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SIMPSON TIMBER
Using Market Research for Better channer Management
Simpson Timber,s Columbia Door Division,
a manufac_
turing facility for wood flush doors used in
home and
building construction, is located in southwestern

Wash_

New Gompetition
The period during which this study was conducted
was a
time of economic weakness for building construction
along the West Coast, so competitive manufacturers
were
attracted to the Midwest market as a temporarv outlet

Simpson was realizing major successes

west market by se
supplied many of
scattered through

in the Mid_

for
their production capacity. This placed lncreased strain
; the new suppliers of
were cutting prices to

alers, who

onractors

er of the wholesalers
condition and attempted
ir regular suppliers, hophter market conditions.

the wood

flush door market was treated by most wholesalers

and

Having traditionally treated the flush door market

as
a commodity market, Simpson had given
it minimal at_
tention except for pr

the Midwest middl

Simpson on competi

market. Most of the new products were slight mod.ifica_

tions of the previous products, and the middlemen
quickly identified each of them as just another alrernative product, with I
iven to the
modification. If the
in the mar_
ket, most of the co
provide an
equivalent version.

The agent also took

agent pror.ided no scrviccs to cust-uurel,s other
than in_
fornatiorr processing. The distance between the
whole_

salc centers in the Midwcst market ancl

the manufactur_
ing facility made direct visits to these middlemen
by
Columbia Door marketing personnel an infieouent

event. This was deemed unnecessary because

the com_

pnn;r's sharr: utf thc producl's wholesale mar-ket

in the re_

gion had been substantial, stable, and growing slightly.

588

were not associated with the commodity door. Surface

material of the door was a special substance that
gave it
improved scratch and nick resistance. Masonite had a
patent on the substance, so competition could not
easily

copy Masonite's new and successful product. Even

though the Masonite flush door had a higher price, it
was

Marketing Weaknesses
beginning to achieve broader acceptance among the
wholesalers, rel.ailers, contractors,.and end users,
Simpson was prepared to introduce its version of the
Masonite product using a different surface material at a

price lower than the equivalent Masonite door, yet

higher than the commodity door. Before introduction,
tlre door division wanted to analyze the market to identi$' the appropriate middlemen and/ or channels for the
product.

Marketing! Weaknesses
After the decision

was made

to study the regional market

for the commodity product and this specialty substitute,

it quickly becarne apparent that the data Simpson had

been using to identi!' its market share were faulty. Although the company was gaining a larger share of the
wholesale market, analysis of the aggregate figures indicated that its share of the entire market might be
dropping.
During phone conversations with some of the large
Midwest wholesalers, it appeared that rhe past preferences for the company's commodity product were weakening. Also, it became evident that damage was being
done by the agent's failure to provide adequate wholesaler support. This was exemplified by the agent's lack of
response to requests for claim settlements for occasional
faulty materials. The wholesalers were handling the
claims from their buyers with the expectation that the
claims would be recognized by the manufacturer, For
long-term custorners, this procedure may have been adequate since they dealt directly with Simpson Timber; but
new customers, having placed their orders with the
agent, found it difficult to find the correct channel for
submitting their claims. This, of course, jeopardized any
"goodwill" that had been developed with a new cusromer.
Further, no one was representing the Simpson flush
door products in local and regional home-building shows
or conventions attended by the maior wholesalers and
their customers.

New Class of Mlddlemen

Another problern in evidence during the initial

of the study was that a new

class

of middlemen

stages

was en-

tering the markt in strong enough force to demand di-

rect negotiations with the competitive manufacturers.

Previously, Simpson's Columbia Door Division had chosen to ignore other types of middlemen and protect the

industry's normal channel relationship (manufacturer

wholesaler ---+ retailer, contractor. and industrial

builder) . This policy probably was appropriate earlier in
the company's marketing efforts, when only the wholesaler had order sizes large enough to fill complete carloads (the normal lot size delivered from most buildine
supply manufacturers)

J-/lL

5Bg '

With the advent of major industrialized home

builders, major component builders, and sizable chain
retail lumber yards, there were increasing pressures for
the manufacturers to sell directJy to these new middlemen. Statistics had not been prepared to indicate the size
and growth potential of this market. Simpson marketing
personnel had mistakenly assumed it to be a small and insignificant influence within the entire product market.
The results of this study indicated that sales bypassing the
wholesalers had grown to 27 percent of the overall market, with the percentage increasing at a rate of up to 8
percent a year: Simpson had an insignificant portion of
the new market. This explains why, despite a conscant (or
slightly increasing) share of the wholesale market, the
company's share of the overall market was decreasing,

