Ferro alloys are additives used during steel making for alloying and, in some cases, refining of steel. Like most products sold in a Business to Business (B2B) setup, ferro alloys are treated as a commodity. We, at Tata Steel, have attempted to create a difference by branding Silico Manganese, meant for sale to the SME segment, and breaking this commodity trap

1. Branding Ferro Alloys in a Commoditized World
Ferro alloys are additives used during steel making for alloying and, in some cases,
refining of steel. Like most products sold in a Business to Business (B2B) setup, ferro
alloys are treated as a commodity. We, at Tata Steel, have attempted to create a
difference by branding Silico Manganese, meant for sale to the SME segment, and
breaking this commodity trap.
Commodity Trap : Commodities are product-service offerings that in the eyes of
the buyer are lowly differentiated from others and have a high degree of
substitutability. The decision to buy such product-service offers are often through a
straight price discovery (L1 quote).
It is well known that B2B buyers drive suppliers into a commodity trap. This is done
by defining conditions of supply, having two or three suppliers, and encouraging
alternate sources (vendor development) to keep suppliers in check. B2B buyers are
informed buyers and usually know as much about the product as the seller does.
This drives substitutability and thus makes buying decisions easy - a
straightforward price discovery. The emergence of e-auction platforms (like Metal
Junction etc.) has only served to accelerate this trend.
As a result, suppliers too focus most of their energy on improving transaction
efficiency as a route to improve market share and margins through :
Logistics and supply chain initiatives like buffer management, establishing
JIT Supply capability, etc.
Initiatives in minimizing associated costs like bulk packing, IT integration to
increase ordering efficiency etc.
This heavy emphasis on transactional selling has led to depletion of the importance
of marketing in most B2B situations.
However, just focusing on improving transactional efficiency has limited the ability
of suppliers to “ring fence” their customers as concentrating on a single
differentiator – e.g. focusing on transactional efficiency or on low cost - is not
enough to stave off competition.
Markets can be segmented : Like in a Business to Consumer (B2C) market,
differences exist in the B2B market place, although they are less obvious. Savvy

2. segmentation of differing needs and cost points of the market is needed to discover
differentiation levers. It is necessary, as a first step in de-commoditizing, to
understand customer needs, and devise and communicate customized offerings that
meet those needs.
Silico Manganese is used in steel making mostly for making long products. In India,
secondary producers of steel (most of whom are SMEs) account for around 70% of the
total market for Silico Manganese. It is virtually impossible for big organizations like
Tata Steel to service SME steel manufacturers. These SMEs represent a large untapped
market for such ferro alloy manufacturers and are usually serviced by traders.
Increasing competition for market share of large steel manufacturers, coupled with
our plans of increasing production capacity of Silico Manganese multifold in the
coming years, it became necessary to make inroads in the SME segment. We did an
extensive market study of the Durgapur, Raipur and Mandi/Govindgarh clusters
and attempted to understand the market. While each cluster is different, the market
characteristics common to the clusters are as follows :
First, for a steel maker, silico manganese constitutes less than 10% of the total
buy and is not worth too much managerial attention.
Second, customers need to establish technical capabilities (of sampling and
chemical analysis laboratory) to evaluate each purchase. Apart from cost and
effort needed in analysis, malpractices (through the corruption of the lab staff)
are common.
Third, the customer is known to the ferroalloy seller and is not anonymous. The
purchasing decision is influenced by technical people, the plant managers and
purchase managers in varying degrees, and the ferro alloy seller can use these
touch-points to establish his brand.
Fourth, the customer has established standards (technical specifications like
chemistry, size and packing) for supply and ignores all other elements of supply.
Thus, ferro alloys have become a commodity and are treated as such.
Lastly, the SME segment is under serviced by manufacturers due to their small
volume of buy (most manufacturers will only supply in truck loads – 16MT and
multiples – too large a quantity for SMEs to buy at a time), making room for
intermediaries (traders) who compete with suppliers for the heart of the
customer.

3. In addition, while the metallurgical properties of Silico Manganese are almost
constant, the priority that different steelmakers give each property is different. For
example, while makers of steel components for automobile applications, and tool
and alloy steel makers (concentrated in the north and west) place a very high
emphasis on quality (mainly impurity levels : %C, %S and %P) and make no
allowances in the purchase specifications, manufacturers of billets and re-bars,
(concentrated in eastern and central regions) do, at times, play between quality and
price. However in Durgapur, which faces a shortage of power, the correct grade
(60/15) is valued because use of inferior grades results in an increase in furnace
smelting time, reducing the number of daily heats.
The kind and size of steel making furnace (induction or electric arc) too determines
the size of ferro alloy that SME steel manufacturers ideally require and their ideal
volume of buy per order.
