How Manufacturers Can Diversify Into New Markets

How Manufacturers Can Enter New Markets and Find New Customers

In our continuing series, "Finding New Customers For Your Manufacturing Business - The Ultimate How-To Guide," we're exploring both the wisdom and the "how-to" of entering new market sectors.

If there is one thing that is just as certain as "death and taxes," it's change.

Emerging technologies can wipe out entire sectors. If you want your manufacturing company to survive, you better have a Plan B before trouble strikes.

Do not wait until your core business declines to the point of no return before trying to position your company in a new market sector.

Diversification Can Increase Sales — and Business Value

Diversification and expanding the markets your company serves not only increase sales, they can also make your manufacturing company more attractive to potential buyers.

By building a stronger market presence before embarking on an exit strategy, you are more likely to attract a buyer willing to pay a higher multiple and maximize the return on the sale of your business.

Many manufacturers don't put much effort into seeking business within different sectors because they mistakenly assume the cost of entry will be too high.

That is not necessarily the case.

Start by asking yourself:

"What other products can I manufacture with the equipment I already have?"

If you're stamping parts for the automotive or military industries, couldn't those same machines potentially be used to manufacture products for the medical or dental industries?

Depending on the market you intend to enter, you may have to completely re-tool.

That was the case when we sold a gun barrel manufacturer to a stamping house. The transaction required the company to purchase different equipment.

If you have the capital to do that, great.

For smaller manufacturers working with a tighter budget, that may not be possible.

That's OK.

Work with what you have. Using your imagination doesn't cost a dime.

Which New Market Should You Target?

So, what industry should you target?

I suggest starting by following the money.

What industries are on the rise? Which are expected to experience significant growth over the next 10 years?

Use Google to research growing industries and emerging markets. Review sites like www.IndustryTap.com to learn about emerging technologies.

Industry and technology publications can also get your imagination and creative juices flowing.

Once you've identified an industry that your team has the skills and manufacturing capacity to enter, it becomes a matter of positioning and marketing.

Position Your Company as a Player in the New Market

With the Internet and social media, it is much easier to break into a new area and position yourself as a player within a particular field.

What once took years and tens of thousands of dollars to accomplish can now be done on a shoestring budget and, in some cases, in less than a year.

A sound brand strategy might include:

• Website development
• Sales brochures — both print and electronic versions
• Corporate video
• Public relations and news releases
• Blog articles
• Social media presence
• Trade show participation

The important thing is to create enough visibility that potential customers within the new market begin to recognize your company as a legitimate supplier.

A Manufacturer Successfully Entering a New Market

Here's an example of a manufacturer entering a new market from a press release that appeared in several online venues:

New Wire Marine, the Charleston, S.C.-based marine electrical system designer, announced today that they have purchased new Computer Numerical Control (CNC) equipment, a high-tech, computer-controlled cutting tool that has allowed the company to enter the commercial switch panel market.

The CNC machine is able to cut any shape with high precision on a 2D surface and enables New Wire Marine to raster engrave graphics, detailed logos and text into their switch panels.

New Wire Marine hopes to fill a large gap in the OEM (original equipment manufacturer) switch panel market by becoming an affordable vendor and leading supplier of custom switch panels to smaller boat builders.

Most vendors in the business will only supply large quantities of a single panel and don't offer the logo engraving and backlighting process that the engineers at New Wire Marine have developed.

Small builders will find that at New Wire Marine there are no minimum quantities, requests for variations in panel design are accepted, and the company will even help a client completely redesign a panel layout.

Check out the company's web site.

They clearly found an opportunity to enter a market where they could solve a problem that larger suppliers weren't addressing.

Customers could choose from stock switches or design and order a custom product.

More importantly, New Wire Marine recognized a gap in the market: smaller boat builders needed custom switch panels, but many existing suppliers were focused on large-volume orders.

They found the gap and positioned themselves to fill it.

Look for Gaps Your Existing Capabilities Can Fill

Entering a new market may be as simple as asking:

"What other products and services can I provide to my existing customers, and what other sectors use the same products or capabilities?"

That is essentially what New Wire Marine did.

Positioning your company as a provider of a new product or service is often not as difficult as you think.

Notice from their press release that New Wire Marine identified a specific problem in the market.

Most providers were only interested in large orders.

They used that weakness to their advantage and built their strategy around serving an underserved group of customers.

That's smart positioning.

I Practice What I Preach

I also practice what I preach.

Asking the same question — "What other services can I provide to the manufacturing industry?" — led this Industrial Auctioneer to realize that I could provide additional services to manufacturers.

With that realization, AcceleratedMfgBrokers.com was born.

We built a brokerage business exclusively serving the manufacturing industry.

Just as New Wire Marine did, I used the Internet and digital marketing to position the company within a very specific market.

A very short time and approximately $100 million in listings later, here's what you find when you search for "Manufacturing Business Brokers."

Expanding Into New Markets Can Leverage Your Core Business for Growth

In my experience, most manufacturers are not marketers.

As a result, they either don't believe in the power and importance of marketing or simply make it harder than it needs to be.

I stumbled upon an online report that drove this point home.

In spring 2013, Oracle Eloqua (an earlier study) commissioned Forrester Consulting to research current and planned L2RM — Lead-to-Revenue Marketing — practices among manufacturing companies in Germany, the UK and the U.S.

Survey participants came from manufacturing companies with 500 employees or more, and 80% of those companies sold to businesses.

Here's what I considered the most interesting part of the executive summary:

"Manufacturing companies that sell primarily to businesses instead of consumers have not traditionally maintained a strong marketing discipline. Many of them only have a product management function as opposed to product marketing; most manufacturers are led by either ex-engineers or ex-sales professionals with little understanding of what marketing can do; and engineering or production people often consider their products to be self-explanatory and that all is required is a well-trained (on the product) sales force to ensure success."

The report goes on to explain that business buying behavior had changed. Buyers were increasingly conducting their own research and delaying conversations with salespeople until much later in the buying process.

That shift makes marketing even more important for manufacturers trying to enter new markets and attract new customers.

Manufacturing Companies Need to Embrace Marketing

So you're not used to being a marketer.

I get it.

There are companies that can help. Some specifically work within the manufacturing sector to help companies create effective brand and marketing strategies.

You can be the best machinists in the world, but if the world doesn't know you're out there, you're screwed!

The Bottom Line: New Markets Require Modern Marketing

If you want to find new customers for your manufacturing business, you will need to embrace modern marketing and brand-positioning techniques.

Not knowing how is no excuse.

Find somebody who does.

If all I did were industrial auctions without actually promoting and marketing my company and its services, I'd be out of business.

You will be too.

If marketing and social media are outside your "comfort zone," think about how uncomfortable it would be to call an industrial auctioneer to close your dying business.

Isn't selling an ongoing, thriving enterprise so you can retire a much more attractive option?

You bet it is.

Breaking into new markets can help you get there.