Christopher Anacker
Christopher Anacker

Marketing for Small to Medium-Size Manufacturers

Marketing for Small to Medium-Size Manufacturers
Extracted from the book: “The Manufacturer’s Guide to Business Marketing: How small and midsize companies can increase profits with limited resources” by Michael P. Collins… first published in October 1994 and still relevant in many ways.

Topics covered below include:

  • Do you truly know what your customers think about your products and services?
  • How to Gain Customer Information Cheaply
  • How to Get Competitor and Market Information Cheaply
  • How to Segment a Marketing (find a “niche”) and Dominate It
  • How to Achieve New Product Success

Small to medium-sized manufacturers tend to have limited resources. So, it’s paramount to use cost-effective marketing methods to increase ‘profitable’ sales. It’s not about simply increasing sales volume or selling to any and all customers. It’s about selling ‘profitably’ to the right customers.

Success comes when you identify a select set of customers, focus on learning the most you can about them, and then design your products and services around them, ideally better than any competitors do. And, when it comes to design, it’s not about offering the ultimate in quality. There’s a point where more quality doesn’t pay, and it may contribute to lost profit. Rather, it’s about finding out what your customers really want, developing something highly marketable to them so that you profitably offer customer value.

As you grow, pay attention to your most valuable customers … those roughly 20% who give you roughly 80% of your profits (some similar low to high proportion). Learn what they like and don’t like; learn why they are buying from you; learn what it will take for them to buy from you in the future, more often, in larger quantities, if possible … and only if ‘profitable’ for you.

Also, pay attention to ‘lost orders,’ so you can monitor how well you can possibly improve your products and services to capture sales among those lost customers in the future, if possible, or among similar prospects going forward.

Do you truly know what your customers think about your products and services?
How would your customers rate you (from poor to excellent) on the areas below? Can you think of any other key areas? Are you surprised by any of the ratings you get?

  • Quality
  • Delivery
  • Dependability
  • Price
  • Performance
  • Technical Support
  • Field service
  • Response time
  • Maintenance (if this applies)
  • Sales expertise
  • Post-sale service
  • … other relevant factors

How to Gain Customer Information Cheaply
You have many easy ways to come to understand your customers and prospects. Some include:

  • Ask non-sales staff to be on the lookout for key information, and teach them how to ask for feedback from customers as the right time.
  • Ask your sales staff to get feedback more often.
  • Offer warranty cards, encourage customers to return them, and review their comments they entered onto the cards.
  • Ask your service staff to get feedback.
  • Ask key questions during a sales follow-up call.
  • Offer product training and seminars, as prospects and customers will often give you feedback at these events.
  • If you can afford it, run a small focus group of prospects and customers.
  • Get your designers and engineers out into the field to meet with customers and prospects, so they can learn directly what is wanted or needed in product designs.
  • Establish or be a part of a Support Council that consists of your dealers, distributors and reps where they discuss the various customer issues.
  • Regularly run a customer survey program of a small group of customers. You can offer a postage-paid mail-back card with a set of key questions and a comments area. Or, you can have someone telephone customers and ask key questions and to encourage customers to elaborate on key areas.

How to Get Competitor and Market Information Cheaply
Small to medium-size manufacturers tend to compete in relatively small ‘niche’ markets. So, it’s not that important to know the market size or your share. It’s more important to know who your competitors are and what they are doing. At least know what you can about the top competitors. Focus on learning what you need to do to defend your niche and to better serve your customers and prospects. And, focus on monitoring if the overall industry in which your market niche exists is still growing or is starting to decline. US-based companies can also get some idea about the growth condition from the US Industrial Outlook, Current Industrial Reports, Census of Manufacturers, and County Business Patterns.

Several low-cost ways exist to obtain competitor information. You can hire a part-time intern researcher to spend time on any of this. You should train and remind your field reps to capture information as they come upon it and can get it from customers and prospects. If it’s affordable, you can buy and consume for yourself your competitors’ offerings.

You have any public avenues to gain information, such as:

  • Manufacturer directories
  • Online ‘yellow’ pages, ‘green’ pages, and more.
  • Competitor ads for products, services, and even their employment job postings
  • Competitor brochures and other public literature
  • Trade shows
  • Suppliers and distributors
  • Industry associations
  • Stock market reports
  • UCC filings
  • Court records
  • Patent records
  • … and more. Visit a good reference librarian at a public library for more help.

