WHAT’S IN IT FOR YOU?
The following account of product management in Clipsal’s heyday (when it was still Australian owned) is a brilliant learning lesson for anyone. Having witnessed and participated in their processes provided me with invaluable experience which I can bring to any future contracting role.
Information about my role in this company is also included in the RESEARCH and ANALYSIS sections on this site. The research section looks at information that was gathered for new product development for a flag ship fan light heater. The analysis section looks at an opportunity that I took to assist the company in their stock holding processes to overcome regular long time product shortages.
HISTORY: Gerard Industries is better known for its flagship brand Clipsal. IT began in 1920 and grew to be the highest market share electrical manufacturer in Australia. By 1998 the company was having difficulty competing in the market due to competitor actions and cheap imports. By the time I joined the company half of it was already owned by Gold Peak, a Hong Kong company. In 2003 Schneider Electric (the world’s largest electrical company) acquired Clipsal.
RANGE RATIONALISATION
MISSION: Product Management in an electrical manufacturer was an ideal marketing role as I moved from being an Electronic Engineer in the Aviation industry. This product management role was to revitalize a $20M portfolio of heating and cooling products. This range of products had been neglected in recent years due to a focus on core cash cow products such as power-points and the introduction of a new range of home automation products such as C Bus.
My mission was to analyse the current range, rationalize where necessary, re-brand the ‘cash cows’ ranges and develop new products as necessary. My work at Clipsal touched on all parts of the marketing mix, which is really what product management is all about.
ACTION: In the other sections of this site I have discussed my work on new product development and re designing the stock holding system. In this section I will concentrated on the some of the excellent methods used for creating strong customer loyalty and my work on rationalizing ranges and developing new marketing collateral.
Because Clipsal had needed many specialist exhaust fans and they covered all residential and commercial markets, over time they found themselves with three overlapping ranges. This meant that while qualities and expected ‘mean time before failure’ values varied, that the overlapping price and specification values caused market confusion. With over 300 exhaust products in the range it also caused problems for stock holding, spare parts, wholesalers and electrical contractors.
The rationalizing process began with sales analysis over the last five years of fan sales. Once this baseline was created, discussions with electrical tradesmen provided some of the greatest insight into the market preferences. This is because while the products were sold into parallel wholesale and retail markets, the wholesale market made the majority of sales.
RESULTS: It was found that Asian imports had forced Clipsal to lower prices across the range so much that along with a complicated system of rebates, many products ended up being loss leaders. Quality also became a contentious issue as some of the spare parts that Clipsal imported were not as reliable as expected.
Many competitor imported products were of the lowest acceptable quality, but this is what many specifiers selected to keep overall house building costs down. This meant that only a few very high quality (long lasting) products were actually required to be stocked by Clipsal. This concept of quality for a purpose was what became very obvious very early on. Consider that using ball bearing motors rather than bush and sleeve designs may only cost a few dollars more but would significantly extend the motor life and its quiet running. Many large projects still select the cheapest exhaust fans.
It was decided that Clipsal would stock a reduced size medium quality range to compete with the imports, drop much of a older range and only stock a reduced set of the very high quality fully imported European fans, O’erre. This rationalization required the following marketing collateral work.
Creating winning Marketing Collateral
All of the brochures and packaging in my ranges were beginning to look tired. While these may not have been vital to acceptance by the specifiers and tradesmen, they were still important to the consumer market, who paid a much higher price for their products. I was involved in the launch of new brochures for the range of ceiling fans, one of the ranges of exhaust fans and brochures for the EcoHeat range. Of particular interest in this area was the creation of a new brochure for the re-launch of a high efficiency heater called EcoHeat. The back story to this product was that it was not heavily supported on its first launch and did not receive support from specifiers because its benefits were not communicated.
This form of electric heating was created in Europe and has a relatively high usage compared to its almost unknown status in Australia. The benefits of this technology are many, but essentially its warming action is two-fold. Firstly it radiates infra-red heat off the metal surface of the heater, likened the warmth felt from the sun on a cool temperature day. Like conventional heaters, it also heats the surrounding air. But because of this direct radiation action, heat in large volume rooms can be felt much earlier, and the heater can be used at much lower power as at least half of its effective heating coming from direct heat means that it doesn’t need to heat the room air to a high stifling level.
