Strategic underpin marketing efforts.

Your company's position in the marketplace depends on your marketing strategy, so develop that strategy with long-term sales and marketing success in mind.

For many in the foundry industry, sales and marketing represent one and the same effort. While these operations may go hand in hand, sophisticated marketers understand that it is actually the marketing strategy that will determine how a product or service will be sold.

"Marketing strategies are the elements that hold the entire marketing plan together," Janie Kokonas, Alexander Marketing Services told the 89 in attendance at the AFS Marketing Conference in Orlando, Florida, November 18-20. Together with eight other speakers, Kokonas helped lay the groundwork for developing and executing an effective marketing strategy. In kicking off the conference, Kokonas discussed various examples of common strategies and how they are implemented as well as many of the do's and don'ts of putting a strategy into action.

One of the first steps in strategy development, she said, is to conduct a "situation analysis" in which you define your market along with the climate of that market as well as a company's position in the market. The situation analysis also includes both a competitive and opportunity assessment.

Kokonas defined a market as including business type, location, and the number and function of the buying influences within that market. Market climate, she explained, includes "key factors and critical issues that may impact your success."

A competitive analysis, she noted, includes the following elements: profile; strengths and weaknesses analysis; pricing strategies; distribution channels; promotion strategies; and the estimate of market share.

The opportunity assessment includes two major factors: a summary of market potential; and comments on positioning opportunities and voids.

In considering your positioning strategy, Kokonas pointed out that you must ask yourself, "What is the product image you want to instill in the minds of your target market relative to your competition?"

When developing a marketing plan, there are a variety of strategies to consider, according to Kokonas. Some of the more common ones include: market share; and competitive, product, price and promotion strategies.

For example, when pursuing a market share approach, Kokonas asked, "Do I build the market or steal sham from competitors to achieve sales goals?" She offered the following rules of thumb.

"If you have a relatively new product where the current user base is small, the potential user base is quite large and there is little competition, go ahead and build the market." On the other hand, she offered, "If you're in a situation where your product is mature with few new customers entering the marketplace, stealing market sham from the competition is recommended."

Noting that stealing market sham is common practice in mature industries, Kokonas offered that the tactic is quite straightforward. "You will need to target specific markets and match the competition. Your advertising will need to communicate benefits or an image that is completely different from your competition."

If you choose the "building" market approach, your major goals will be to educate prospects about your products and services and then convince them to choose your company.

Kokonas offered a variety of "Do's and Don'ts" when it comes to developing and implementing a marketing strategy:

* Do make sure your marketing strategies are descriptive statements of how you will achieve your marketing objectives;

* Do make sure to focus on one idea at a time when writing your strategies;

* Do take considerable time developing your marketing strategies because they form the cornerstone of your entire marketing plan.

As for the "don'ts," she offered these:

* Don't let strategies become too executional;

* Don't limit the focus to one or two specific areas;

* Don't write long, elaborate strategies;

* Don't be stagnant in your thinking;

* Don't expect a 100% success rate.

Start Simple

If Tim McMillin, Magma Foundry Technologies, had any advice for getting started on a marketing program, it would be this: "Start simple." McMillin said, "Don't focus on SWOT (strengths, weaknesses, opportunities and threats) analysis or psychographics. Your first step should be talking to your current customers. Take some time to interpret the competitive environment and to really understand what your product is."

He suggested that you interview tough clients, even those whose business you may have lost. "Determine their attitudes about castings and go beyond the purchasing department if you have to. Next, do a thorough review of your own operations and ask yourself hard questions like 'What kinds of people do you work with? What are their unique strengths? How can they be part of the plan? What kind of processes do you have? What are their capabilities? How can you use them to advantage?'"

Once you determine these things, then develop your plan. And above all, McMillin says, "Sell capabilities, not tools. Don't provide customers and prospects with a list of equipment, tell them why the equipment makes you better. Explain their role in quality and show how your equipment makes you more efficient."

In concluding his presentation, McMillin stressed the importance of communications in any marketing effort. "Explain what's relevant and important," he said. "Also, try to cover several audiences, if possible, with your communications. Don't be afraid to explain in some detail and never underestimate the client."

Marketing Technical Capabilities

Nearly all foundries have some unique capabilities that should be the focus of any marketing effort they may initiate. In most cases, a foundry's uniqueness involves its technical capabilities. According to Mike Gwyn, Pelton Casteel, these skills can range from facility capabilities (molding, finishing, etc.) to rapid launch and delivery reliability to exceptional dimensional capability and secondary processing.

