Case Study Report: Marketing Program Design

DuPont (B): Alliances for Total Gain

Prepared under the guidance of Dr. Vimi Jham

Group 7, Section A Adarsh Shroff AnkitGauba AnkitMadhok Arpito Roy (12DCP-005) (12DCP-016) (12DCP-019) (12DCP-023)

AyushTibrewala (12DCP-025) Dhaarna Chopra (12DCP-031)

Case Overview Long Term Alliances Costumer Alliances For Total Gain
Carr always maintained the objective to ensure that the end users needs were satisfied. In order to serve this purpose completely, he believed that everyone in the distribution chain were required to share this effort and start with the same starting point. To set his objectives straight he decided to-Identify the target segments they wished to aim at -Choose those retailers and mills that can best satisfy the targeted segment. DuPont's strongest relationships had been with mills. While they received 200-300% mark-up at the retail level, the real value addition took place at the interface between DuPont and the carpet manufacturers, where fiber was transformed into the finished product. They wanted to deal with only those mills that best served their purpose. This reappraisal eventually resulted in establishing specially designated "customer alliances" between DuPont flooring systems and certain selected mill throughout Europe. Out of 250 carpet mills that were DuPont's customers in Europe, Carr decided to target 15 mills as target customers. The main motive behind this was to concentrate company's resources on those manufacturers which could give the company the inroads it was looking for in the market. The few mills that were selected went through a thorough analysis and were eventually chosen on the listed criteria-whether a mill's product geared to the high value end of the market where premiums were possible - Whether it was aligned with the strategies and mindset of DuPont; it was important that the mill understood the concept of solutions DuPont was working on and provided the same to the end users. - Whether it was a long term player, being both financially and professionally viable. The criteria were applied rigorously while he deliberately tried to keep the alliance customers to a minimum. He had several reasons for deciding to do the business with fewer customers-

- It was the only way to have truly meaningful customer relationships - Such relationships gave DuPont a larger percentage of the gains and provided DuPont's customers with the benefit of its know-how, information, and initiatives - He selected firms that would be not competing head on with each other. This could be done by guiding the alliance customers to differentiate their offerings so that they could compete for the consumers more effectively. There was a need to maintain balance between the portfolio of customers in the market and the broader market needs. Carr knew that not just anyone be an alliance customer as the company wanted to offer expertise, information and know-how in order to help them excel in product and design that too in a conceivable way.

Aggrieved Customers
Not only DuPont but also the entire carpet industry is facing a crisis where the customers are not satisfied. The reason stem from the fact that there are far too many manufacturers currently who are buying carpet fibres from DuPont, which result into price competition among the manufacturers and in the process of which consumer needs are not met. In addition to the above, there exists a very large distribution channel, there are too many wholesalers and retailers and the absence of proper control. All of this has led to improper Customer Relationship Management (CRM) and after sale services are close to non-existent. The CEO of one of the DuPonts customers has accepted the above claim and said: From a customers point of view, carpeting is plain bad news. They are fed up: retailers might own the consumers in theory, but they are doing a pretty poor job of it. Lets be honest: service at the shops is just plain lousy.

Revamp of the Value Chain

This clearly shows that DuPont needs to venture into a complete transformation of the value chain and customer oriented marketing and hence, all these steps are progressions made in that direction. 1. It has already initiated and understood the importance of Marketing Organization and is venturing into manufacturing partnerships and alliances 2. It has taken steps to improve its after sale services through the use of Information Systems

3. It has ventured to completely revamp its value chain and to make each party in the distribution channel understand that it is only by the process of collaboration can each of us succeed Now that DuPont had successfully designed and delivered the kinds of services that would enhance the customer's carpet buying experience, Jim Carr, marketing manager, Europe, for DuPont's fibre Division, had a new challenge: how to reassess the links within the entire carpet distribution channel? The relationships within this chain, like those in many other industry chains, had been largely adversarial; each member out to strengthen its part of the whole, even if this meant endangering the integrity of the whole. DuPont would now take the lead in ensuring that all in the channel were meeting end users needs, no matter how far removed. And DuPont, although the farthest removed, also had the most to lose if things went wrong; the company annually invested hundreds of millions of Swiss Francs in fiber R&D, but unless others shared these efforts in the chain, they would fall flat. Breaking through barriers

IT in the future
Through IT the company might be able to have a window into commercial and residential customers, and would be able to track when carpets need maintenance or replacement. DuPont could then transmit this information on to the carpet mills, instead of waiting for it to be received at the retail level and hopefully be passed on. In other words, DuPont could actually schedule the carpet manufacturing process reducing the time, money and unnecessary activities involved. It was clear that if this could become reality, the business system would change dramatically and DuPont could own the customer interface and fundamental roles of wholesalers, retailer etc might be questioned. From the customers point of view, this may be good news since they dont have to be worried about their carpets assuming that they are loyal to the brand.