After I performed competitor analysis on numerous competitor products (other heating technologies) the direction of the brochures was set. This meant that while the brochures still needed to carry considerable educational content (as is often the case with the launch of a new technology product), it also needed to have a complete range and make an emotional connection with the potential buyer.
It was realized very early on with the relatively high cost of these units that niches would need to be indentified and testimonials quoted. Because of the very robust nature of the product they had previously enjoyed considerable success being installed in such places as correctional centers, public places (pedestrian tunnels) and industrial complexes. My research also suggested that due the innovative nature and higher cost of these units that they should have some other way of differentiating themselves from the standard package that had some people consider them to look like a refrigerator door. My suggestion was to provide information on the brochures as to where customers could get exact replication of any scanned artwork or pictures blown-up and printed on the heaters surface.
RESULT: The complex nature of this brochure that would span national distribution and the re-launch of the range which was constantly being extended made this a fairly complex project.
CONCLUSION: The complexity of this report was high because of the number of stakeholders that needed to be incorporated into the information gathering process including negotiations on the third party manufacturer Thermofilm. Managing this project and coordinating the final brochure creation with the in-house advertising department was a steep and memorable learning curve.
THE SECRETS OF WINNING CUSTOMER LOYALTY
HISTORY: When text books and articles discuss customer loyalty they usually refer to the cost of acquiring a new customer being in the range of 8 to 10 times more than it cost to retain a customer. With 60% plus market share in Australia Clipsal, knew what it was doing in regard to loyalty. By being located in Adelaide, they kept manufacturing cost down. Recently by relocating from Bowden near Adelaide to a mid range suburb (Gepps Cross) they have made a short term gain on real estate and decreased future land rate costs. In many aspects many industry experts considered Clipsal products to be equal in design and quality to HPM, their main competition. And while much of their ability to retain their leading share relied on their ability to force supplier costs downs and sell loss leader products, they also had excellent customer loyalty programs.
MISSION: Loyalty was so valuable to Clipsal that they had their own marketing promotion team looking after it. The biggest regular events Clipsal put on were their legendary weeklong, fortnightly spaced product education retreat classes in Strathalbyn. Even the location of this purpose built centre was genius as Clipsal negotiated a very low price for the land in the scenic Adelaide hills, for resort style conference centre, golf course and tennis courts, educational facility. In return the council of Strathalbyn would get kudos and potentially increased traffic and money into their town. See Google maps: Clipsal Strathalbyn - Dunreath Road, Dunreath St, Strathalbyn, SA 5255.
Clipsal Strathalbyn Conference Complex
ACTION: The brilliance of this system was that only the top product buyers were invited to these camps. For those lucky enough to be invited to a Clipsal camp it usually involved a week with seminars by day and parties at night. Besides the camps excellent facilities, customers were usually treated to the best of Adelaide’s restaurants and on occasions a few customers may ‘off the clock’ tag along to the towns best clubs.
They also got to hear about future Clipsal product releases. On the Friday of these weeklong seminars the invitees were bused to head office just south of the CBD and the Product Management team would be given a five to ten minute time slot to present some of the finer points of their range.
An even bigger lure was the competitions that were regularly created. Besides good discounts for promising to exclusively carry the Clipsal range, customers often partook in competitions such as the Malaysian Commonwealth games campaign. For this event Clipsal decided to run a lottery where tickets were essentially the tokens provided on the packaging of products electricians bought. Buy many products during the competition time and increase your chances of winning an overseas holiday and entry to some of the games events.
Whilst these large competitions were relatively sparse, one of the most coveted prizes in the industry was the legendary Clipsal leather and suede jacket. To an outsider, this kind of sports jacket would have no particular value, but due to the brilliant branding, good quality products, weekly seminars etc, the rarity of winning these jackets was likened to winning a green jacket on the Golf masters tournament.
CONCLUSION
This information is not a competitive secret, as all of the wholesalers, tradesmen and customers were in on it. Also several years have passed, so I am sure that their methods are much more sophisticated now. It is also very likely that the competitors also lure customers by providing that something extra special. However you will see from the glimpse above, that Clipsal knew how to keep its best customers very close. They had already discounted their prices to the barest of margins for many of their ranges and here they were giving away many other prized things such as ‘time’. Sponsorship of events such as the Clipsal sports car races again aligns themselves closely with their customer’s values.