American manufacturing is going through some gut-wrenching changes and continues to shrink as a percentage of GDP. When you read articles in trade journals and newspapers, everyone agrees that we need to find ways to grow manufacturing. Most solutions to this problem offered by manufacturers, associations, trade journals, and political pundits are focused on government solutions. They want the government to reduce taxes, halt the rise in healthcare premiums, eliminate cap and trade legislation, and stop the manipulation of foreign currencies.
This author also hopes that manufacturing gets a break on many of these issues, but I would like to suggest that we can’t depend on government to solve our manufacturing problems. But, there are many changes that can be adopted by manufacturers that can halt the decline of manufacturing, simply by adopting new strategies. In fact, I will go out on a limb and say that that many of these strategies are being used today by progressive manufacturers and they will become commonplace in the next generation.
Here are seven problems with strategies to solve them that I believe will eventually be adopted by the survivors in this economy:
Problem -- Your customers (even large customers) also have many pressures and problems trying to compete. They also have to lay-off people, “farm-out” systems that were integral to their manufacturing, reduce inventories, and get more done with fewer people. Their problems can be opportunities if you can find out about them.
1. Monitoring customers and markets. The key is to focus on how to improve customers’ performance and solve their problems. It requires visiting the customers and finding out what you can do to help them solve their internal problems. If you can change and offer new services, you won’t have a problem. Show the customer how your product and services will solve their problems and improve their performance.
Problem -- The old selling techniques that are still taught in national sales training programs are not working very well for today’s markets and buyers. The old idea of selling product features and using magical closing methods does not work, especially for buyers of industrial equipment.
2. Consultative Selling. Buyers don’t want to hear a sales pitch but they do like sales people who can understand their problems and have empathy for the buyer. It is called consultative selling and it is more about interviewing than selling.
Problem -- We need innovation and new products but we also have to establish a competitive advantage. The biggest single reason new products and new ideas don’t sell is that the company does not find out until the point of sales that the product or idea is not unique.
3. Improve the success rate of new products. Progressive manufacturers spend time finding out what kinds of competitor products or services are in the market prior to spending a lot of money on design or prototypes. They invest this time because they want to make sure that their new product idea is unique. You know you have done a good job on this step of product development when you have identified every competitor and compared their features and prices in a matrix.
Problem -- Manufacturers do not use modern marketing strategies to find new opportunities. The old methods of attending a few trade shows, printing literature, running an occasional ad in a trade journal and waiting for prospects to find your website won’t work now. In the glory days of manufacturing it was possible to get on a lot of bid lists and customers would come to you, but now manufacturers must be more proactive. This means identifying the best customer profiles, identifying the market niches, and finding low cost ways to reach them.
4. Using sales prospecting and niche marketing techniques. Progressive manufacturers have figured out that they can use modern methods to identify, contact and pursue prospects. One industrial marketing strategy is to use inquiries to identify new prospects and customers.
For example, by generating inquiries and identifying market niches, a manufacturer of robot systems was able to identify a specific application in the dairy industry and the 150 plants that could use these robots. Once this specific application was known, it was possible to focus the marketing techniques and make sales calls on the plants, the sales forecast was achieved in just one year, and within three years they were growing at 15 percent per year, while the company achieved their sales and profit goals.
Problem -- In some industries, such as the EDM machine marketplace, sales are down 50 percent from previous years and may never come back. Depending only on products to make the sales forecast may not be enough for OEMs to stay in the business. They need other kinds of sales.
5. Creating new services. You can provide a better value to your customers if you add additional services. Consider adding localized services, for example. It could cut down on travel expenses and add value to your products.
Problem -- The old sales channels just aren’t working for today’s customers. Many manufacturers who used only inside sales people (as in job shops), independent reps and distributors and traditional sales organizations are finding they are not working very well in this new era of globalization. The problem is that customers are more sophisticated, have many options, and there are many new requirements and tasks required in the selling process.
6. New sales channels. Manufacturers need to profile their various customers and their requirements and consider evaluating new types of sales channels. For instance, job shops may have to hire their first outside sales manager. Manufacturers of packaging machines may have to consider training specialized independent reps who sell a few complimentary lines and know as much about the products as factory sales people. And some companies who sell to a wide variety of markets and customers may have to create a system of multiple sales channels.
Problem -- Almost every European country is good at exporting (including their small manufacturers). They are good because they recognized a long time ago that they had to sell internationally to survive. Americans have been spoiled by being located in the biggest market in the world, and have avoided marketing internationally.
7. International Marketing. There are many market niches overseas that are just developing and can use existing U.S. products. You simply just need to take the first baby steps at learning how to market to foreign countries. You don’t have to be a large manufacturer to sell to foreign customers.
What is unique about all of these ideas is that they are all external strategies. Hammering away at the bottom line with continuous improvement is absolutely necessary, but if you want to create a new future for your company you need to develop a growth plan focused on external strategies to find growth opportunities.
Manufacturers are going to have to become industrial marketers if they want to survive. The alternative is keep doing what you do best and hope that conditions in the economy will improve. Perhaps the dollar will continue to decline and the price of imports will increase, forcing many customers to buy from American suppliers. Or perhaps some of the customers that now buy from foreign suppliers will tire of the hidden costs, late deliveries, and quality problems and come back to you.
This defensive "wait and see approach" is possible, but dangerous. Suffice it to say that waiting for outside events to change or the government to step in and save manufacturing may never happen. Hope is not a plan.
This article is an attempt to convince readers that there are many things we can do to grow, despite the problems. Remember, American manufacturers have some clear advantages. We are located in the market, we are close enough to monitor customer needs, we can offer short lead times and unique products, we can offer unique overnight services, and we are still the most innovative manufacturing sector in the world.
A better strategy for growth would be to go on the offense and take matters into your own hands. I believe that the next generation of manufacturers that survive this shakeout and prolonged recession will use many of the strategies described above. Their cultures will change from a focus on internal processes to a focus on external customer and market issues.
Michael P. Collins is president of MPC Management, a manufacturing consulting company, and the author of the book, “Saving American Manufacturing."