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FUNDAMENTALS OF CHEMICAL MARKETING No· 6 in α Series

Management Looks at Market Development L. A . HATCH, Minnesota Mining & Mfg. Co., St. Paul, Minn.

A market development group with its eye on tomorrow's market can have a tremend­ous effect on the growth of a company

M ODEIIN: industrial management has found it desirable to delegate to specialized groups t w o of its most important func­tions, namely, the investigation and pro­motion of the sale of new and improved products.

Market research and market develop­ment are the generally accepted names given these functions. The proper prac­tice of these functions is a significant aid in obtaining the maximum profit from a new product development program and the maximum security for the investment «»l the risk capital involved.

Facts ajre one of the most essential tools ol management. Vlarket research obtains the facts. Market development puts them to work. Modern industrial market de­velopment has become sufficiently complex to warrant the obtaining and training of specialized technical personnel to promote new business developments effectively and efficiently- Effective market development is particudarly important in the chemical process industry.

Properly managed market development results in expediting the commercialization of new products, ©r ensuring expansion of the sale of established products at a rea­sonable cost. Economy of time and money is, of course, an economic necessity in modern technical industry.

Definition Market development encompasses that

field of promotional effort concerned with creating a new market or substantially in­creasing the sales of a specific product or allied group of products. Promotional effort includes all available scientific» tech* iiological» and business activity which is pertinent and k3pful to the objective. This definition presupposes that a market

exists, or at least is believed to exist po­tentially as indicated by market research. Note that I have said a specific product. Management cannot deal in generalities on something as important as markets.

History Historically, market development has

been going on for thousands of years. It is deeply rooted in our economic history, it provided the reason for sending cara­vans long distances and ships far beyond the fishing grounds. In recent economic history, management has spent a great deal of effort and money in market de­velopment. As L. B. Hitchcock said [ Hitchcock, L. B., C H E M . AND E N G . N E W S , 27, S-9 (1949)1 a few years ago, the public no longer beats a path to the door of the builder of a better mousetrap. To­day the better mousetrap must be vigor­

ously promoted to tlie customer. The in­dustrial revolution, with its opportunity and need for mass markets, and the later rise of management as a profession, brought into prominence the promotional activity w e call market development.

Even in the smallest business the man­agement devotes a very substantial part of its time to increasing t h e market for its products and searching for new products to produce and sell. For many years man­agement was the only group concerned in this activity. With growth and the passage of time separate sales organizations were developed, and often they assumed re­sponsibility for market development.

Within the past 2 5 years further steps have been taken to delegate this responsi­bility unce reserved to management. Within sales organizations special promo-

Idea . . . Research and Development · .

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tional groups have been organized which are concerned solely or primarily vvitb the company's business of tomorrow and not confined to today's products and cus­tomers. In the chemical industry and other technical industries this group has gnovvn in importance and in the educat ion and training of its personnel. As a result , the work of such a group has, in m a n y cases, h a 3 a t remendous effect on the company's growth.

It was inevitable tha t men so engaged , and therefore having common interests, would get together in at tempts to solve their common problems. The Commercial Chemical Development Association and the Chemical Market Research Association, and now the interest of the Chemical Market ing Subdivision of the ACS attest to this fact.

How to Organize T h e market development g roup can be

located on the company organization char t in at least three different positions. T h e s e are as follows:

1. A depar tment of the regular sales organization.

2. A depar tment of the technical or­ganization.

3. Two complete depar tments , one in the regular sales organization and another in the technical organization, each work­ing in the area of the depar tment in w h i c h it is located and dividing the work to some extent as follows:

a. Regular sales depar tment ( 1 ) Market development of e s t ab ­

lished products, h. Technical organization

ί Î ) Market development of new products .

T h e choice of location depends upon the following factors:

1. T h e size of the company. 2. The size and importance of t h e job

to be done. 0. T h e exact na ture or the objective. Two observations should be made at

this point which are based on experience. 1. Since there is no exact line of de­

marca t ion between market research and market development , it is essential tha t they b e located together and report to the same manager .

2 . Coordinat ion with the sales depar t ­men t on one hand and with the research a n d deve lopment organization on the other.

