We helped a large chemical maker significantly increase the value of a new coatings additive, originally developed purely to help customers meet regulations, by discovering/showing that customers’ customers (contractors), using product with the new additive, could save costs and enhance revenues for their clients.
This chemical manufacturer sold raw materials to the commercial market for interior architectural coatings (AC), applied to door, window, and other ‘trim’ surfaces. The long, complex chain for this market included paint makers, then their customers, including commercial retail outlets, distributors, and commercial paint contractors. Then there were the end-users, the paint contractors’ customers: commercial property-owners and their property-managers. Also serving property-owners/managers, and influencing decisions in this chain, were commercial architects, designers, and leasing agents. Finally, at the end of the chain, were the owners’ customers (tenants, shoppers, etc.) who generated the owners’ revenue (i.e., rent) but typically were not directly involved in painting decisions.
Chemical suppliers such as our client, however, typically focused only on the first link in this long chain – the paint makers, and especially the specifiers in those companies (e.g. their purchasing and technology functions)
Our client had developed a new resin (a key coatings component) in their long-standing line of alkyd, solvent-borne resins. In this respect, our client was in the wrong place at the wrong time: solvent-borne (‘oil-based’) products for architectural coatings were declining globally, due to environmental regulations restricting use of Volatile Organic Compounds (VOCs), and the growth of latex, water-borne technology with lower VOC levels. Nonetheless, coatings-makers still sold substantial volumes of alkyd-based paints, especially in the commercial market.
New, even more restrictive VOC regulations, affecting the commercial market, had recently been issued in important geographies. Reducing VOC levels without degrading the basic performance of these paints was very challenging, however. Therefore, producers of alkyd-based paints urgently needed a new alkyd-resin. They, and our client, did not expect to slow the decline of alkyd paints, but hoped to increase share of this declining category by responding quicker and better to the regulations. Our client’s new product was a technological achievement, both meeting the new regulations, while maintaining basic paint performance.
DPVG was asked to help the new-product Team apply our discovery methodology, in search of insights that could help maximize the new product’s success. Using the DPV approach, we urged the Team to go beyond responding to the paint makers’ new-product request, starting by studying the actual commercial-painting experiences of relevant entities downstream. Thus, we helped explore whether and how paint makers, with paint using the new alkyd-resin, could deliver dramatically improved value propositions (VPs) to their customers, the contractors, and how in turn contractors could deliver stronger VPs to their commercial-property customers.
With our help, the Team explored ‘Video One – the current experiences and behaviors – of the relevant entities across the commercial painting chain. With the DPV approach, we did not ask these entities what characteristics they wanted in a new paint; rather we interviewed, observed, and analyzed what they actually did, in search of potentially improved experiences.
This exploration first showed that contractors found it easier to apply and work with alkyd paints than with latex; but pressures from regulation, and the contractors’ customers, were increasingly forcing them to switch to latex. However, with our help the Team’s analysis discovered opportunities for contractors to deliver a stronger VP. They could allow their commercial customers to actually reduce total painting costs by using paint with the new alkyd-resin, versus either latex or traditional alkyds.
Video One showed that 90-98% of the costs in a commercial paint job are labor, making most price differences among paints relatively insignificant compared to any impact on labor. For two reasons, costs of any given paint job were lower for latex than alkyd paints. Alkyds dried more slowly, adding time, and thus labor costs, to the job. Moreover, contractors using alkyd rather than latex paints more often had to paint after hours, thus incurring overtime costs, to avoid exposing occupants to alkyds’ stronger odor.
Analyzing the new product in light of these issues, the Team recognized that the new product not only met the new VOC regulations well ahead of other alkyd resins; it had also achieved a significantly faster drying time, and a lower odor. Thus the new product would clearly provide superior value, allowing commercial properties to save painting costs, versus other alkyds. Still, latex would have faster drying time and lower odor.
However, the total cost of painting must also account for the frequency of repainting, which was driven by appearance. For most properties, revenues are affected by maintenance of a clean and new appearance; once that appearance deteriorates sufficiently, the property repaints. Compared to latex, paints with alkyd (including the new resin) form a harder film that lasts longer, and is easier to clean. The Team studied how quickly trim surfaces – doors, windows, etc. – in a commercial space would typically deteriorate (i.e. chips, cracking, etc., plus the cumulative effects of soil and stains, and of trying to wash the surface). To maintain high-quality appearance over a three-year period, latex-painted surfaces would need repainting about three times, versus just once for alkyd-painted surfaces. (In addition, alkyd paints, including the new product, had better ‘cover’ than latex, thus requiring fewer coats of paint when repainting with a new color.)
The cost of painting with the new alkyd resin would compare to latex better than traditional alkyds had, since the disadvantages for dry time and odor were significantly reduced by the new product. Including the cost savings from less frequent repainting, and from fewer coats needed when changing colors, the Team’s analysis demonstrated that in net, the total cost of painting with the new alkyd would be significantly lower than with latex. Thus, the Team’s analysis indicated that paints using the new product could potentially win share not only from existing alkyds, but possibly even from latex – a bigger business opportunity for the new product and the makers of alkyd paints.
Our client successfully partnered with a series of its paint making customers and achieved a significantly stronger market impact with the new product, for them and our client. The DPV methodology had helped the Team find surprising insights, focused much closer to the most crucial entity – the commercial property managers/owners – and had helped them launch, with great success, a more ambitious growth strategy.
