Mining Equipment Company Streamlines

Operations and Qualifies for New Business.

A multi-national manufacturer of mining equipment was faced with a significant decline in business at one of its international locations.  The alarming aspect of this decline was that mining activity in that country was actually increasing, while local competitors were making significant inroads at both new and existing mine sites.  In fact, there were some major equipment purchases for which this manufacturer was no longer qualifying, largely because of a reputation for not being able to service the equipment in a timely manner.

Initial efforts to understand the organization’s competitive value proposition were confounded by the organization’s failure to segment its market correctly.  Because of that failure, initial measures of customer value indicated that the organization was positioned as an average value provider – not a winning value proposition, but not one that should be resulting in such significant market share losses either.  Further examination of the value models, however, revealed the existence of two distinct segments within the underground mining market.  One segment, consisting primarily of new mining operations known as “greenfields,” required only the newest equipment that would run without failure for an extended period of time.  Their key quality drivers consisted of on-time delivery and installation services.  The other segment was made up of mature, established mining operations that had only a few years of operation left before being depleted of coal.  The key quality drivers for this segment consisted of quality service and parts supply.  This segment was also more price sensitive than was the greenfields segment.

Examination of the organization’s value propositions for the two segments revealed dramatically different pictures.  Within the greenfields segment, this manufacturer enjoyed a value leadership position, capable of delivering new equipment in a timely manner, and with the expertise to assist with initial operations.  Within the mature segment, however, the organization was perceived as a poor value provider.  Their service and parts delivery capabilities were significantly less than many local competitors, who could also deliver those services at better prices.  Moreover, the company’s reputation for sub-standard service at the mature mine sites carried with those mine operators as they closed down their mature mines and moved to establish greenfield operations.  All indicators pointed to a death-spiral.

With the new insights into value differentiation provided by MVS, however, the management team was able to develop new competitive marketing strategies for each market segment, focusing process improvements pertaining to service and parts on the mature segment, while leveraging its strengths in quality equipment and delivery expertise on the Greenfield segment.  The organization achieved a 35% improvement in repair turnaround time at substantial cost reductions, leading to an improvement in service margins from 11% to 28%.  These improvements, focused on the mature segment, led to the company’s ability to qualify for $8M in new equipment sales in the Greenfield segment, sales for which the company had previously not even been considered.  Over a two-year period, the company has experienced a 30% increase in total revenue in that country.