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Analysis of 3M's global marketing strategy

Article · April 2017

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Analysis of 3M’s marketing strategy

Vikram Razdan

Business consultant and Technical writer

April 2017
 Vikram Razdan
vrazdan@yahoo.com

Table of Contents

1. Introduction .................................................................................................................... 1

2. 3M: Product portfolio and marketing strategy ............................................................. 1

3. Analysis of 3M’s marketing strategy ............................................................................ 2

3.1 Product.................................................................................................................... 2
3.2 Price ........................................................................................................................ 3
3.3 Place ....................................................................................................................... 3
3.4 Promotion ................................................................................................................ 4

4. Conclusion ...................................................................................................................... 5

References ......................................................................................................................... 6
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1. Introduction
This study evaluates the marketing strategy at 3M, a multinational company, ranked 93 in
the Fortune500 list (Fortune500, 2017), where product innovation is a tradition (Coyne,
2011; Brand, 1998) and science is in its DNA (3M, 2017a), and how it has been able to
introduce new-to-the-world products on a sustainable basis (products (Boh, Evaristo, and
Ouderkirk, 2014), thereby becoming a global conglomerate, with a product range in excess
of 47,000 and annual sales exceeding US$ 30 billion across 70 countries. 60% of 3M’s sales
are from outside the USA, including 44% from developing countries, and it has
manufacturing facilities and research labs in 36 countries (3M, 2017b).

Figure 1: 3M’s international sales mix, excluding USA (3M, 2017b)

2. 3M: Product portfolio and marketing strategy

3M’s product portfolio of 47,656 products (Refer to Table 1) listed on its US site (3M, 2017b),
is spread across 5 business segments. Health care is the best performer, with the highest
operating profit margin of 31.7% (3M, 2017d). 3M’s main competitors are GE (industrial
products), Argen (health care), Bosch (electronics) and Unilever (consumer products).

3M’s marketing strategy revolves around a rule that 30 percent of each division’s sales
should come from products developed in the last 4 years (Denton and De Cock, 1997). This
pivotal rule has been the key driver for product innovation, enabling 3M to launch new-to-
the-world products, and thereby maintain its competitive advantage in the marketplace.

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Average
% of Key financial data (Year:
Business Number of sales per % of
operating 2016)
segments Products product sales
income (US$ million)
(US$ million)
Industrial 22,554 0.44 33 29
Health Care 1,936 2.95 19 27 Sales: 30,109
Safety & Operating income: 7,223
7,538 0.68 17 17 Net income: 5,050
Graphics
Electronics & Free cash flow: 5,242
13,142 0.37 16 12 Free cash flow conversion:
Energy
Consumer 104%
2,486 1.82 15 15
Total 47,656 0.63 100 100
Table 1: 3M’s business segments and key data (3M, 2017c)

3. Analysis of 3M’s marketing strategy

McCarthy’s marketing-mix of 4Ps (Kotler and Keller, 2012), can be used as a framework for
analysing 3M’ marketing strategy.

3.1 Product
Bergstein and Estelami (2002) describe new-to-the world products as having no substitutes
in the market at the time of their launch, and all of 3M’s products fall into this category. New-
to-the-world products involve creative use of technologies (Brand, 1998), and by creating
research labs in 36 countries, 3M has been able to understand needs of the local market,
develop tailor-made products, and introduce them quickly, such as the 3M GermKleen
Treatment for car interiors, which was developed entirely at 3M’s research facility in
Bangalore in India to cater to the local market (AutoTechReview, 2014). The focus is on
developing products locally for the markets where these are to be sold, like biodegradable
surgical drapes made in Europe for the European market, and air pollution control
respirators made in China for the Chinese market (Nasdaq, 2013).

3M’s products have been classified broadly under two main headings viz. business products
and consumer products. Product category size ranges from 1 (stethoscopes) to 204 (tapes,
glues an adhesives). Although the product range is vast and product-mix extensive, the
categories have not been standardised, especially for business products sold internationally.

‘3M’ is a corporate brand (Uggala, 2006), and parent to some well-known consumer product
brands like Post-It, Scotch and Nexcare. There are also more than 30 brands in the business
products area (Refer to Table 2). Both ‘line extensions’ and ‘category extensions’ of its

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consumer product brand ‘Scotch’ have been used. Keller (2002) states that prior research
has shown that line extensions of symbolic brands (like 3M) are likely to be more successful
than less symbolic brands (like Scotch). While a ‘line extension’ like Scotch-Brite
(Rankingthebrands.com, 2015) has been successful, not much can be said about ‘category
extensions’ like Scotchcal, Scotchkote and Scotchlite.

