Benchmark Andersen Consulting Study: Lack of Strategic Marketing Skills Hurt Forest Products Companies' Financial Performance.

NEW YORK--(BUSINESS WIRE)--Oct. 19, 1998--

Strategic Marketing Skill-Building Can Lift

Company's Bottom Line as Much as 40%

The financial performance of North American pulp and paper producers suffers because of insufficient attention to strategic marketing skills, according to a new Andersen Consulting study. The first-of-its-kind study shows that forest products companies do not sufficiently focus on marketing activities that can dramatically affect financial performance by as much as 40 percent.

"It's no secret that the forest products industry has not kept pace with the profit performance of other industries over the past decade," explained Andersen Consulting Associate Partner Stephen Dull. "Yet, we see a handful of pulp and paper companies not only out-performing others, but keeping pace with some of the best U.S. manufacturers. We wanted to find out why."

The goal of the Andersen Consulting effort was to identify the marketing and selling skills (and in what combination) that most affect bottom-line performance. Surveying 90 percent of North American forest products companies with more than $2 billion in annual sales, Andersen Consulting quantitatively measured marketing skills and executions across the industry, and related those measurements to financial performance. Results indicate that high performing pulp and paper companies are those focusing on marketing elements that others under-emphasize or ignore.

Although more than 40 percent of the differences in forest products company financial performance is driven by specific strategic marketing, the study showed executives tend to over-emphasize other skills -- such as those involving selling strategy. This is at the expense of skills that ultimately add more to the bottom line, like strategic price management and profit-driven market segmentation.

For example, effective segmentation can add as much as $20 million to Return on Sales (ROS) of the average firm, the study revealed. Marketing segmentation is the process of dividing broad markets (such as buyers of kraft linerboard) into segments or customer groups based on common needs or characteristics that a company can profitably satisfy, then developing and executing segment-specific plans for sales, marketing and service.

Employing strategic price management means understanding market dynamics that drive industry price levels. "This is a major league challenge," explained Dull. "But it happens to be one of the strongest drivers of value. It involves withdrawing capacity during market downturns and taking actions to avoid difficult-to-stop price wars."

"For years I felt like a lonely Don Quixote believing that marketing mattered in the forest products industry, yet I could not have dreamed the impact on Return on Sales would be this large," Dull said. "This is great news because we are talking about things a company can actually change. It's hard to continue to decrease costs dramatically. Oversupply will continue to be a problem worldwide. But new marketing skills can stay with a company and make a lasting difference in a short time. And, whereas a competitor can mirror the quality of paper or the kind of equipment used, a skill-based competitive advantage will be hard to imitate."

The study found that some skills have less apparent impact, including: promotion, packaging, and channel strategies. Other skills seem to pay off if used, regardless of the level of performance and skill. These include: brand strategy, effective sales support, and understanding how customers make purchase decisions. Advanced capabilities, skills that benefit high ROS performers disproportionately, include: partnering strategy, information systems, and strategic price management.

For a copy of the study, contact: Katy Hansen at 212-708-1278.

Andersen Consulting is a $6.6 billion global management and technology consulting organization whose mission is to help its clients change to be more successful. The organization works with clients from a wide range industries to link their people, processes and technologies to their strategies. With more than 250 people in the Forest Products Practice, Andersen Consulting teams with forest products companies around the world to build their competitive advantage and enhance their bottom-line performance. Andersen Consulting has more than 59,000 people in 46 countries. Its home page address is http://www.ac.com.