branding for sme

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Chemical Industry Digest. Annual January 2012

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Branding Small & Medium Size Chemical

Enterprises through Advertising

A Case Study for the Fine Chemical Industry

Dan St. Andrei

Yesterday, branding was a prerogative of large chemical companies. Today, small and mediumsize chemical companies MUST include branding in their activities or risk being wiped out bythe globalization tsunami. This article provides an insight into the relationship between posi-tioning, branding and advertising for SMEs.

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Introduction

Globalization has changed the rules of engagementin B2B markets and yet few executives involvedin the chemical industry seem to acknowledge

this. Countless small and medium size enterprises con-tinue to focus their resources on developing better tech-nologies and purer products, increasing manufacturingcapacities or enhancing their regulatory and analyticalcapabilities. Little, if any attention is being paid, how-ever, to the processes happening at the interface with thecustomers.

For a marketing agency this does not come as a sur-prise. The “manufacturing” culture has its roots in thepost-war, blue collar era when the product was every-thing. Very few companies had the technology and theworkforce to innovate and manufacture a winning prod-uct or service. THE PRODUCT was the key to commer-cial success in a world of national competition and boom-ing demand.

This situation has since changed radically: at the lat-

est CPhI-Paris 2010 edition. e.g., there were approxi-mately 1900 companies offering their products and ser-vices to a market where the top ten pharmaceutical com-panies cater to roughly 75% of the total global demand.In the post-industrial era, many have the product or theservice and clearly that the offer is overwhelming the de-mand.

The question arises how can a SME stand out in

the global cacophony of names and logos and capture

the buyer’s attention?

B2B Marketing: back to the futureThe history of B2C marketing offers a great clue on

how to achieve awareness and acceptance in clutteredmarkets. A long time ago, consumers began to be con-fronted with an overwhelming number of productchoices. This was when consumer companies realizedthat sales and profitability are not determined by theproduct itself but also by the marketing behind the prod-uct.

AuthorDan St. Andrei is an art director and communications consultant specializing inadvertising, branding and rebranding. He is the Creative Director and owner of theagency Creative Corporation, which is based in Lisbon, Portugal, and has offices inCanada and Romania.

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the physical product made by the plant is ac-tually translated by marketing activities in pal-pable financial assets.

So, what I want to emphasize here is theprinciple that small investments in brandingactivities can work just as well in a SME en-vironment, lead to market leadership and in-creased profitability.

In today’s economy, the marketing battle isa battle of the brands. Companies will recognize thatbrands are the most valuable assets and that it is moreimportant to own markets than the factories, because theonly way to own markets is to own dominant brands.

Many marketers struggle to get CEOs to see the valuein B2B branding. The CEOs see the branding process asan expense rather than an investment. It is easy to seewhy this thinking has been predominant in recent yearswhen you look at their business models. B2B companiesoperating in small vertical markets know most of theircustomers and competitors by heart. When the customerrelationship is built on personality why would the cre-ation of a brand help business? Branding, they argue, ismore suitable to a B2C environment than a B2B.

Recent economic conditions have shaken these verti-cal markets. They are no longer a safe haven. As every-one is looking for an opportunity, those in related fieldscould well make the jump into a relatively naive marketand make a big splash. The economy has forced compa-nies to diversify. This means they have to transcend mar-kets. The only means they have to do this successfully isby being recognized and having successful B2B brand-ing. Despite having no roots in the market, the brand isstrong enough to make the transition.

Branding Penn: a business caseIn 2005, Penn Specialty Chemicals Inc. (a US based

medium enterprise specializing in furan derivatives) ap-proached our agency to develop the concept for their ad-vertising campaign. This advertising campaign coincided

In particular, branding emerged as the main antidoteagainst the lack of product differentiation. In their fightfor the consumers’ mind share, companies brandedpretty much anything from big ticket items (Mercedesand Frigidaire) to services (Hilton and Hertz) and to bev-erages (Pepsi and Gatorade) and even to plain water(Evian and Perrier). Brands command higher prices asthey fulfill consistently a certain expectation in terms offunctional and emotional attributes.

A similar paradigm shift is now afoot in the B2B mar-kets as companies are facing a similar situation. With theadvent of globalization, the company’s message has tobreak through the hubbub of an increasingly complexmarket place. Beyond the numerical and geographical ex-pansion of the competition, a flurry of international andtransnational acquisitions, mergers and divestituresaround the world have only added to the confusion. Es-tablished names in the chemical industry disappear,morph or shatter continuously in a constellation of newnames and complex ownership structures.

In this context, the power of the brand remains theprerogative of large organizations such as BASF, DuPont,Degussa, Dow, Bayer, DSM or Lonza. Moreover, most ofthe newer brands have emerged as a result of the M&Aactivities of branded companies, e.g. Evonik fromDegussa, Lanxess and Saltigo from Bayer, etc.

It seems that the value of the brand is understood

only by the market leaders who know how to build their

brand architecture and use it to boost profitability. As amatter of fact, people realize that the brand has a dollarvalue just like any other physical or financial asset sit-ting on the balance sheet: e.g. the 3M brand value was $3.1 billion in 2010 and was ranked # 90 on theInterbrand Best 100 Global Brands list. Whenbrands lose their lustre so does the shareholdervalue! Merck’s brand was valued at $ 9.1 billionin 2001 but was worth less than $ 3 billion in 2010after the Vioxx debacle.

In spite of this palpable dollar value attachedto the brand, SME executives continue to miss the

connection between brands, profits, growth and

company valuation. They fail to acknowledge that

It seems that the value of the brand is understood only by

the market leaders who know how to build their brand ar-

chitecture and use it to boost profitability. As a matter of fact,

people realize that the brand has a dollar value just like any

other physical or financial asset sitting on the balance sheet.