Tearing Down the Walls And Barriers

Now that DuPont had successfully designed and delivered the kinds of services that would enhance the customer's carpet buying experience, Jim Carr, marketing

manager, Europe, for DuPont's Fiber Division, had a new challenge: how to reassess the links within the entire carpet distribution channel? The relationships within this chain, like those in many other industry chains, had been largely adversarial; each member out to strengthen its part of the whole, even if this meant endangering the integrity of the whole. Who would these customers be? What were the selection criteria? How would they make them cost effective? How would they change people's attitudes and behaviors? were top on Carr's agenda. The volume, price and short term gain mind set which had dominated the industry for years had led to adversarial relationships and die hard attitudes, especially amongst those who had spent their entire working lives in the industry. The value was apparent to all, as was the necessity. Yet, making the idea a reality was a different story. DuPont would now take the lead in ensuring that end users' needs were being met by all in the channel, no matter how far removed. And DuPont, although the farthest removed, also had the most to lose if things went wrong; the company annually invested hundreds of millions of Swiss Francs in fibre R&D, but unless these efforts were shared by others in the chain, they would fall flat. Carr thus launched a system of customer alliances for total gain. In order to make the alliance a reality between the people at DuPont Flooring Systems and at the mills a reality, methods had to be found to create and institutionalize ways for them to meet, talk to each other, and work together. Carr began formulating what would have to be done to break down the walls that traditional ways of operating and viewing success had created. Some of his proposals were as follows: Joint Workshops Workshops were created which grouped a team from DuPont Flooring Systems with the mills CEO, Production Manager, and Sales Manager, each of whom had different needs. CEOs needs as was seen revolved around having a profitable business, pricing, marketing support and creating a brand name. The production Manager was after quality, on time delivery, technical assistance and a large enough product line to allow adequate selection. Sales Manager wanted training, promotional material, assistance and support.

Account Management The account manager was responsible for ensuring that the customers needs be met through a multi-functional team.

These teams comprised of marketing and technical specialists. The Account Manager had carte blanche access to all of DuPonts resources. He was empowered to make teams work as a unit in solving each customers problems. According to Carr, We will drop an internal matter if you need us to see a key customer. This is our number one priority.

Sharing Information Giving time and sharing information were two fundamental steps towards eliminating walls between DuPont and the mills. The main problem was people who associated information with power, found this concept difficult to accept and implement. Free flow of information up and down the channel was essential for overall performance. DuPont designed forums to disseminate information about industry trends and needs to all its alliance customers, mills, wholesalers and retailers.

Combining Activities Certain mills no longer had to place order because of IT and close links between DuPont and mills. DuPont was able to know their production schedules and the type and colours needed for each run. Company could thus ship directly without waiting for an order. Hence saving time. The process eliminated much unnecessary control functions-quality control for instance did not have to be performed at DuPonts plant as well as the mill.

Holding inventory was reduced to a great extent hence saving on cost as well as money.

Commitment

For Carr, partnership that implied special kind of commitment to ones partner, i.e. through thick and thin as in marriage, never work in the commercial world. The bottom line for each enterprise was still money. Therefore to achieve mutual gain, each party had to make a financial commitment. Carr felt the need to charge 50% of the cost of basic pattern books from carpet manufacturers which were earlier distributed free of charge. Time too was an important ingredient in commitment. Understanding each others business and solving problems was integral to customer alliance process. The members of the channel could not sell any product on discount just for the sake of making a sale. Hence there was commitment to the same business principles.

Empathy To deal more closely with customers meant not only changing their ideas about business, but also about people they did business with. They were required to learn about each others working styles and personalities, even their families. This was in contrast to the typical business relationship which had characterized the industry. Things were viewed differently. Having an alliance with one supplier would lead to relationships which were not only longer term, but more enduring. Even if there was some strain and tension in the business that occurred, personal friendship should remain intact.

Getting People to Learn Persuading staff to work according to different criteria was not easy.

They were asked to spend time with customers, to get to know and like them and sacrifice short term profits for long term benefits. Instill in them a sense of trust and understanding of customer needs and demands. People were made to operate outside their comfort zones. Training program was launched in 1991. It was not in an auditorium or classroom but in the mountains, forests and woodlands.

The training program helped the employees to gain confidence, work jointly and depend on one another. They realized that different forms of behavior were acceptable in unfamiliar and unexpected circumstances.

