Situation: Revenue for a product and craft business has been slipping. At the same time, their competition has been disappearing. It is clear to the CEO that demand is and will continue to be present because of the market that the company serves. The question is how to maintain the profitability to survive long-term. How do you build in a declining market?
Advice from the CEOs:
The keys to recovery in a business like this will be in two areas: improving sales and increasing margins.
To increase sales the choices are more aggressive marketing and selling to existing customers or creating new markets like previous generations did when they started the business. Consider services that you could bundle with your products to augment the ways that customers use them. It will be the responsibility of your sales and marketing teams to demonstrate these product/service bundles to increase sales both to new and existing customers. This will help to solve the revenue slippage.
The other side is ongoing efforts to reduce cost which will, in turn, improve your margins. Costs can be reduced in creative ways that are not obvious. These include improvements in purchasing, reduction of waste, recycling of component materials, and inventory controls. It will be the responsibility of your production, purchasing and inventory management teams to develop these solutions. Assure that these teams are recognized and rewarded for their solutions.
Look at the segments of your product offering. Are they declining at the same rate or are there differences? This will help you to focus your efforts, as a company, to grow market share even if the overall market is declining.
Other suggestions for increasing sales:
Take advantage of the craft trends. Do this with NEW talent – not tired talent.
Consider partnerships and collaborations.
Set up contests and craft classes.
Look at how other industries promote to the craft industry and follow their lead.
Situation: A company is in the process of shifting their business model to better address customer needs. They have three different models under consideration. Management is split between these models, but must arrive at a consensus. How do you optimize your business model?
Advice from the CEOs:
Right now, you are considering three different potential models:
Tools – your old model
Data – produced by your old model
Service – your new model
These are different models with different prospects.
The money makers in marketing focus on data, not tools. Data is information, and this is what is valuable to clients. If you want to focus on the data component of your offering.
Currently, you are scraping data from social media and matching this to your client’s database on a real-time basis. There’s a model and value here because you are enhancing your client’s current database by making it more useful and actionable to them.
You have tools to enable and add value to existing client databases by allowing them to better segment their database. Again, there is value here.
Your core IP is the ability to correlate diverse data sources. Have you protected this IP? If not, this needs to be a top priority.
How much information that you scrape from social media sources can you share without violating privacy? This is something to think about because people are becoming increasingly sensitive about companies collecting their private information.
Situation: A small company has always used guerilla marketing as its marketing modus operandi – trade shows, etc. Their VP Sales recently left. They feel a need for a marketing plan and hired a company to assist them in understanding how they are perceived by their customers. Should they continue to outsource, or is it preferable to bring marketing expertise in-house? Is it time to hire a marketing manager?
Advice from the CEOs:
How well do you understand your customer profiles? It is important to characterize, segment and understand your customers before you can understand your marketing.
What is the company size of your typical customer? Small companies don’t spend a lot on big trade shows, other than perhaps sending a couple of people as attendees. Event marketing may be a more effective way to reach small customers.
The company that you hired should be answering these questions for you.
Marketing is about creating an environment in which people are aware of you and find you versus your having to go out and find them. Social media have fundamentally changed the marketing challenge, emphasizing pull versus push marketing – commercials, ads, billboards, etc.
An important role of marketing is perception management so that when a lead or need arises, your company is a natural answer.
Whether or not you hire a person, you need a marketing plan. Once you have a plan, you need a marketing budget.
The company is now at 35+ employees. Fischer’s growth curve research indicates that at this size you need a professional in the marketing position – someone with experience who knows the ropes. This person could be inside or outside.
Situation: A company was launched on a single product with variations. Their R&D team has now developed several additional products which they are planning to launch. This will involve new product names and new customer segments. Having not done this before, the CEO seeks advice on managing multiple products, brands and market segments. How do you manage multiple products and segments?
Advice from the CEOs:
The most important element is the plan – write it carefully and build from a solid base.
When working with multiple products or market segments, match your segment strategy for each segment to your product strategy for that segment.
Build a grid that shows all products and all segments where you wish to sell them. In each cell, determine both the decision maker(s) and their top purchasing priorities. This will help you to build your Product/Segment strategy and optimize resource allocation while increasing sales and marketing effectiveness.
It may also help you to fire problem customers who cost you money and attention and reallocate these resources to more promising opportunities.
Analyze the customer’s decision-making process for each product and segment. Make sure that your marketing and sales effort makes sense within their decision process and focus on what is workable.
When introducing a new product or idea, focus first on smaller segments and test the fit of your product or idea. This is low risk if you fail, and you can leverage what you have learned if you win.
Build a one-page strategic plan that covers your full company strategy. Each department compliments the company strategy with its own departmental strategy to support the company strategy.
Special thanks to John Maver of Maver Management Group for his contribution to this discussion.