Silicon company explores dual-brand approach

After changing the way it approached business Dow Corning has experienced double-digit sales growth every year since 2002, with a record sales growth of 13% in 2006.

Five years after Dow Corning reinvented itself with a two-brand strategy, the bottom line is success.

By changing the way it approached business - putting customer needs first by offering a choice in how to purchase materials and solutions - Dow Corning has experienced double-digit sales growth every year since 2002, with a record sales growth of 13% in 2006 over the comparable period in 2005.

The launch of its online business Xiameter was a bold step.

The new business model, designed for a certain market segment - price-seekers - came with a risk of cannibalising the traditional Dow Corning brand, if current customers moved to the new offering.

While Xiameter provides market-driven prices and products that do not come with added services, the Dow Corning brand enables customers to purchase products along with full service and solutions offerings.

For its first 50 years, Dow Corning developed an industry with product innovation and technology leadership based on silicon science.

Product technologies ranged from silicone fluids used in hair and skin care products to advanced silicone sealants that have enabled skyscraper construction and shaped global skylines to materials that protect circuit boards and sensitive electronic assemblies against costly failure.

But the business landscape shifted dramatically in the 1990s.

With a global recession, currency crises, and increased competition from both global and local suppliers around the world, product innovation alone could no longer drive or sustain the company's success.

"Severe cost pressures made customers more wary and demanding", recalls Donald Sheets, Chief Financial Officer and Americas Area President, Dow Corning.

"Fortunately, we recognised that our environment was changing, and we were able to adapt".

"Our two-brand strategy offers the choices and solutions that customers need to help them solve problems and seize opportunities".

Xiameter has helped bring change to the industry.

Designed for customers who can order in large volumes and know what they need, how to use it, and do not need extra services or technical support, it complements the corporate brand which comes with expertise, advice, counsel, labs, technical support, and scientists.

So rather than cannibalising the corporate brand as some feared, Xiameter has only made it stronger.

In 2000, Dow Corning had virtually zero online sales, but by 2006, the percentage of combined Dow Corning and Xiameter sales conducted online had risen to 30% - significantly higher than the industry average.

According to a benchmark study conducted by the American Chemistry Council, on average, chemical companies in America conducted just 11% of their sales through e-commerce methods in 2004 and 12.8% in 2005.

Dow Corning achieved investment payback only four months after the launch of Xiameter.

The significant reduction in inventory, which is attributed to Xiameter's products being "made to order" with required minimum lead times, freed up working capital as well.

In its first year, Dow Corning estimates that its new business model reduced logistics costs by 60%, saving the company approximately US $3.5 million, mainly due to the elimination of warehousing costs and more efficient shipping of larger loads.

Xiameter also serves as a means of geographic expansion for the corporation.

Originally selling products in 50 countries, Xiameter is now configured to sell in 83 countries, some of which were new to Dow Corning.

"What we have achieved over the past five years not only indicates our success, but it shows that we have been able to help our customers succeed as well by offering them choices in how they want to purchase materials", said Shelley Bausch, Global Executive Director, Xiameter.

Offering customers choices and bringing new value propositions to the silicone marketplace, Xiameter was only one part of the company's larger global repositioning strategy, which was based on the results of Dow Corning customer feedback and segmentation studies.

The Dow Corning brand was re-focused on providing a variety of solutions and services, in addition to the thousands of silicon-based materials the company offered.

By making this change at the same time Xiameter was launched, the company was able to reinforce the value of its corporate brand.

"We took advantage of a tremendous opportunity to create solutions and provide services to our customers", said Sheets.

"Our customers told us they were willing to pay for these offerings".

Today, Dow Corning provides a wide range of solutions including full formulation development, analytical and application testing, and environmental health and safety services.

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