Conventional wisdom states that when times are bad and sales are down, management should cut all expenses except sales and marketing. And when things get really bad, management must cut everything but sales because selling is the fastest way to increase revenues.
This business-to-business case study illustrates how, if executed properly, strategic marketing can sometimes be a quicker, more efficient and more effective way to grow sales.
A manufacturing firm’s brand enjoyed high name recognition, and the longstanding business had survived and often thrived through multiple business cycles during its storied history. A competent management team had been assembled and was balancing operational needs with cash-flow requirements.
However, sales of the manufacturer’s primary division were declining and the market for its products was in a severe depression. The lack of volume meant the company was not covering its overhead. Escalating energy and raw material costs were eroding profit margins.
Product and Distribution Channels
Market perceptions of its products were mixed. The company had a strong reputation as a manufacturer of “green” building products, but it was not well regarded for solving end-user problems. The firm was not in a position to compete on price.
Although the company’s products were esteemed by specifiers and designers for being sustainable and other specific performance attributes, many end-users were put off by the high cost of the products, and sometimes found these products to be difficult to work with and of questionable quality.
Low sales volume and slow inventory turns decreased the company’s value to channel members and kept new distributors from taking on the line. To cut costs, existing distributors reduced their inventories of the company’s products, and dropped slower-moving niche items manufactured by the firm entirely.
In response, management hired a full-service marketing firm and undertook a full-blown marketing and advertising campaign. The marketing message trumpeted the environmental friendliness of the firm’s products but failed to communicate their other performance values.
Choosing Strategic Priorities
Rather than simply initiating a typical marketing campaign, the company needed to find:
· A high-volume application…
· In which it could be cost-competitive…
· In which it had a different story to tell…
· In an expanding market, enabling growth without having to take market share…
· And reestablish its value to distributors.
The company’s primary product is a fiber board used for various purposes by construction trades. Reducing sound transmission in buildings appeared to be the company’s best opportunity to generate volume. Multi-family projects that required sound reduction could require multiple truckloads of product. The firm already marketed this application but was not emphasizing it.
The company’s sound-reduction product performed well and was cost-competitive in flooring applications. It was installed very differently than the products dominating the market. Competing products were sold directly to specialty contractors, bypassing traditional distributors and contractors.
The housing market had collapsed with no recovery in sight. The lack of money for down payments, overly strict mortgage requirements, and fear of declining home values crippled demand.
Still, people needed places to live. Apartment construction, while also down, remained viable, and increased demand was forecast for the foreseeable future. Demographic changes predicted surging demand for student housing and assisted living. Changing consumer tastes were boosting the desire for urban living. The Federal government’s spending on affordable housing, often in the form of apartments, was increasing in an effort spur economic growth.
Executing the Strategy
A volume application had been identified that met the company’s strategic imperatives. The marketing group now needed to focus all its resources on implementing the initiative as quickly and inexpensively as possible against larger, better-capitalized competitors that dominated the market. Every problem perceived by customers that could hold back sales needed to be solved.
The marketing team implemented a wide array of tactics to support the new strategy:
Brought It Inside. To reduce cost, the firm terminated its engagement with the full-service outside marketing agency and brought marketing in-house, with assistance from independent professionals.
Aligned the Messaging. The marketing team developed a compelling tag line aligned with the new strategy. The message was simple and specific, yet universal to the company’s other product lines.
Developed Aligned Materials. The team conveyed its solution and addressed all known obstacles through new marketing tools in a wide variety of mediums, including video, website, packaging, sales aides, installation graphics, product sheets, trade show booths and more.
Accessed All Available Channels. The team tapped all available cost-effective channels to disseminate the message, including the company website, YouTube and industry related third-party websites.
Quality Improvements. The marketing team communicated quality improvements needed to increase market acceptance to operations. The Operations Department innovated and made improvements. Third-party testing labs were engaged to refute end-user performance concerns and induce confidence.
The shift in marketing strategy contributed significantly to turning around declining revenues into consecutive year-over-year sales increases of 20% and beyond. Identifying and targeting an expanding market segment supported this growth in sales. Increased market share remained a goal but was not required for significant recurring revenue increases.
Companies that follow conventional wisdom run the risk of leaving core problems undiagnosed and fail to turn sales around. The strategic marketing process avoids this pitfall. Strategic marketing effectively gives the sales force an improved product to sell and a better market to sell it into, thereby propelling increased sales at a rapid rate.