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Idea Applications

Jeff Falk

I have a bin on the shelf near my desk, just a regular bin to keep paperwork that you can find in any office supply store. I inherited it along with the other usual supplies when I joined GCI magazine; it had been labeled “Purgatory.” I have no idea what files it had held for punishment, but it has become a storage place for the “purification” of ideas. Besides the materials that are sent to me and end up in the bin, bits of torn out magazines and newspapers find their way there—waiting for the ideas they contain to spark something more that the editors of GCI can run with.

One now discoloring piece is a blurb that I tore from my local paper in March 2010, and it is apropos to this issue, with its focus on anti-aging: “A man stole eight bottles of anti-aging products and four bottles of regenerating serum, items worth a total of $323, from CVS ... ” My first thought was, “Wow. That’s a lot of product.” My second thought (showing I’ve caught on to thinking about consumers in targeted segments) was, “I wonder how old this guy is?” I mean, is he looking to head off the aging process at the pass? And what product types would suit those needs best? Another thought that now occurs to me is that for all the brand owners looking for entrée into the men’s market, I think we found a consumer study candidate— check out Alisa Marie Beyer’s Testing, Testing ... 1, 2, 3 for real insight into consumer studies.

Regardless of what attracted this Dorian Gray kleptomaniac, it is clear consumers as a whole are looking for the newest breakthroughs in anti-aging—and are also expecting better results and more choices. In New Solution for Anti-aging, Shyam Gupta and Linda Walker consider the application of osmoprotection for multifunctional skin care, notably to address signs of aging. It is relatively new, but early indications suggest the potential for anti-aging products that will capture consumers’ imaginations. One of the signs of aging that osmoprotection addresses is intracellular inflammation, and Marie Alice Dibon contributes Inflammation and Aging, noting that low-level irritants can trigger an almost ongoing inflammatory reaction that is a major culprit in aging skin—described as inflamm-aging. Dibon writes that addressing inflamm-aging involves fighting the external damage by using anti-inflammatory compounds and antioxidant compounds; fighting cellular damage and fighting protein oxidation. And according to several articles published in late January, scientists have found a protein that acts as a “master switch” to determine whether certain white blood cells will boost or dampen inflammation. I wonder what implications this switch may have in the development of cosmetic products.

In the March 2011 issue, Eva Martin Fernandez, MWV’s European marketing manager, writes about the importance of consumer insight, notably of French consumers, and the impact on brand strategies and the packaging that fulfills these strategies. At about the time I was editing this contribution, I received an email with information on the efforts of Shelley Bausch, Dow Corning vice president and global executive director, Xiameter brand, and Dirk Soontjens, Dow Corning Hair Care global marketing manager, toward meeting the needs of a specific market and consumer through product customization based on market data/consumer insight and served through appropriate/innovative supply chains.

Soontjens tells us the starting point for developing formula/products for specific target consumers/markets always has to focus on consumer needs. In other words, specific claims and positioning essentially respond to consumer needs and an inherent trend toward individualization. And, according to Bausch, “consumer demand and stricter regulation in emerging and developing countries are leading to a growing emphasis on maintaining a ‘green’ supply chain.”

Here is the rest of our Q&A:

GCI: Brands are tending to target narrower and narrower consumer segments with very specific claims/positioning. Is that what has pushed formula customization or is it the outcome of formula customization?

Soontjens: To some extent, one could view the question from both sides. However, the starting point always has to focus on consumer needs. In other words, specific claims and positioning essentially respond to consumer needs and an inherent trend toward individualization. As a supplier of specialty silicones, when we strive to provide materials for customized products, we're responding to needs that exist or, in terms of developing or emerging regions, may be unmet.

Certainly emerging and developing markets are becoming more sophisticated, and consumers seek specialized products that reflect biological hair type, grooming practices, cultural fashion and technologies that can make better performing products. In this framework, silicone technology is a perfect example—the demand for high performance, and competition for differentiated personal care products continues to lead [brands and manufacturers] into new global territories, creating demand for specialty ingredients that push technology boundaries. That approach can serve as the starting point for new products that fill unmet-or in some cases, unrecognized-needs.

One driver of customization is the trend toward an all-around increase in hair treatments, including heat, chemical and other means. The result is greater opportunity for high performance ingredients and products that address hair protection and repair. We're seeing a greater focus on products created to enhance hair volume or to protect and strengthen color- and heat-treated hair. There also is a convergence of product functions, such as the use of conditioners to provide styling benefits. So although products for shampooing and conditioning of dry, oily or normal hair have been with us for decades, the global market keeps moving toward increasingly tailored hair care solutions.

GCI: What role does formula customization play in creating strong consumer/brand connections? Are you working on these customizations with addressing a need (addressing split ends, for example) in mind or with serving a consumer type in mind?

Soontjens: In some markets, brand loyalty is minimal, and that points out a strong need for directly addressing consumer needs. Lack of brand loyalty may occur in developing or emerging markets, where products are not sophisticated or highly differentiated. In this case, some consumers switch brands because they are trying to find the "perfect" product. Brand switching can also happen when consumers feel they need to make periodic changes because their hair becomes overly accustomed to a single product, which they perceive doesn't perform as well over time.

