Brief

Three Changes in Chemical Sales That Aren’t Changing Back

Covid-19 speeded up transitions already underway: more technical and virtual sales, the rise of online marketplaces and faster product development cycles.

By David Burns, Jason McLinn, and Jessica Snow-Wasserman

First published on febrero 10, 2021
min read


Executive Summary The Covid-19 pandemic has accelerated changes that were already underway in chemical sales. While key accounts still warrant travel and in-person meetings, repeat sales and smaller accounts are increasingly handled remotely and online. Virtual sales allow teams to quickly assemble the right people to meet customers’ needs, including technical experts who may be in different locations. Online marketplaces are also changing the industry, allowing customers to compare prices more easily and to explore new brands and products. Product development times are speeding up, as chemical producers can quickly see what competitors are offering. Chemical companies must take these shifts seriously and move rapidly to build up their digital capabilities, or they risk being overshadowed by more nimble competitors. Some chemicals producers may remember 2020 as the best of times. Certainly, anyone producing chemicals that went into cleaning, hygiene, or protective plastics saw their business grow wildly. More producers, however, may remember the year as among the worst of times. Economies slowed to a trickle during lockdowns in Asia first, then Europe and the Americas. Everyone from executives to the front line had to work hard to keep production running. Even when demand was there, supply chain and workforce safety challenged their ability to meet customer needs. These sudden changes were especially hard on commercial teams, who had to quickly learn new ways to sell and to build and maintain relationships—all of this while dealing with unreliable demand forecasts that meant even booked orders couldn’t be counted on. Close communication with clients became more important, but also more difficult than ever. In some ways, though, the pandemic merely accelerated trends that were already underway. Commercial teams have known for years that the nature of their work was changing and that they needed to modify their sales and marketing models to adapt. Covid-19 forced many to finally do so. Based on our year-end discussions with senior executives in the chemicals sector, here are three things that have changed in chemical sales that aren’t changing back (see Figure 1). Figure 1 Some channels are becoming more important while others are becoming less so The accelerated death of the relational sale Even before the Covid-19 pandemic separated sales reps from their customers, the rising importance of technical expertise was already changing the nature of direct sales in chemicals. As products have become more complex, expectations are rising for suppliers. Customers want sellers to bring more expertise on products, different applications, and their segments overall. The changes necessitated by the pandemic—more business conducted virtually, and purchases made online—have accelerated the trend away from the relational sale that was already underway. Without the steak dinner to fall back on, sales reps have been forced to up their game. Direct sales will continue to play an important role in key accounts, while becoming more technical and virtual (for more on this, read the Bain Brief “The One-Two Punch: Virtual Selling and Sales Playbooks”). This isn’t all bad: The shift online makes it easier to connect the right people at critical moments—for example, bringing your field engineers in contact with the customer’s R&D department earlier in a sales cycle, wherever they are. Over time, it could bend the sales operating model away from geographic regions to one based on expertise and specialties. One polymer producer reorganized around six priority markets, creating end-to-end sales teams from marketing to customer service, to better focus on its most promising segments. This allowed it to increase specialization in sales capabilities, while also streamlining cost-to-serve on lower-priority segments, which moved to indirect models. As a result, the company gained about 20% market share in three key segments and increased margins about 5 percentage points. What will sales reps do with all the windshield time they save? Here’s where managers will have to roll up their sleeves and show their teams how to spend time wisely, guiding them on the types of growth they should target, which accounts they should focus on, and how to be successful in this new world. While ride-alongs and in-person coaching are not possible, technology also creates the opportunity for managers to sit in on virtual calls more easily and provide more real-time feedback. For smaller accounts, efficiency will become more important, just as lower cost routes to market continue to expand. While not a new channel, inside sales—selling remotely without travel and in-person meetings—is emerging as the dominant model across the industrial and commercial landscape, and many companies see this moment as the time to build and optimize virtual sales capabilities. In the early months of last year, a food ingredients producer introduced inside sales in one of its business units to increase efficiency for smaller accounts and create more balanced coverage for mid-tier accounts. This raised sales ratios as high as one rep to 500 customers. Some customers say they are receiving more attention than before as they are more of a priority for the inside sales team, and reps spend less time traveling. Early results indicate a better than 20% uptick in return on sales investment. A stronger role for online chemical marketplaces Online marketplaces for chemicals had been slow to gain traction prior to 2020, but the pandemic has accelerated their uptake, with more B2B buyers conducting some business online. Most customers still want to talk with a rep before buying a product, especially the first time, but online marketplaces are becoming important channels for product discovery and comparison, and in some cases for repeat sales. In China, where marketplaces are more developed than elsewhere, a small portion of sales passes through marketplaces, but all major chemical companies participate on these platforms to make sure they are getting in front of potential new customers. As in other industries, online marketplaces can change industry dynamics by increasing price transparency and shortening the period of product differentiation, since competitors see what others are selling and charging. Online marketing also becomes more critical: Can you articulate the unique features of your product without a sales rep in the room? Some companies have joined these platforms partly as a defensive move after seeing their own products for sale by distributors, asking: Why not sell it ourselves and have control over the messaging? Another reason to participate is to access data on how customers shop and buy. In the US, interest is growing in online chemicals marketplaces such as Knowde, Chemberry, and CheMondis. These platforms are beginning to offer analytics to its vendor customers, allowing them to develop more sophisticated and personalized offers and informing them of potential new leads that showed interest in their products. Shorter product development cycles Customers have seen product development cycles speed up in other industries, and many are looking for the same in chemicals. Digital tools help shorten the development cycles. Online collaboration tools, including virtual coworking spaces, make integrative development easier, within organizations and with partners. Data mining and machine learning improve predictions about formulations, based on end use. Robotics enable faster throughput tests and reduced cycle times. Historically, the chemicals industry has been relatively slow to bring new innovations to market. While the sector has had to improve to meet the demands of customers, there are new technologies now available that allow companies to make both formulation and sampling largely virtual and technology-enabled and speed time to market. Senior executives in chemicals are increasingly allocating investment in these new technologies to speed the sales cycle (in the case of formulation and sampling) and improve time to market. The process for moving from pilots to enterprise deployment is now tried and tested across chemicals and other industrial sectors (see the Bain Brief “Scaling Digital Operations in Energy and Natural Resources”). As vaccines roll out to the public, life and commerce may gradually return to something like normal. For sales teams in chemicals, however, that new normal will look a little different from the old one. Now is the time to commit to change and invest in new models for meeting customer needs.