Market Analysis/Strategy Analysis

Market Segmentation
For DuPont Flooring Systems to provide its customers with complete solutions, both products and services, it would have to dedicate vast amounts of energy, effort, time and money. In lieu of the same, DuPont established that it had to deliver value and be cost-effective at the same time. To do this, they decided to continue to sell to every end of the market and segmented the end market into 3 categories based on the customer relationships it intended to develop. Commodity Market: These were the price sensitive customers, the mass. DuPont would target them with their basic product range and all customers would receive the same offering. This category was meant to have the weakest customer relationship. Middle Market: These were the mills with reasonably good brand-names. DuPont would target them with similar offerings in terms of application, designs and products with some customization as per needs. This category was meant to have moderate customer relationship in terms of solution. Premium Market: These were the individuals and alliance mills. DuPont would target them with completely individualized offerings. This category was meant to have the strongest customer relationship to the extent of co-designing, using each others expertise to add value and reduce costs at the same time.

Situation analysis
SWOT ANALYSIS STRENGTH 1. Delivered a series of value added services at the mill, wholesaler and retailer level 2. Strong relationships with the mill. Alliances and partnerships for future 3. Advanced IT systems enable cost saving. Scheduling and information sharing along the distribution and value chain 4. Segmentation and targeted offering of quality and relevant product to the segmented customers 5. Formulation of specific long term strategies WEAKNESS 1. Short term mindset of the employees and adversarial relationships among people well established in the industry 2. Lack of trust among partners and people working in the industry 3. Changing employee attitudes from performance to relationship + performance 4. Controlling costs and adding value was a trade off to be managed OPPORTUNITIES

1. Better relationship with mills will result in better products and hence better value to the customers. Long-term loyalty and satisfaction of customers. 2. By providing customers with value propositions and meeting their demands, the market capitalization and customer retention will increase 3. This strategy will lead to long term growth and profits 4. It shall be able to position itself as a company that provides complete flooring solutions THREATS 1. If no meaningful relationships are developed between alliance partners i.e. DuPont, mills, wholesalers and retailers, the experiment and the company as a whole can collapse 2. Lack of appropriate control on information dissemination along the delivery chain may lead to information breach and leakage to competitors 3. Inability to develop long lasting relationships across mill owners

Marketing Mix
Market Positioning
A complete solution for all your flooring needs Positioning is the art of designing the companys offering and image to occupy a distinctive place in the eyes of the target market. The goal is to locate the brand in the mind of the consumer and maximize potential benefit to the firm A good brand positioning helps guide market strategy by clarifying the brand essence, identifying the goals it helps consumers achieve and getting them in a unique manner. A good positioning strategy places one foot in the present and one in the future. It has to be aspirational provide the brand room to grow and improve. This is exactly where DuPonts strategy is heading. Specific strategies on positioning requires:1. Determining a frame of reference by identifying target market and relevant competition 2. Identifying Points of parity (POP) and Points of Difference (POD) 3. Creating brand mantra to summarize positioning and essence of the brand

Value Proposition Table

Company DuPont

Customers Quality and value conscious consumers

Benefits

Price

Value Proposition Complete Solutions flooring

High quality Segmented carpets at across affordable categories prices

Paradoxes and Confusion

The irony of the reappraisal of the value chain was not lost on Jim Carr. The same concept that he had envisioned to bring the company closers to its end users would play a role in distancing important components of its value chain. It was a flummoxing issue that had to be resolved Delicately Paradox 1 To create win win situation for the whole value chain. The alliance partners had to be kept happy and the end users had to be satisfied. Creating a select group of partners would help but along with that the knowhow and expertise had to be passed down to the customers to help them differentiate themselves. Paradox 2 Adding value yet remaining cost effective. The company could not afford a tradeoff between customers and business. DuPont realized both could not be achieved. Hence it made its stance clear. We cant be squeezed on price and deliver value. Yet we can deliver value and be cost effective. This was achieved by striving to deliver a premium product at the best possible market price and adding value to it by dedicated customer relations.

Suggestions
DuPont had a number of issues to be addressed. Here is our view on the viable solutions. The number of alliances had to be whittled down from a lumbering 250 to a meagre 15. Yet that 15 had to be able to handle the whole burden. Doing this over night would drastically and probably irrevocably damage the market share of the company not to mention the relation with its outcast partners. We think if this process was carried out in a step wise or slab wise manner the damage could be mitigated to a large extent. The alliances that had to be formed needed to keep up with DuPonts values and vision. The company wanted its alliance partners to grow along with it and was willing to invest resources and time to make that partnership a successful one. One model of organization structure that we felt might be suitable was the keiretsu model followed by Japanese companies. In this concept the central company which in this case is DuPont holds a minority stake in its partners. So it makes sure that the growth of the partners takes place and they can watch over it also at the same time not needing to invest the resources needed to own that company.

DuPont needed its select retailers to be profitable so that the relationship strategy that was being developed was viable in the long run. This can be achieved by adopting a push concept where the dealer margins are higher thereby fostering confidence in its partners.