These commonalities and differences provided an opportunity for us for creating
customized product-service offerings for the customer set responsive to these
differentiators.
We decided that our differentiated product-service offer would serve these un-met
needs of customers and that we would offer benefits as follows :
Product Consistency – guaranteed exact 50 kg weight
Quality Assurance – low impurities, 3P(third party) certificate
Size Consistency – 10 mm to 50 mm with + 5% u/s, o/s
Assured Availability – priority replenishment
Packaging Reliability - branded bags, sealed
Customized order lot size
On-site delivery - reduce customer inventory holding.
Backed by the TATA Assurance of Quality.
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4. Branding : A logical extension once we identified the differentiated product-service
offer was deciding a brand name. A brand is a bundle of promises to create a
mutually acknowledged relationship between buyer and seller that transcends
transactions. After an internal contest, coupled with an IPR search, we selected
TATA SILCOMAG as our brand name, the first mover advantage allowing us to
choose a brand name very similar to the category name (Silico Manganese, called
“Silico Mang” colloquially). The logo, shown below has a stylized image of liquid
steel being tapped from a furnace. We have legally protected our brand name and
logo.
Building Brand Loyalty via Emotional Connect : One big advantage that we hope
to capitalize on is the emotional connect of the Tata Brand in India, a brand that
evokes images of ethical values (reinforced by the Values stronger than Steel
campaign of Tata Steel), of superior quality and of a nation builder (Voltas : India
ka AC).
Capitalizing on the emotional connect, we designed all communication to illustrate
that represents product superiority and a long term commitment – a
partnership.
Devil in the details : Before the brand launch, we strengthened our back office and
support infrastructure. These actions included :
1. A task force worked on improving bagging across all production units (ours
and those of our conversion partners) that improved and standardized the
quality of bags.
2. The task force also developed a sealing solution unique to the ferro alloy
industry which was implemented across all production units. The sealing
solution, currently implemented for all OE dispatches, included a system of bag
wise traceability. For bags meant for distribution, an appropriately designed
stitching machine was developed and distributed to all plants.
3. A system for marking the lot number on each bag is being developed as an
additional security feature.
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5. 4. Developing ability of the distributor to deliver in small lots (up to a single 50
kg bag) to customers in a milk run.
5. Branded delivery trucks, owned by the distributors for the last leg logistics
(from the distributor to the SME customer)
6. Creating a database of all SME steel manufacturers by collating data from
multiple sources and triangulation. We estimate that we managed to collate
authentic data of all the steel manufacturers in our sectors of interest.
7. Extensive training of the distributor’s staff on the SME steel segment and on
TATA SILCOMAG.
8. Training of the Tata Steel helpline (1800 345 8282) on TATA SILCOMAG.
Halla Bole : For creating excitement for the Brand Launch within Tata Steel, we
ran a week-long teaser campaign over email and the intranet. The campaign traced
the history of discovery & use of Manganese ferro alloys in steelmaking, each time
asking the question : what historic event will take place on 22nd Aug’12 ?;
finally revealing on the 22nd the brand name, TATA SILCOMAG and details of the
value proposition.
The same campaign was developed into the brand launch film and into coasters
that were gifted to each participant at the launch event.
External Communication was limited to hoardings at event areas before the
launch. However, along with our distributor, we personally met each potential
customer and invited them to the launch. For many of these customers, we met the
owners as well as the plant managers & technical people and invited them
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6. all for the launch. And many we were meeting yet again, having met them multiple
times before during the market survey.
Apart from customers, we also used Tata Steel’s PR agencies to invite the national
press to a Press Conference held just prior to the event and ensured wide coverage
of the launch.
The brand launch was a grand affair, of dance sequences intermingled with AVs on
Tata Steel, Ferro Alloys & Minerals and TATA SILCOMAG, and concluding with a
rocking performance by “Dhwaani”, an event our customers, distributors and Tata
Steel officials will remember for a long time to come.
Images of Branded 50kg Bag, and Collaterals like pamphlets, standees and brochures
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7. Just after the launch of our logo, at 9 pm on 22nd August, our website
www.tatasteel.com/famd sported a popup announcing the launch of TATA
SILCOMAG. A micro site with details of TATA SILCOMAG, linked to the main site, too
became active. The Tata Steel intranet page too had the new brand on the first
page as did our departmental webpage on the intranet site.
Standees placed strategically and a display on the TV screen at the reception greeted
employees and visitors entering Tata Centre next morning. Our floor was festooned
with balloons in the brand colours, and everyone in FAM had name cards, instilling a
sense of pride and ownership of the brand.
