Dow Corning's Xiameter Brand: Product Commoditization and Business Model Innovation
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Case Code: BSTR446 Case Length: 13 Pages Period: 2000-2013 Pub Date: 2014 Teaching Note: Not Available |
Price: Rs.400 Organization: Dow Corning Corp Industry: Silicone, Specialty Chemicals Countries: US,Global Themes: Business Strategy, Brand Management, B2B Marketing |
Abstract Case Intro 1 Case Intro 2 Excerpts
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The Impact of a changing Operating Environment
However, considering that these were short term initiatives, Dow decided to embark on a course of action that would provide a fillip to its sales. Accordingly, the company formed teams of managers who analyzed relevant developments including customer buying behavior, market trends, competition, and other international factors impacting business prospects.
Speaking on this issue, Marie Eckstein, Global Industry Executive Director of Dow, said, "It was teams of our best people that took a real structured approach, looking at where we are, where we have been, and what we could be."...
Launch of Xiameter
Dow recognized the fact that dealing with the threat of commoditization would require an innovation in its business model. In late 2001, it decided to create a new brand called Xiameter under which it would sell its commodity silicone products. The name, Xiameter, did not denote anything in particular. Randall Rozin, Global Manager of Branding and Marketing Communications, said, "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."
Dow created a new brand identity, as it felt that this radical business model needed to be operated independently, so as to have greater organizational acceptance. So, while the 'Dow Corning' brand was expected to have an association with high-value products along with customized services, the 'Xiameter' brand was to denote commodity products, with no attached services. Moreover, the company did not want its new emphasis on serving the silicone commodity market to affect its hard-earned reputation as a provider of innovation and technical support....
The Xiameter Protal And Its Features
The Xiameter website’s main page offered visitors an option to "TakeATour". This option gave a step by step guide to searching, ordering, and purchasing the required silicone products. The website offered a complete list of the products available on the site, through the “Browse Products” option. They were categorized as silicone fluids, silicone emulsions, silicone rubber, silicone sealants & polymers, and silanes.
In addition, there was a "Find" option to simplify the search process and get back details of any particular product that the customer had in mind. There was also a customer support option, wherein prospective customers were offered guidance on how to open an account and the facility to browse the product catalog and information about purchase options. There were also links to other Dow company websites.
To start off, customers created a profile and got registered. After that, they could place an order, for which they were provided with an acknowledgement. Then they were given the shipping details and an electronic invoice. This process reduced the extent of customer support needed for the sales transaction....
Business Model Success
The Xiameter business went on to become a huge success, enabling Dow to earn a return on its investment within three months of its launch. The company revealed that a year later, Xiameter had experienced a double digit growth in sales and earnings. Dow was also able to save costs through the Xiameter model. The company believed that Xiameter’s contribution to its overall financial health was "very favorable".
Some analysts felt that the two-tiered pricing of the company's products would upset the premium priced purchasers, causing them to demand more reasonable pricing. From the start, Dow had been clear that it would not allow its ‘Xiameter’ business to cannibalize its 'Dow Corning' business.
Fillmore said, "However we decide to grow, we’re not going to intentionally compete against ourselves." In actual terms, less than 10% of the 'Dow Corning' brand customers shifted to 'Xiameter'. On the other hand, Xiameter managed to attract several customers in the hitherto untapped "Economic Buyer" segment. It garnered customers across all its geographies, especially Asia. Xiameter attracted small entrepreneurs as well as multinational corporations...
Road Ahead
As of 2013, Xiameter accounted for 40% of Dow's US$ 6 billion annual sales. Antifoams, blends, and resins were added to the Xiameter product catalog and were made available in over 100 countries. The company was also keen on expanding its reach in the Beauty Care, Automotive, Coatings, and Energy markets.
Dow was working on introducing a new customer tool on Xiameter.com. The new tool was expected to provide customers with the option of selecting their order date. This was expected to increase customer satisfaction by enabling them to order the desired quantities and getting them on the required dates.
Dow was also developing a method to use social media platforms to bring its European distributors together, in order to increase operational efficiency. The company believed that social media should aid its geographical expansion efforts, apart from helping inform customers about the usage of silicones in their various applications....
Exhibits
Exhibit I: Important Milestones of Dow
Exhibit II: Information on Global Silicones Market
Exhibit III: Details about Customer Segments
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