As products become more sophisticated and tailored to individual needs or preferences, one might expect consumers to show greater brand loyalty because of better performance. So yes, Dow Corning definitely focuses on customizations based on specific needs. Because many specialty silicones are multifunctional, that's a significant advantage for us. We can provide formulators with materials that offer combinations of mild to intense conditioning, shine, improved combing, moisturizing, color and heat protection, enhanced strength, or volume. Within that framework, we make certain we guide our customers in selecting the right silicone-based solutions for their applications and economic considerations. If we can help our customers develop successful products that motivate brand loyalty, we've served not only those customers, but consumers as well.

GCI: What has been the most dramatic impact of e-commerce on supplier/brand owner partnerships? How has it affected already global brands - is there a new paradigm for reaching and serving global markets/consumers?

Bausch: From a [brand owner's] perspective, e-commerce has reshaped the supplier/customer relationship by allowing suppliers to become valued business partners through increased efficiency and convenience.

By providing instant access to information and pricing, and the ability to order products no matter the time of day or physical location, customers find that online business models, with their self-service capabilities, make their jobs easier and facilitate the buying process much quicker than ever before.

This empowers customers to be more self-serving, finding information at the exact time of the day they need it. Having 24-hour/7 day-a-week access to order placement, order tracking, order histories and product information online is particularly important when the supplier is on the other side of the world. And in geographies across the globe where the traditional work week is not Monday-Friday, it opens doors for doing business when our customers need and want to do business. There is no need to call a customer service representative to place an order, the customer completes the transaction when it's convenient for them.

An added advantage, e-commerce services provide equal opportunity for businesses of all sizes. By being able to promote product features and pricing online, small firms can compete with much larger companies. In some cases, online services can be more cost-effective, allowing them to offer highly competitive prices.

One important reason for the rapid adoption of e-commerce in both developed and developing markets is changing demographics. Young people have grown up with computers in their hands, texting on their mobile devices, buying everything from books to clothes to electronics online, and sharing information on their favorite social media sites. Now, many of them are in the business world, looking for the same efficiencies and immediate access to information.

Dow Corning recognized this trend a decade ago when it launched its web-enabled Xiameter brand, which sells standard silicone products at market-based prices. The business model was based on extensive research, customer segmentation and the recognition that transformation needs to be proactive, not reactive based on market pressures. In 2009, Dow Corning expanded the model and increased the number of products available through the brand from a few hundred to more than 2,100, added a new order entry platform with enhanced self-service functionality, volume quantity options, and the option for customers to buy from distributors for the first time.

The value proposition enticing customers is based on an efficient ordering process and the availability of products offered at competitive market prices. The Xiameter business model strips costly services traditionally bundled into the price of the product and posts transparent tiered pricing visible to all customers. This allows customers the ability to balance their inventory costs with product costs based on the different purchasing options offered online.

One advantage of an e-commerce model is that you can build efficiencies directly into the website. Important is the fact that customers can find information at their fingertips creating ease of use, but the element directly effecting profitability is the efficiencies built into the order entry process. For instance, the Xiameter brand has implemented "business rules" that create a discipline for maintaining efficiency. These rules provides standard options to customers, but doesn't allow for customization which adds costs to doing business. So to purchase directly from the brand site, minimum orders are required, standard credit terms is the norm, and lead times for order are required. However, the business model recognizes there are exceptions to these rules. In this case, the value is captured by charging service fees for non-standard terms and rush orders.

These business rules aren't used to discourage business, it's quite the opposite. In fact, the business rules are implemented to ensure that products can continue to be offered at market-based prices.

GCI: How are innovative supply chain models in emerging geographies changing the face of the beauty industry, and what are the changes you foresee over the next five years?

Bausch: Consumer demand and stricter regulation in emerging and developing countries are leading to a growing emphasis on maintaining a "green" supply chain.

A global survey of senior chemical purchasing managers, conducted by an international research firm on behalf of Dow Corning, showed agreement on the importance of sustainability and environmental stewardship, but it revealed significant differences across geographies when it came to specifics. For example, Americans and Europeans named reducing waste as the most important environmental consideration, while developing environment-friendly products was most managers in China, Korea and India for example, consider the development of green (environmentally friendly) products as a more important driver than CO2 emissions, use of clean/renewable energy sources or waste reduction.

What's clear from these results is that, while there are differences in emphasis around the world, the priority for companies both big and small is to reduce their own environmental footprints.

In the future there will be even more emphasis on reducing CO2 emissions and use of renewable energy sources, as costs for solar energy becomes more affordable and climate change gets more attention in all geographies.

Navigating such differences will be a major challenge, as purchasing decisions by suppliers and customers will be increasingly influenced by sustainability goals and programs. For innovative companies, sustainability (encompassing environmental, social and economic aspects) also can present attractive business opportunities.

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