The Domestic Market Share Index has fallen 9.5% since 2002, a loss equivalent to $789.5 billion in annual lost domestic market share. This indicates that 68.4% of U.S. manufacturing demand is met by domestic production, and 31.6% was met by imported products.
But this might change with Trump’s implementation of new tariffs. The tariffs might pressure U.S. manufacturers to reshore production and jobs, which might create new opportunities to sell into hundreds of new market niches, and thousands of new applications—there are always opportunities in chaos.
A good example is packaging and the packaging industry. Every time a large consumer product manufacturer changes the packaging of their products, it can cause a chain reaction of opportunities down through the OEM suppliers that supply machines for their production lines. For example, saving money by eliminating the traditional corrugated or cardboard cartons and replacing them with some kind of shrink-wrapped package or plastic bag will cause every machine in the production line to be redesigned or changed in some way. In many industries, thousands of packaging changes result in thousands of opportunities for new machine applications and designs. It is a matter of finding these new opportunities.
Finding New Markets and Customers
To survive in the new economy, manufacturers of every size must find new markets and customers as a defensive strategy. Developing a system to find new customers and markets on an ongoing basis should become a high priority for most small and midsize manufacturers (SMMs).
Real security for manufacturers is to develop a diverse group of customers and a portfolio of market niches that will help your company “ride out” the cyclical nature of many industries and the fickle nature of many customers.
Where Do You Begin?
Start digging into your data. Manufacturers usually have a goldmine of information that can be used to find new customers and markets. First, evaluate your internal information on quotations, lost orders, and costs to determine what has happened historically. Second, gather external details on customers, competitors, and markets to know where to go in the marketplace. Again, much of this information is already available, but it is scattered around the company.
The Six Essential Questions
Here are six essential questions that should be answered to find new customers and markets. If you can’t answer some or all of these questions, you are not alone. You are the majority of manufacturing managers who have never had to do this. Getting the answers to these six questions may seem to be a daunting task, but it is not as difficult as it appears.
1. Can you identify the best customers to sell – now and in the future?
Profile your customers. It is important to know how to profile the best customers, the right customer, a profitable customer or one with future sales potential to grow your business profitability. The simplest way to achieve this is to profile the ideal type of customer carefully and then find more like them.
Begin by printing a list of all accounts sold in the last 12 months (can vary from one to three years) by sales volume — from the largest to the smallest volume account. It is also very helpful to include the average profit margin percent of each account before overhead.
2. Do you know which market niches (customer groups) to focus on now and in the future?
Group your customers into market segments—each account is assigned an NAISC code. Next, group them into market niches. If your customers are in a spreadsheet, you can sort the NAISC codes from the smallest to the largest. The last step is to access a database, such as Dun & Bradstreet, and find out how many prospects are in each market niche. This is a preliminary estimate of market size. The idea is to end up with a list of prospects in each market niche.
3. Do you know what kinds of products and services the best customers want?
You will find many ideas for new products and services by developing a systematic way of monitoring customers. Monitoring customers is almost always the key to success in increasing sales and finding market opportunities, regardless of whether it is something you’re naturally good at or it feels like pulling teeth. You can find out what customers want through service reports, quotations and RFQs, sales calls, or simply by giving the best customers a phone call.
4. Can you compare your products, model by model, to the competitor’s products in terms of price, delivery and key features?
When the objective is to find new customers and new markets it is essential to find out:
- How many competitors are there for each product line or service?
- How do your products or services compare to their products in terms of customer buying perceptions?
- How do your prices compare in terms of customer buying perceptions?
If you can’t answer these basic questions, you will find out at the point of sale whether you have a competitive advantage. It goes without saying that it is very expensive to find out you don’t have a salable product or service at the point of sale.
Creating a simple matrix is a quick way to find out how much you know about competitors. On the top of the page, list all direct competitors for a specific model. On the side of the page, list some key specifications, capacities, and sell prices that the customer will see. Now, fill in the information gathered from their literature and websites into the matrix.
Use a “?” when you do not have the information and a “???” when the information is vital and you need an answer. Here is an example:
5. Do you know the specific reasons you lost orders to competitors for every known lost order in the last year?
One of the best indicators of whether a marketing or sales program is working is the ratio of orders to lost orders. Knowing why customers buy or don’t buy is vital to industrial marketing, and I have included it as one of the six essentials. The reasoning is simple: It is difficult to know how to prevent future lost orders or customers if you don’t understand why you are losing current customers and orders.
6. Do you know if you are making adequate margins on each product line, model, or job?
To compete in the new economy, you will need to find out if you are making adequate margins on each product line, model, job, or service.
Maintaining detailed records on profit by customer account, product line, and even product model is necessary to make customer selection decisions, to change selling and pricing strategies, and to identify “product dogs” that should be dropped. To compete in the new economy, you will need to find out if you are making adequate margins on each product line, model, job, or service.
It is dangerous to find new customers, go after large accounts, or bid on large projects when you do not have good cost information.
Anytime there are big changes in industries, there will be many new marketing opportunities. To find these opportunities, you need to develop a systematic approach.
American manufacturers are geographically closer to these customers and markets than foreign competitors and can seize the initiative. The first place to start is digging through your data on lost orders, costs, and quotations. Second, you must gather external information on customers, competitors, and market niches to find new prospects and market opportunities.
Successful manufacturers start with a large list of potential prospects that might be interested in buying. They gradually narrow their focus (reduce the number of prospects), by systematically eliminating prospects that don’t fit their customer and market profiles. If they are persistent in their sales prospecting and lead qualification, the focus eventually defines the right customers and markets.
You can learn more about monitoring customers and competitors in the Growth Planning Handbook by Mike Collins. He can be reached at [email protected] or on mpcmgt.net.