Executive Summary

The Covid-19 pandemic has accelerated changes that were already underway in chemical sales. While key accounts still warrant travel and in-person meetings, repeat sales and smaller accounts are increasingly handled remotely and online.
Virtual sales allow teams to quickly assemble the right people to meet customers’ needs, including technical experts who may be in different locations.
Online marketplaces are also changing the industry, allowing customers to compare prices more easily and to explore new brands and products. Product development times are speeding up, as chemical producers can quickly see what competitors are offering.
Chemical companies must take these shifts seriously and move rapidly to build up their digital capabilities, or they risk being overshadowed by more nimble competitors.

Some chemicals producers may remember 2020 as the best of times. Certainly, anyone producing chemicals that went into cleaning, hygiene, or protective plastics saw their business grow wildly.

More producers, however, may remember the year as among the worst of times. Economies slowed to a trickle during lockdowns in Asia first, then Europe and the Americas. Everyone from executives to the front line had to work hard to keep production running. Even when demand was there, supply chain and workforce safety challenged their ability to meet customer needs.

These sudden changes were especially hard on commercial teams, who had to quickly learn new ways to sell and to build and maintain relationships—all of this while dealing with unreliable demand forecasts that meant even booked orders couldn’t be counted on. Close communication with clients became more important, but also more difficult than ever.

In some ways, though, the pandemic merely accelerated trends that were already underway. Commercial teams have known for years that the nature of their work was changing and that they needed to modify their sales and marketing models to adapt. Covid-19 forced many to finally do so.

Based on our year-end discussions with senior executives in the chemicals sector, here are three things that have changed in chemical sales that aren’t changing back (see Figure 1).

Some channels are becoming more important while others are becoming less so. — Some channels are becoming more important while others are becoming less so

The accelerated death of the relational sale

Even before the Covid-19 pandemic separated sales reps from their customers, the rising importance of technical expertise was already changing the nature of direct sales in chemicals. As products have become more complex, expectations are rising for suppliers. Customers want sellers to bring more expertise on products, different applications, and their segments overall. The changes necessitated by the pandemic—more business conducted virtually, and purchases made online—have accelerated the trend away from the relational sale that was already underway. Without the steak dinner to fall back on, sales reps have been forced to up their game.

