Large and very large lubricant marketers enjoy many competitive advantages tied to scale – favored relationships with the majors, geographic reach, ability to attract talent and acquire technology, access to capital, and more – yet they also have some significant challenges. And some of these challenges are directly related to their size and accelerated growth.
The first and often most difficult set of hurdles arises when a marketer transitions from being a mid-size outfit to one that is large-size and upward. This progression often includes mergers or acquisitions along the way that must be integrated. And any marketer who has been through the process will attest that integration can be very complicated and even painful.
Mergers and acquisitions typically require management to yoke together the people, corporate cultures, products, processes, technologies and policies of companies that may once have been competitors. Although it certainly is challenging to integrate each of these elements, marketers who have ridden in this rodeo say the most demanding part of integration is corralling and aligning the people and corporate cultures.
In many cases, integrating personnel includes finding a new role for the owner(s) of the acquired company, often a role they never have filled during their entire careers. Thats because they may have entered the business as entrepreneurs, or through family succession. But in any case, they are now working for someone else and have to adjust accordingly.
Similarly, the management team, sales representatives, support staff and the drivers of acquired companies must also be brought into the fold. Although there can be challenges with the support staff and drivers, the real difficulties are said to be in integrating the management teams and sales force. This is where fear and uncertainty, culture clashes, power struggles, personality conflicts, changes in headcounts and other issues can arise to tear at the fabric of an acquisition and undermine its success.
With the demands of integration running in the background as larger marketers work to become larger, companies can become distracted and inwardly focused. This pulls employees away from the business of providing excellent products and services to their customers. When that happens, some employees may jump ship and take business with them, or customers may not like what they see and make a switch.
But there is another and more sustained challenge large lubricant marketers face, one that may be inherent in what it takes to be large. Large companies tend to impose more layers of management, additional policies and procedures, and other structures that typically come with size. Although necessary, these can hinder the marketers ability to react quickly to deliver the level of service expected by its customers, or previously provided by a legacy company prior to its acquisition.
Also inherent in the business models of some large and very large marketers is a dogged focus on numbers through the use of customer relationship management software and other analytical tools designed to maximize sales and profits and minimize unproductive time spent with customers. Whereas this is certainly good business practice, it can become an issue if reaching volume, profit and efficiency goals comes at the expense of customer intimacy.
At the end of the day, customers care more about their business then they do the business of their lubricant marketer. And if large-company analytics put efficiency ahead of customer intimacy, due to their volume, face-time requirements and other special needs that bite into the marketers profits, you can be sure theres a segment of customers who will open their doors and wallets to suppliers more willing to meet their needs.
That segment will likely comprise small- to mid-size customers who appreciate and place value on the relationship they have with their lubricant supplier. In some cases, they prize the ability to pick up the phone and speak directly to the head of the company about an urgent order, or maybe just to chat about new products or a competitor that stopped in to ask for their business. Such intimate behaviors also signal how important the customer feels its business is to the supplier. Measures of that importance can include access to the owner, speed and quality of responses to inquiries, going to bat for them on pricing, frequency and quality of sales calls, and other meaningful and genuine acts of customer appreciation.
A major challenge large marketers have is to strike the best balance between profit-oriented efficiency and customer intimacy. Although its true that most companies, regardless of size, have similar challenges, its also clear that the best balance for some may be considered way out of balance by others. And therein lie the opportunities for large marketers – and for small to mid-size companies to grow as well.
Tom Glenn is president of the consulting firm Petroleum Trends International, and of the Petroleum Quality Institute of America. He currently is updating the multi-client study Lubricant Supplier-Distributor Relations. Phone: (732) 494-0405. E-mail: tom_glenn@petroleumtrends.com