech support.

From a customer standpoint, this was the best of both worlds–lower prices and Dow Corning quality. And from a branding standpoint, it would allow Dow Corning to compete head-on with the low-price suppliers of mature product lines, without damaging its position as a value-added leader at the premium price end of the market.

Once the decision was made to create a no-frills business model, it was full speed ahead. San Francisco-based Landor Associates was brought in to orchestrate the brand creation process under the stewardship of Randall Rozin, global manager of branding and marketing communications for Dow Corning.

“The Landor process was very structured and extremely stimulating,” Rozin says, “and they didn’t even blink when we told them we wanted the whole thing finished in 14 weeks.” That meant naming the new brand, creating a logo and initial corporate identity system and designing the start-up Web site.

It is noteworthy that the 14-week period included the trauma of 9/11, so the branding team had to cancel several important meetings and handle decisions by long distance.

Even with those distractions, the work proceeded without a hitch.

Using Young & Rubicam’s BrandAsset Valuator service as a guide, the group developed a list of key attributes for the new subsidiary that would resonate with the target audience. These included things like speed/energy, trailblazing, empowering directness and honesty. Also implied were quality and reliability because of the Dow Corning pedigree.

A key word that surfaced during this time was “diameter.” A diameter goes directly through a circle, bisecting it, just as Dow Corning was bisecting its own business with the new Web-based business model. It also contains the word “meter,” which connotes measurement and setting standards.

Altogether, more than 2,500 possible names were considered. Of these, 151 were put through a preliminary legal search and 18 were given a full legal search and native language check to ensure against negative connotations.
The winner was an entirely new word, Xiameter, which is pronounced with a “z” like xylophone. A tagline, “The new measure of value from Dow Corning” was immediately added to clarify the brand promise and make the parent-company connection.

“We sought to create a name we could own. Initially, when we put Xiameter in an Internet search engine like Google, there were zero hits,” says Rozin. “Now you can do the same thing and get over 78,000 associations.”

The Xiameter Web site went live in March 2002. It offered more than 300 silicon-based fluids, resins and adhesive/sealants for shipment to 50 destination countries. Once a customer went through a simple registration process, he or she could get pricing and minimum/maximum product quantities, determine payment terms and receive guaranteed shipping dates.

And what about results? While Dow Corning does not report sales for Xiameter independently, there has been a significant increase in overall company sales and profitability since Xiameter was created. The actual numbers are as follows:

  • In 2001, total sales: $2.44 billion, net income: $36.3 million
  • In 2002, total sales: $2.61 billion, net income: $141.6 million
  • In 2003, total sales: $2.87 billion, net income: $177.0 million
  • In 2004, total sales: $3.37 billion, net income: $288.8 million

Monthly Xiameter transactions have grown continuously since its inception. And acceptance of Xiameter outside of the United States has been much greater than anticipated, especially in high-growth potential countries like China. The number of authorized ship-to destinations has now been expanded to 82 countries.

Rozin says the cannibalization of Dow Corning sales by Xiameter has been very low–much less than forecast. But the most significant result has been the revitalization of the Dow Corning brand.

“By addressing customer needs at various levels of segmentation, we’ve been able to put a more focused effort into building the value-added, leading innovator image for Dow Corning,” Rozin says.

This image helps Dow Corning form closer strategic relationships with key customers and encourages other prospective clients to approach Dow Corning with developmental opportunities. And it has had a noticeable effect on morale among the company’s many “whiz-bang scientists.” The best scientists, after all, want to work for the best science company.

“Before Xiameter,” Rozin concluded, “you rarely heard the word ‘brand’ at Dow Corning. Now it’s an important corporate priority. We realize how critical it is to help create a positive branding experience for our customer across the hundreds of daily touch points between our company and theirs.”

Amazing what a little competition can do for the soul, and for the bottom line.