In spite of this palpable dollar value attached to the brand,

SME executives continue to miss the connection between

brands, profits, growth and company valuation.

Countless small and medium size enterprises continue to fo-

cus their resources on developing better technologies and

purer products, increasing manufacturing capacities or en-

hancing their regulatory and analytical capabilities. Little,

if any attention is being paid however to the processes hap-

pening at the interface with the customers.

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with the rebranding of the company from a leader in fu-ran derivatives to a leader in the emerging markets ofgreen chemicals.

One of the major elements of any brand is creating thebrand story. Penn’s long tradition in producing solventsfrom corn cobs and sugar cane bagasse could be tracedback to WWII efforts to diversify chemicals away frompetrochemicals. Penn’s history provided, therefore, aunique backdrop for its brand repositioning on the greendimension as it was truly a pioneer in chemicals fromrenewable resources.

As the Kyoto protocol entered into force on February16, 2005, Penn expected that it would usher in an era ofa low carbon economy. Penn’s solvents were uniquely po-sitioned to capitalize on their bio-origin in corn cobs andsugar cane.

In this strategic context, Penn had to reinvent its com-mercial persona and capture the strategic position ofleader in the green solvent markets.

Penn started by abandoning its old logo, (a black andwhite contour of William Penn) that spokemainly about the origin of the company inthe Philadelphia area and Quaker OatsChemicals. These powerful symbols in theNorth American culture meant little to itsglobal customer base. It also spoke nothingabout the green offering of the company.

Penn’s new logo was a pentagon coloredin shades of green and blue, a hybrid sym-bol of the five member furan ring and a re-minder of the green fields, blue skies andrain water, the three natural forces behindPenn’s production of furfural (Fig 1).

The heraldic change was further rein-forced by the modification of the tag linefrom a strong positioning on the technicaldimension (The furan chemistry specialists)to a strong positioning on the green dimen-sion (Chemicals from renewable resources).

Penn had limited marketing resources sothey could not invest in building first thisumbrella brand. They chose to invest simul-taneously in the marketing of a productwith high market potential. It was hopedthat the successful marketing of the greensolvent would eventually spill over to estab-lish Penn as the innovative global leader ingreen solvents. The chosen solvent, 2-MeTHF, was an excellent opportunity to

substitute tetrahydrofuran (THF) with a quarter billiondollars market.

Penn’s market research, however, showed that by late2005 the world was not prepared to pay a premium ongreen. The concern for MeTHF’s high price overpoweredthe environmental benefits of the solvent. Therefore, wedeveloped an advertising concept emphasizing the over-all cost reduction opportunities offered by MeTHF dueto its superior product attributes. Nevertheless, we didprovide the “green” overtone to the ad concept throughthe presence of the new logo and tagline. Moreover,colour coordination with the logo added to the “green”overtone of the ad and established an early claim onsustainability (Fig 2).

Subsequent market research by Penn showed that thesustainability aspects got increasing traction as the Kyotoprotocol was seeping through national legislations andcorporate values around the world. The advertisingchanged in 2006 to accentuate the green aspects first. Sec-ondary overtones in cost savings were still present as costremained a high concern (Fig 3).

Fig 1: Penn’s new logo expresses the shift to a green economy

with a global reach (2005)

Fig 2: Early stage advertising for 2-MeTHF emphasizes cost

savings first (2005)

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Finally, market research conducted byPenn at the end of 2006 showed that mar-ket perceptions shifted even further. Bynow, focus groups represented by purchas-ers, R&D and regulatory professionalssaw the low carbon economy as the wayto the future. Several pharma companiesclearly captured this in their annual re-ports.

In response to the shift in demand werepositioned the product as a true agentof change. The juxtaposition of MeTHFwith Penn’s logo ensured that the greenfuture is associated with the umbrellabrand of the company (Fig 4).

MeTHF was nominated for the CPhIInnovation Award in Paris in 2006 and forthe Presidential Green Chemistry Awardin Washington DC in 2007. At that pointPenn’s name was firmly established as a leader in greensolvents.

ConclusionFor many companies, successful branding will only

come when the concept of having a B2B brand is acceptedthroughout their organization. Everybody needs to knowthat branding, and having a brand, is more than havinga logo. A brand holds the promise of what the organiza-tion represents now, what it aspires to and what it will

evolve into.

Managing demand is critical in a globalized world.Marketing is the dedicated function that manages thelong term demand. Most chemical SMEs however focusonly on sales, which is short term focused. ChemicalSMEs should learn from their industry leaders and makebetter use of marketing activities such as branding andadvertising.

As if that wasn’t enough to convince you, a quick lookat the top ten global brands for 2010 will show you that

five of them are primarily B2B brands.Download the full list of the top 100brands and you will see many more B2Bcompanies with mature brands. The oldexcuse that branding is a B2C activityno longer stacks up. B2B branding ishere to stay.

Branding is no longer the reserve ofleading consumer businesses. In orderfor an organization, be it B2B, to pro-mote its uniqueness in a busying field,it has to distinguish itself by means ofa brand. B2B branding will become moreprominent as more organizations real-ize this.

So, I am ready to bet that in the 2011Top 100 brands list you will see moreB2B organizations showcasing success-ful brand.

Fig 3: 2-MeTHF advertises greenness as Kyoto protocol gains

market traction (2006)

Fig 4 Contrast between old and new; Penn becomes a leader in

sustainability (2007)

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