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A Publication of WTVP

The phrase "Don’t put all your eggs in one basket" continues to be useful advice for companies that have just a few customers or narrow product lines.

It’s particularly important for manufacturers in supplier-heavy regions, like the tri-County area, with reliance on industries that are often subject to slowdowns (earthmoving, construction equipment, and automotive, etc.).

We frequently see smaller manufacturers lulled into a false sense of security when they have a few large customers, particularly when they’ve had those customers for a long time. They know they really should diversify and expand their customer base to spread their risk, but it’s awfully easy to put it off when they’re busy taking care of all the business they can handle.

With the manufacturing sector currently in a recession, it’s even more important that companies look at new markets for their products. Unfortunately, there are a variety of reasons manufacturers lose business. Company ownership changes, or a new purchasing agent comes in with a stable of vendors. Demand for the main customer’s products is low. Foreign competition cripples a U.S. industry (most notably the steel industry).

To be prepared for such instances, we encourage clients to understand the characteristics of their customers, identifying commonalties such as size, type, and market. Having a snapshot of the companies they’ve been successful serving is a good first step in pursuing new customers who look just like the ones they already have.

During this process some of our clients discover the companies they thought were big customers really aren’t large at all. They’re just the ones that make the most noise. It’s a key reason we encourage manufacturers to keep track of customers by profitability, rather than by total sales. It can be somewhat frightening for a client to find out what they assumed to be a big customer isn’t a profitable one.
Another important activity we encourage is the analysis of lost bids.

The process should include tracking quotes submitted and won, detailing the cost of preparing quotes, and interviewing lost bid customers.

Keep in mind that getting a high price response from a customer frequently is a mask for a different problem.

Getting to the root of why a bid wasn’t successful will help a manufacturer develop strategies to address problems and improve hit rates.

Other important activities in preparation for pursuing new markets include gathering data on competitors, identifying industry trends, organizing a sales and customer service function, updating sales literature, initiating a system of continuous improvement, and putting it all down in a written marketing plan.

It can all be a bit daunting for the smaller company. IBI

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