TATA SILCOMAG is a premium, differentiated product-service offering. The
extraction of premium for a differentiated offering demands
that we at FAM make good on the promise of delivering
added value. The value is real and tangible and is defined
upfront (in terms of the “6 fold advantages”) for the
customer to experience, measure and evaluate. It is the key
for the success of the brand. The entire supply chain is
sensitized to this and we resist any deals or short-cuts for the
sake of short term sales. One key feature is that unbundling of
the offer is not allowed and TATA SILCOMAG will always be
sold through organized distribution as a product-service
offer.
The first step in selecting & gaining customers is segmenting customers based
on buying behavior as follows :
P1 Premium Customers who would enter into long term strategic
partnerships with us for SILCOMAG. They will typically be more demanding
and would constitute about 5% to 10% of the customer base. Typically, we
expect SME steel makers in the alloy segment, and auto component
manufacturers who would be concerned with getting consistent product
quality and assured availability to fall in this category. These would be the
easiest to target and gain as assured LT customers.
P2 Potential Customers who have a high emphasis on price but are willing to
pay for selective product-service attributes. They would shy away from a
formal long term relationship but would acknowledge some degree of
partnership with us. They would evaluate total delivered cost inclusive of
transport, delivery, inventory holding, and some degree of costs on account
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8. of quality. These customers, forming 30% to 40% of the customer base, would
need to be converted to long term customers by demonstrating the superior
value proposition of TATA SILCOMAG.
P3 Pure-price Customers who constantly seek just the best deal in current
transaction and would constitute about 50%-60% of the customer base. We
would need to ask
a) Whether they should be our customers at all ? Or
b) Whether we could convert them through education?
We would approach only those customers who we feel we could convert, through
the technical adviser or the works manager and attempt to influence purchase
decisions by demonstrating our value proposition.
Pricing : It is important to use pricing as a tool to drive differentiation and extract
a premium. The pricing policy should acknowledge true cost of differentiation
(initiating-building infrastructure, delivering & supporting the bundle of offers);
even in face of commodity suppliers providing a particular service selectively to
gain a customer; e.g. competition offering 3P test certificates to select customers.
One way of protecting the premium position is to not allow the differentiation to
be unbundled either by the competition or the customer; and to truly believe that
the bundled offer is the core of the brand. We will need to resist pressures of
immediate sales and ensure no deviations from an established policy.
We need to constantly extract value for even seemingly small differences through
customer education : e.g. door delivery offer of
TATA SILCOMAG v/s lifting from nearby competitor
plant (headaches outweigh cost); customized order
size and priority replenishment offers of TATA
SILCOMAG which is not offered by competition
(customers need to be sensitized to both inventory
carrying cost & cost of stock out).
The true value in TATA SILCOMAG lies in its impact
on our customer’s operations : i.e. value of superior
grade & consistent size is decrease in smelting time giving more heats/day and in
better yields and decreased chances of off heats.
The success of TATA SILCOMAG lies in our ability to get the customer to
acknowledge this and transfer part of the value to us by way of a price premium
and a higher market share.
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9. Sustaining the Excitement : All of us, including brands, age, and thus face
challenges in remaining relevant. One way to sustain the excitement and keep the
brand youthful is to continuously engage with customers. While we have not yet
finalized the details, we shall use methods like a) volume based incentives (perhaps
a passbook scheme) to enhance repeat buy & brand loyalty, b) a Star Club for
decision makers of key customers which will be the platform for regular meets and
events, c) drive engagement with technical personnel of our customers having
regular technical meets and conferences etc.
Our Distributors would be a part of the “FAMily” a forum to regularly interact,
raise and resolve concerns, to build on the emotional connect and learn from each
other. Standard tools like volume based incentives and Distributor Meets for our
performing Distributors are also on the agenda.
Ear close to the ground : We are in the process of establishing systems to track
competition moves, monitor partner performance, monitor customer trends and
identify opportunities through the Distributor Score card and a Customer Account
Manager MIS which are essential steps to ensure survival and growth of the brand.
Long Road Ahead : The ferro alloy branding story has just begun. We look forward
to introducing new brands, perhaps TATA FERROMAG (Ferro Manganese), TATA
CROME (Ferro Chrome and Charge Chrome) and brands of refined alloys.
There would be continuous and complex trade-offs between market share &
market premium and the need to exploit markets when there are opportunities to
leverage differentiated bundle of offers and surrender market share (but not
significant premium) when market conditions are tough.
Market Discipline : Finally, it is essential for all of us in the organization to believe
in the brand, to believe in the value branding bring to customers and the difference
brands make in the B2B marketplace. Only then will TATA SILCOMAG find its
rightful place in the sun and be the trailblazer in the branding of ferro alloys in a
commoditized world.
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