I migh t call your at tention to our ex­per ience that these two functions overlap in the same way that scientific research a n d p roduc t development do in industrial laboratories. It is desirable, therefore, to have close working arrangements . It is many t imes also desirable to have the same m a n or team that does the market research go forward with the project th rough market development . This fluidity ensures the maximum utilization of all of t h e information discovered dur ing the in­vestigational phases. It is only human to become very interested in the project one is working upon. In fact it is almost es­sential that the man or team "catch fire" so that their enthusiasm will carry them over the inevitable low points always ex­per ienced in such programs. Such a group will do a Miperlative job and the manager can then reserve his efforts for the exercise of liis objective judgment instead of trying to inculcate sufficient interest to ensure a thorough job.

In dec id ing how best to organize a market development depar tment one should consider the factor of the size of the company as be ing of pr ime impor­ta nee. Small companies find it advan­tageous to l ia \e it as an integral part of (he regular sales depar tment . The? sales manager of a small company cannot con­fine his entire effort* to today's business, l i is responsibility lor the company's sales would not permit this to happen without the penaltv of inhibit ing growth. A me­dium sized company can probably best organize to have its market development section under technical management since the emphas is is essentially on new and Miipro\cd products . These cannot he per­mit ted to interfere1 with the regular busi­ness. Large companies can afford and therefore t end to have two units, as de­scribed above. One unit should be under the sales management to work with the

regular sales force in the introduction of new related products and providing tech­nical assistance in the field while search­ing for n e w sales areas. The other should b e under technical management and should p romote the radically new products to the point where they can b e transferred to the regular channels.

Expedience or other practical factors, such as the availability of competent supervision, often dictate t h e location of t he market development department and are considered under the headings of the second a n d third factors. It is a greater mistake to have a rigid organization plan and force all projects through channels without consideration of the human ele­ment , than to have no channels and de­pend on the good sense of trained men . At 3M w e consider the bes t plan is to provide an enabl ing skeleton organization and allow reasonable individual freedom of action.

Location Our managemen t considers this plan

very important . It is necessary to organize any substantial business in to functional groups to get things done in a responsible manner. Technical organizations ai'* no exception. Basic research laboratories are often organized in sections devoted t o or­ganic chemistry, physical clvemistry, and physics, while development laboratories are organized into product development, expérimental production, quality control, and technical sales departments. This is the way the 3M technical eilort is ar­ranged in both staff and industrial division laboratories.

While it is recognized as «desirable and important to break down a complex job into individual functional groups, two points must always b e kept i n mind.

1. T h e market develop merit w o n ρ should b e small enough to work effectively under one competent man.

2. Fluidi ty of manpower should he pro­vided t o avoid categorization of certain types of good men. It must r>e recognized that some men develop best into specialists while others develop best when given first a wide t ra ining in all the functional groups

ivemmnt Market Survey . . · Test Selling Commercialization

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and then broad responsibility. The per­sonality and mind of each individual re ­quires study, and good management should provide not only opportunity but training by competent supervisors to bring out the very best in every technical man.

The project method we try to employ at 3M proviiles a mechanism which brings together a team made up of representa­tives of the product development, experi­mental production, quality control, and technical sales departments in order to accomplish the most rapid commercializa­tion of «ι new product . The close working together of this team based on their desire to accomplish a single objective provides an opportunity for good "on the job" training and a chance to appreciate t he contributions of others. I mention this method because of the necessity for the technical sales member of the team to carry out «til of his many jobs, including project contacts within and without the company and particularly the market re­search and market development programs. He has the advic·· and counsel of the staff groups and the business management at his disposal. He is well advised to seek their assistance early in the project as well as in the Liter stiji s when then under­standing of his problems .in\ their good will is essential to the success of the entire project.

Selection of Personnel Assuming a sincere desire on the part

of management to organize a market de­velopment group, and further assuming its location in the organization is selected, the next most important step is the selec­tion of personnel. Most companies prefer a smaller number of superior men to a larger number of less experienced and competent men. In practice, however, we never achieve perfection and therefore we make the best selections possible and seek to provide trainees to take care of future needs. Men should be chosen who have an adequate technical education and whose personalities are suited to the work.

In our experience extreme extroverts or introverts are seldom successful in market development. Ambiverts are psychologi­cally bet ter suited to succeed in this diffi­cult work. T h e power to persuade is very important and distinguishes a good sales man. Since all market development deals first with an idea and since an idea is the hardest th ing in the world to sell either to management or to a prospective customer, it is only logical 11 select men who rank high in this ability. Other important t haracter is tks of mind are well developed powers of observation, ingenuity, and re­sourcefulness. Management always will accept a man who has superior ability to apply himself.