Direct sales will continue to play an important role in key accounts, while becoming more technical and virtual (for more on this, read the Bain Brief “The One-Two Punch: Virtual Selling and Sales Playbooks”). This isn’t all bad: The shift online makes it easier to connect the right people at critical moments—for example, bringing your field engineers in contact with the customer’s R&D department earlier in a sales cycle, wherever they are. Over time, it could bend the sales operating model away from geographic regions to one based on expertise and specialties. One polymer producer reorganized around six priority markets, creating end-to-end sales teams from marketing to customer service, to better focus on its most promising segments. This allowed it to increase specialization in sales capabilities, while also streamlining cost-to-serve on lower-priority segments, which moved to indirect models. As a result, the company gained about 20% market share in three key segments and increased margins about 5 percentage points.

What will sales reps do with all the windshield time they save? Here’s where managers will have to roll up their sleeves and show their teams how to spend time wisely, guiding them on the types of growth they should target, which accounts they should focus on, and how to be successful in this new world. While ride-alongs and in-person coaching are not possible, technology also creates the opportunity for managers to sit in on virtual calls more easily and provide more real-time feedback.

For smaller accounts, efficiency will become more important, just as lower cost routes to market continue to expand. While not a new channel, inside sales—selling remotely without travel and in-person meetings—is emerging as the dominant model across the industrial and commercial landscape, and many companies see this moment as the time to build and optimize virtual sales capabilities. In the early months of last year, a food ingredients producer introduced inside sales in one of its business units to increase efficiency for smaller accounts and create more balanced coverage for mid-tier accounts. This raised sales ratios as high as one rep to 500 customers. Some customers say they are receiving more attention than before as they are more of a priority for the inside sales team, and reps spend less time traveling. Early results indicate a better than 20% uptick in return on sales investment.

A stronger role for online chemical marketplaces

Online marketplaces for chemicals had been slow to gain traction prior to 2020, but the pandemic has accelerated their uptake, with more B2B buyers conducting some business online. Most customers still want to talk with a rep before buying a product, especially the first time, but online marketplaces are becoming important channels for product discovery and comparison, and in some cases for repeat sales. In China, where marketplaces are more developed than elsewhere, a small portion of sales passes through marketplaces, but all major chemical companies participate on these platforms to make sure they are getting in front of potential new customers. As in other industries, online marketplaces can change industry dynamics by increasing price transparency and shortening the period of product differentiation, since competitors see what others are selling and charging. Online marketing also becomes more critical: Can you articulate the unique features of your product without a sales rep in the room?

Some companies have joined these platforms partly as a defensive move after seeing their own products for sale by distributors, asking: Why not sell it ourselves and have control over the messaging? Another reason to participate is to access data on how customers shop and buy. In the US, interest is growing in online chemicals marketplaces such as Knowde, Chemberry, and CheMondis. These platforms are beginning to offer analytics to its vendor customers, allowing them to develop more sophisticated and personalized offers and informing them of potential new leads that showed interest in their products.

Shorter product development cycles

Customers have seen product development cycles speed up in other industries, and many are looking for the same in chemicals. Digital tools help shorten the development cycles. Online collaboration tools, including virtual coworking spaces, make integrative development easier, within organizations and with partners. Data mining and machine learning improve predictions about formulations, based on end use. Robotics enable faster throughput tests and reduced cycle times.

Historically, the chemicals industry has been relatively slow to bring new innovations to market. While the sector has had to improve to meet the demands of customers, there are new technologies now available that allow companies to make both formulation and sampling largely virtual and technology-enabled and speed time to market.

Senior executives in chemicals are increasingly allocating investment in these new technologies to speed the sales cycle (in the case of formulation and sampling) and improve time to market. The process for moving from pilots to enterprise deployment is now tried and tested across chemicals and other industrial sectors (see the Bain Brief “Scaling Digital Operations in Energy and Natural Resources”).

As vaccines roll out to the public, life and commerce may gradually return to something like normal. For sales teams in chemicals, however, that new normal will look a little different from the old one. Now is the time to commit to change and invest in new models for meeting customer needs.