Simpson Timber, with little information coming

was having a difficult time rracking the
market activities of its competition and potential customers. After a gross picture of the situation was obtained by using many approximations and substantial
secondary data sources, management decided to obtain
a closer view of the trends and events or conditions that
were supporting the trends. Accordingly, a survey was
conducted in the market, covering most of the highvolume users.

from the agent,

Need for Data Sources and Analysis

Initially the Columbia Door Division's records were reviewed to develop a list of customers for the past three
years. Volume trends for each of the customers (all of
them wholesalers) were established,
Building statistics were obtained from R. C. Mean's
Forecasts for homestarts. From these statistics, using standardized conversion multipliers, the number of wood
flush doors corrsurrred or to be consumed in the market
could be estimated. When these figures were compared
to estimates of the number of units handled by wholesalers, they were noticeably larger; and the trend indicated that the gap could become even larger.
Personnel in the door division were concerned as to
the accuracy of the secondary sources used in these
calculations and wanted confirmation of their initial observations. It became evident that a survey would be necessary to obtain more accurate figures concerning the

590

Case

11

3/4

Simpson Timber

market impact of the new middlemen purchasing

di_
rectly from manufacturers, Figures *...
ulro needed
to

.
.

Major competitors
Any major channel and product volume
trends that were occurring, including trends
for specialty type subgroups

Telephone
rs, retailers, major contractors,

better than

lders, and large component

the respon
dents were

ase

wood flush doors in sizable

competition, which were helpful in verifiing statistics

from each respondent and gaining information on the
l0 percent who would not reply to the telephone re_

that these lists included every possible carload lot

pur_
chaser in the market. (It was recognized, that
a number
of entries on rhe lists did not qualifi for carload
lot pur_
chases so one of the survey's leading
questions focused
on purchase sizes.) The liss were consolidated
into a
master Iist with duplicate entries eliminated.
The questionnaire was developed
goals of obtaining informadon on:

.
r

with the mqjor

Responses from the middlemen (wholesalers, retail_

ers, industrial component, and home build.ers) verified

that the historical channel arrangement (until the late

1960s) had been through the wholesaler (see Exhibit
l).
The data also indicated rhat there had been a sub_
(see

Exhibit 2).

purchases from

Annual wood flush door volume

The volume of major door subgroups, such
unfinished and prefinished

quest. Once preliminary data were obtained for

each en_
try on the list, key customers were personally interviewed
to verif the findings and to obtain estimates for some
of
the missing responses.

as

The year-to-year increasein purchases ofeach

such group

The number of suppliers, volume from each

supplier, and breakdown ofsales per
customer ry?e

especially the larger ones, expected to see substantial

growth in the specialty market and were looking for new
supplier competition in this part of the market.

Discussion

Changes Instituted

markets. There appeared to be an upsurge

The first change to be considered and instituted was

for
the c

the

with
would be endangered.

Also, there was concern that the agent,s product

lines from other manufacturers complemented, in
some

way, his

door offering from Simpson, However, the

re_

sponses indicated that there was no direct physical

con_
nection between the agent's other products and the flush

doors. And conversations with some of the middlemen

who
btage

Question

bgt 4/+

in demand,

primarily to fill inventory in the retail Iocations where

the salesman had substantial influence because of his
previous experiences.
The salesman also opened direct negotiations with

selected members of the industrial and retail sectors.

These visits were limited to industrial and retail cus_
tomers who had small, if any, flush door purchases from
the company's current wholesale customers. Response

from these negotiations was favorable, with a number of

initial orders. Visible concern by the current wholesale
customers was not evident.

Initial response for Simpson,s new specialty product

the questionnaire
,.rgg.r, thar these

fears

Once the decision was made to find a replacement

for the agent, it was concluded that the position should
be filled internally by opening a sales office in the
mar_
kct. This would mean that there would be a sales
position

in the region responsible for both thc commodity

cloor.

and the introduction of the new specialty substitute. The

company was fortunate to obtain an individual exper!
enced in the geographical market and casually familiar
with wood flush door products.

Result: lmproved Sales

Missionary work with larger retailers and contractors
im_
proved sales to the wholesalers who wer.e serving these

share will have been thwarted. Simpson will have en_

hanced its ability tto atfact the new class of direct pur_
chasers with a

full line of specialty

and, comrnodity flush

doors.

Discussion Question
1,

Evaluate Simpson's researclr srrlvey :tud its charrrrel

strategy change in response to the information
plovicled by the survey,