The supervisor or manager of market development must be an experienced man and a capable leader. He must be well grounded in the basic business procedures which consist of four steps, namely: Analysis of the problem, synthesis of a program, obtaining his management** ap­proval, and then getting the program ac­complished. Some men are good at one

or more of these steps but the supervisor must be good «tt all of them.

A good sense of timing is also very im­portant. Test selling or actual marketing can fail if the product and production facilities are not ready tor commercial consideration. On the other hand, it is undesirable to wait for perfection since much valuable time can be lost and per­fection can seldom be achieved.

Tuning is important in another sense. A new product may be excellent but the market is unrecept iw because other totally different de\elopinents have not had time to create the need the new product is intended to fulfill.

T h e supers isor must be able to work well with a great variety of people since he must seek to have on his staff a hetero­geneous group of minds having varied professional training in order to provide the widest possible approach to his many problems. In other words, he must be able to work with his customer's produc­tion foremen without a hint of superiority and deal with the president without a feeling of inferiority. Tomorrow's business must be ι challenge and not a burden.

This, then, is the organizational loi a-t nui, the size, tin* kind of personnel, and the qualities of supervision needed lor market development.

Application of Market Development I have selected .1 case history to show

the actual application of market develop­ment to the promotion of a new product. The chronology of this project covers un eight-year period. In 1944 the idea of obtaining a facsimile copy of printed, typed, or written memoranda, using .1 nonphotographic procedure, was selected for aggressive research and development from the ideas being explored by the fundamental research section of our staff laboratory. In 1945 a practical exempli­fication of this type of copying medium was produced. In 1946 mechanical and electrical equipment required to carry out the process was completed.

Normally, at this point a market re-

QUOTOONS I R E G . U. β - P A T E N T O F f t C E l

Silence is not always golden. Sometimes it means simply that the other fellow didn't listen to a word you said.

A gentleman h a man who will step aside for a lady in a crowd, and let her make a path for him.

Xothing improves a persons hearing like overhearing.

—O. À. BATTIS τ Λ a l l B i a H î f e B E 6 E R V E O

search investigation would have been made, but due to the shortage of personnel and the press of research programs in­volved in the postwar adjustment, this was not done until later.

The next two years were spent in im­proving the first sheet material and the equipment used to accomplish the objec­tive. Investigations into the type of ma­chinery required to produce substantial quantities were conducted on experimental production equipment.

In 1948 the product was ready for seri­ous promotion, and a more rapid rate of expenditures was authorized. A market survey was initiated by the market re­search group to determine the extent of the need for a rapid copying process. T h e information developed indicated a market existed in the office duplication field for such a process. The survey also brought out the characteristics of the initial p rod­uct that were considered undesirable by customers, and further information was obtained showing the need for develop­ment of certain properties which would give the product a high consumer value.

In 1949 test selling of the improved product was initiated, a trademark was adopted, and introductory advertising literature was prepared. Further improve­ments in the laboratory and in the ex­perimental production provided increased incentive, and a recheck on the market survey added more specific information, resulting in t he building of pilot produc­tion equipment in 1951.

Test selling was expanded, and in 1952 full time salesmen were selected, trained, and assigned to territories to provide a skeleton national sales organization.

In August 1952 the project was t rans­ferred from the staff research and de­velopment laboratories to an industrial division of our company for commercial­ization. T h e project personnel, fully cognizant of the product and the market , provided the organization capable of carrying the work forward. This final step was taken because management had be ­come convinced that this new produi t had developed to the point where sub­stantial capital investment in men and equipment was unquestionably warranted, and that the hazard to such capital invest­ment would be normal. This example shows in brief outline how we built a new business unit which will contribute to our sales and profits. It cannot show the training and growth of men which occurred during the development of this product.

As our national economy expands, the operation of technical industries will be ­come increasingly complex. This com­plexity will itself necessitate the broaden­ing and refining of the market develop­ment function to assist management in solving the problems of future growth.

I foresee that these forces will br ing about a general acceptance of a market development organization as an equal partner with research and product âe~* veloprnent in the technical industries.

Τ ne above papc* wa« proMmtett at £be Chemical Marketing Symposium beld at ih# AMWWAN CHUMICAL SOCIBTV M«wtfo«. Atlantic City, N. J., Sept. Î6, ΙΘ52.

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