Low-cost ways to gain market information:

  • Have one or several of your employees review industry trade journals and other materials to find and collect information on news and trends among customers, the industry, technology that could impact the industry, and other relevant topics.
  • Use your hands-free travel time (e.g., airline travel, subway, bus, train) to read relevant trends and updates literature.
  • Get to know your local public library that has a good business section, and spend enough regular time there reading the right publications.
  • Allow a few customers to use your product in development and give you feedback on the strengths and weaknesses. For example, let them use demonstration products to find out how they use the product and how it actually helps them address specific needs and issues.
  • Arm your tradeshow attending employees with a set of specific questions to ask about competitors they observe at the show.
  • Have lunch with industry experts, when you can.
  • Talk with your suppliers and distributors.
  • Encourage your salespeople to ask customers what they think and know about the market. This non-selling time can be a good source of marketing information.

How to Segment a Marketing (find a “niche”) and Dominate It
Segmenting the markets (finding a niche market) can be as simple as finding common traits and needs among customers and prospects and then tailoring your offerings and outreach to them. In other words, you concentrate on a group of customers and prospects you can best work with, dominate the sales to them among competitors, and easily protect your turf. This can include segmentation by Industry code (e.g., US NAICS), sales volume, company size, territory / geography, products they need, and more. One thing to note is that in business-to-business marketing, it’s less likely (probably unlikely) that some of the segmentation analysis done for “consumers” (e.g., psychographics, behavior analysis, etc.) will not work, and you’ll waste money on it. Instead, you start with a rough idea of who might buy your offerings and then narrow it down as you eliminate customers and prospects that aren’t the most viable and profitable for you. You focus on altering your products and services to sell to those who show the most potential.

Some of the key reasons to sell into a niche market include:

  • It can be more efficient. Selling to fewer, highly-targeted customers typically returns more profit for the investment than trying to sell more widely.
  • It can be more effective as you are able to design products that serve your niche better than products that try to satisfy a wider range of customers with widely varying needs.
  • It can be less costly, as you don’t need to spend as much on product development, advertising and selling.
  • You can have a competitive advantage, as your offerings are more specific to your niches market comparted to manufacturers offering broader solutions.
  • You can do a better job at retaining your niche customers.
  • It is easier to improve the quality of your products and services for a few select customers.

Key Niche Marketing Approaches

  • Don’t take on any customers who don’t give you a profit or whom you can’t sufficiently support.
  • Focus your development efforts on the applications of the product.
  • Sometimes a niche will emerge from a product line extension.
  • Take the time to find a niche for a leading-edge product.
  • In an existing niche, create a substitute product.

How to Achieve New Product Success
Your being a small to medium-sized manufacturer likely means you can’t afford very many failures, if any at all.You don’t need to have your product be among the one-third of all new industrial products introduced to the market that fail (per The Conference Board observed industry average).

The way to achieve success with new products is to be customer-focused, not designer or engineer-focused. Involve your customers in the process; let them collaborate with you in the concept and design phases, and you’ll increase your likelihood of success the first time out. Otherwise, if it has any interest at all, you want to avoid having to spend all that money and time to redesign it after you get customer feedback that you should have gotten during the development phase.

It helps to keep in mind that marketing strategies for industrial products are different than for consumer products. And, the same is true for simple manufactured products than complex, highly-engineered products.

Be sure you understand the number and strength of competitors, the number and strength of competitive/alternative/substitute products, the actual number of potential users, and the price customers will pay for the product.

Categories of New Products
We can put new products into essentially three categories, ranging from easy to hard, little cost to much cost, for current customers and markets to new customers and markets:

  • Line extensions or simple modifications — simple redesigns that reduce costs of manufacture, offer new features, or somehow expand the line
  • Substitute or replacement — similar products that do the same as other products in the market
  • New, “on the leading-edge” — for the small to medium-sized manufacturer, these are often products that adapt a new technology.

You should decide on which category of product development you wish to pursue, based on the risk and money you can afford to lose, if it doesn’t succeed.

Sources of New Product Ideas
In addition to capturing ideas for products from your customers through one-on-one conversations, user panels, or customer surveys, you can also find some among:

  • Trade journals
  • Your competitors
  • Your suppliers
  • Your own employees on their own or from brainstorming
  • Your customer service records
  • Patent filings
  • Trade shows
  • Industry experts, inventors, scientists, technical wizards
  • New hires (salespeople, engineers, etc.) from your competitors