Brands
Consumer Business
Graphic
Scotch-Brite Scotchcal laminates
Lava Dental crowns
Corrosion
Scotch Scotchkote protection Incognito Dental braces
Reflective
Scotchgard Scotchlite materials
ESPE Dental implants
Wire
Post-It Scotchlok connectors
Speedglas Welding helmets
Anti-vandalism Food safety
Nexcare Scotchshield window films Petrifilm testing plates
Structural
Filtrete Scotch-Weld adhesives
Novec Engineering fluids
Road safety
Command Diamon Grade products
Table 2: 3M’s brands (3M, 2017b)

3.2 Price
With a high operating profit margin of 24% in 2016 (Refer to Table 1), it is clear that 3M has
been able to price its products at a premium to the market. The operating profit margin in
3M’s Industrial business segment in 2016 was 23% (3M, 2017d), which is far higher than
GE, its nearest competitor in this segment, whose operating profit margin was only 8.3% in
2016 (FinancialTimes, 2017).

The price of a new-to-the-world product depends upon estimating the exact value of its
incremental utility over existing products. Traditional approaches to product pricing include
intuition, direct questioning, conjoint analysis and market experimentation (Bergstein and
Estelami 2002). Test marketing under market experimentation involves testing the product at
various price points at different locations, and although this process is time consuming, 3M
has based its pricing strategy on this approach.

3.3 Place
Place covers the geographic locations where the product is sold and how it is delivered to
the customers. 3M has 203 manufacturing facilities, out of which 122 are in 36 countries

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outside the USA, and it has a vast distribution network of wholesalers, distributors, retailers,
jobbers and dealers, located in various parts of the world (3M, 2017d).

Products are sold directly to customers (like NHS) or through the distribution network,
depending upon various considerations (size of order, type of customer, product safety etc.).
Consumer products, though, are mainly sold thorough the distribution network, although
some products are available for sale online through Amazon.

Localisation of the supply chain is a key strategy for 3M (Nasdaq, 2013), where the focus is
on sourcing from suppliers nearest to its manufacturing facilities, thereby lowering the lead
time for transportation of raw materials.

3.4 Promotion
Kotler and Keller (2012) suggest that advertising of a new products is advisable when the
product is superior to the market leader, and being a new product it needs a large
advertising budget. However, 3M’s products are new-to-the-world products, and there is no
market leader. Thus, 3M’s strategy is to rely on a mix of print media and sales promotions for
new product introduction, where the process begins with educating the customer, followed
by product trials and finally the customer acceptance. The sales promotions at 3M are
mainly through point of sales displays, coupons and free products trials for consumer
products, whereas for business products 3M advertises in trade journals and organises
events and conferences. 3M also claims to provide a unique offering of customer education
on the proper use of new-to-the-world products (AutoTechReview, 2014).

2016 2015 2014

Sales (US$ million) 30109 30274 31821

Advertising and Merchandising 385 368 407

expenses (US $ million)
% of sales 1.27 1.21 1.28

Table 3: 3M’s spending on Advertising and Merchandising (3M, 2017d)

3M’s expenses on advertising in USA were only 0.28% of sales in 2015, as compared to that
of 0.77% at GE, its nearest competitor (Statista, 2017). The spending on sales promotions
was much higher at around 1% of sales. Refer to Table 3 for details.

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4. Conclusion
The ability to commercialise new-to-the-world products, and localisation of the supply chain
are two hallmarks of 3M’s marketing strategy, and these have enabled it to consistently
outperform the market, whether in the US or internationally. The prime mover behind product
innovation is the culture of innovation at 3M, especially the 15% rule, which states that
employees can spend 15% of their time working on their own ideas (Brand, 1998).

With web technologies and superfast broadband speeds, companies can conduct market
research (interview, focus groups) faster, and at a fraction of the cost compared to traditional
methods, thereby reducing product development time and cost. In addition, webinars
through online social media networks are a low-cost option for companies to educate
customers. Rapid 3D prototyping is becoming commonplace, and even small design studios
are now able to translate designs into ‘real’ products. The next step would be for a design
studio to partner with a research lab and create products just like 3M, and that would be the
beginning of the end for 3M.

The time has come for 3M to revisit its marketing strategy, and focus on its weak areas such
as brand management, customer loyalty, digital marketing and customer service, while
continuing with development of new-to-the-world products.

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References

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<http://www.3m.co.uk/3M/en_GB/company-uk/> [Accessed: 6th April 2017]

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