So, how do you determine which of your unique capabilities to market? Gwyn pointed out that you should always look for those that produce the best margin potential based on the type of capitalization involved and your in-house know-how - what you are really good at. He also suggested that you should look at opportunities to "grow the market."

"Participate in the creation of new castings with higher margin potentials based on your focused capability," Gwyn said. "And, above all, avoid competing for 'what is' on the basis of lower price and lower margins."

Gwyn, a proponent of the engineering approach to marketing castings, favors growing the market via fabrications-to-casting conversions. With this approach, he said, "You need to develop the know-how to adapt 'what is' to your foundry alloy, molding methods and finishing processes. With this approach you will find you will need to focus more on process geometry than structural and functional geometry. You will also need to adapt technology that will allow you to participate in the customer's design process."

Perhaps the biggest traditional barrier to this approach is the often-heard story of a foundry investing significant resources in reengineering a component only to have the production of the part turned over the to the lowest bidder. Gwyn said that the only solution to this is to have an up-front cooperative engineering agreement with the casting customer that will not allow the casting user to take the conversion design to the lowest bidder or even allow them to share the new geometry with others.

Customer Perspectives

One of the first steps in developing a marketing strategy revolves around knowledge of the customer and understanding their expectations. Jacob Jones, Meritor, and Tom White, Deere & Co., provided their perspective as major casting users on the direction many casting users are taking and why.

In 1990, Meritor, a $3.5-billion manufacturer of heavy and light vehicle systems, utilized some 2200 suppliers for a wide variety of components. By 1998, their total supplier base had dropped to 514. Jones estimates that by 2002, the number of companies supplying Meritor will fall to about 300.

What this means is that Meritor, as well as many other large manufacturers, increasingly look to suppliers to fulfill a much larger role than simply supplying parts in the very near future. In other words, foundries and other suppliers will no longer be able to rely simply on selling the customer, but will need to develop a long-range strategy to anticipate and meet customer needs.

According to Jones, companies like Meritor will continue to seek out suppliers that can provide systems, not merely parts, and for those who will, in fact, design the parts that they manufacture. The major challenges in terms of delivery will come by way of reducing lead times from months to weeks to days. "Our suppliers will need to provide discrete lot orders in order for us to minimize inventories," said Jones.

Because 60% of Meritor's sales take place outside of the U.S., Jones indicated that they will be looking for suppliers with a global presence. This can be accomplished in a variety of ways including being able to supply components and systems from the U.S. or establishing international alliances.

Along with their other expectations of paperless commerce, daily communication, 24-hour quotations, machining and assembly of components, and engineering support, cost will continue to play a major role, according to Jones.

"We will continue to expect year over year improvements (in costs), and our suppliers will need to be competitive worldwide. We will continue to look for lowest total costs. This includes purchase price, quality, delivery, warranty, inventory and overall logistics."

Jones suggested that customer expectations will continue to change and increase with their focus on total value. He added, "If you can't provide differentiating value, then price will usually dictate the choice of suppliers."

Much like Meritor, Deere & Co. is a major user of metal castings. And White, manager of Supply Management Services, helped put into perspective the pressures on companies like Deere.

According to White, Deere & Co. sales in 1997 were $12.8 billion and their annual purchases surpassed $8 billion. The company's purchases represent between 65-70% of their cost of sales. In North America only, Deere's purchase of castings equaled $200 million in '97, while machined casting purchases exceeded $250 million. Their top 10 casting suppliers provided 85% of total castings purchased that year. One of the main objectives handed down to the Supply Management group, said White, is to reduce purchased material costs by $1 billion in the next 5 years.

White listed three major initiatives currently underway at Deere as well as what results they expect from their foundry suppliers. The first is supplier integration and value analysis. The response, he said, is for foundries to provide technical assistance in casting design. The second initiative is supplier development. The goal for casting producers is to participate with Deere Supplier Development personnel in removing waste and lowering costs from tool design through casting assembly. The third initiative is cost management. The expected response, in addition to these other increased levels of support, is to control all input costs to offer castings of greater value.

White expects the ultimate result of these initiatives to be additional applications for castings and better value for Deere customers. What else would White like to see from his foundry suppliers? "Weldable ductile iron along with additional value-added activities," he said.

In addition to these speakers, the Marketing Conference also featured Steve Storer, Executive Search, Ltd., on "Finding and Keeping Good Managers," Dennis Dotson, The Dotson Co., on "Implementing MIS/Internet," David Littman, Comerica Bank, on "State of the Manufacturing Economy," and Disney Univ. with their presentation on "Customer Loyalty: Keeping the Promise."