Marketing strategies for small manufacturers

Don’t get tripped up by marketing myths. Use these customized techniques to build a successful marketing plan.

Marketing industrial products is a different game than selling consumer items. If you make a DVD player, a good advertising campaign can virtually guarantee sales. But if you’re a small manufacturer supplying parts to General Motors, consumer-marketing techniques are not very effective.

Good business-to-business marketing calls for a customer-focused approach that uses your limited resources wisely. Unfortunately, several marketing myths obscure the importance of finding your best customers and determining what they need. By avoiding these myths, you can build a sound marketing plan based on principles that are effective for small manufacturers.

Four marketing myths

Michael Collins, author of the book “The Manufacturer’s Guide to Business Marketing,” has found four marketing myths that lead small manufacturers down an unprofitable path.

Higher sales equals higher profits. All sales are not necessarily profitable. If your manufacturing or sales costs are too high, you could be losing money with each sale. More sales just multiply your losses. You may also have quality and service problems. Higher sales will only worsen these problems and add more costs.
All customers are good customers. Customers have widely varying needs. As a small manufacturer with limited resources, you can’t serve all customers equally well. You have to pick the customers you can serve most effectively—and profitably.
If we build it, they will come. Customers may buy your new product—if they think they need it and you know how to reach them. Without good market research, you could be investing precious capital in products that won’t sell.
Big markets are better than small markets. The problem with big markets is that they’re hard to enter. That’s because big markets draw big companies that can make and sell a product a lot cheaper than you can. It’s the niche markets that big companies don’t care about that present your biggest opportunities.

Seven steps to better marketing and sales

To help avoid these myths, follow these marketing principles designed for small manufacturers.

Determine your most valuable customers and products. Which customers and products are your moneymakers? To find out, calculate your contribution margin for each product. This is sales minus variable costs, such as materials, sales commissions, and shipping. Sort contribution margin from highest to lowest. You’ll quickly see which customers and products yield the most cash for paying fixed costs and generating profits.
Define your market niche. In step one you’ve already identified your most valuable customers. Now profile them. Identify these customers by SIC codes, region, company size, and other characteristics that help describe them. This defines your niche market. Focus your sales efforts there.
Know your competitors—and yourself. Who are your competitors and what are their strengths and weaknesses? Their weaknesses are especially important—they are your opportunities. It’s just as important to know how you compare to your competitors. To find out, ask your customers. Then use this information to position yourself in the marketplace.
Find out your customers’ needs. What else do your most valuable customers need besides your product? It may be technical support, repair services, or warranties. Face-to-face meetings and plant visits are great ways to gather this sort of information. Other valuable sources are your sales force, customer complaints, and surveys. Use this information to build your customer service capabilities.
Analyze unsuccessful bids. Interview customers and find out why you didn’t get the sale. Then document your findings and develop strategies to improve your bid rate.
Identify trends and determine market potential. Know where your market niche fits in the broader market. Study characteristics such as market trends, sales growth, and sales potential. Industry experts, dealers, associations, and sales managers can all provide useful information. So can trade journals, online sources, and your local library.
Create a marketing plan. This is your roadmap to success. Document your information, analyses and strategies. Your marketing plan should include the following:

· A projected income statement for next year

· Measurable goals and objectives

· An account list that includes an analysis of your most valuable customers

· Market analysis of customers, competition, market trends and niches, and sales potential

· Marketing strategies, including a sales and distribution plan, pricing, promotion, and customer service

· An action plan that includes timelines and responsibilities

If you would like more information on this subject, Michael Collins will be conducting a special, pre-conference workshop on “Developing Your Strategic Focus in the Marketplace”, May 18th, 1-5 pm in Milwaukee. His book, The Manufacturer’s Guide to Business Marketing, is the first to address marketing and strategic issues for small manufacturers. Take advantage of Mr. Collins’ valuable expertise and attend this insightful session. Please visit www.manufacturingmatters.org to register or call 877-800-2085.

© Copyright 2003 by WMEP.org

WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices including lean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.

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