Survey reveals routes for attracting casting business, spending: AFS 2003 marketing Benchmarking Survey. (The Market-Driven Foundry: Part III).

The first two installments in "The Market-Driven Foundry" series concentrated on marketing's all-important first step--how to determine the most attractive (profitable) work for your plant's unique production arrangement. This is a critical decision to reach, but it's still only the beginning.

The next step--ensuring the sales effort is properly focused on the target(s) and that this audience hears your message--takes a fair amount of brainpower as well.

It is well known that metalcasters have spent disparately less on marketing than other manufacturers. In fact, a 2001 AFS Confidential Operational Cost Study showed that metalcasters allocated only 0.26% of sales to marketing. Meanwhile, a National Assn. of Manufacturers' survey showed that the manufacturing community at large spends nearly 1% of sales (or four times what foundries do) in securing new business.

There are few certainties in today's world, but one you can take to the bank is that what worked in the past in regard to marketing is anything but a sure-bet tomorrow. Competing materials, import threats and fewer total buyers in the market have tossed aside notions of what previously worked in drawing new casting orders to the mailbox.

By their own admission, many foundries are unsure of how much to allocate to business development and which methods are most effective. As a result, the AFS Marketing Div. conducted a confidential 2003 AFS Marketing Benchmarking Survey to determine the methods (and spending) currently used by U.S. foundries in reaching their casting accounts.

The seven-question survey inquired about sales and marketing staffing, sales-related travel, use of independent sales representatives and annual marketing expenditures. The survey was distributed via a single broadcast fax to 1579 sales/marketing managers at noncaptive U.S. foundries on January 29.

Participants in the survey received detailed reports in early April. The results are abstracted in this article.

Results

The table below summarizes the average annual spending for each of the net sales groups surveyed.

Print Advertising--Print advertising was the most-cited tool within the two lower sales groups and was the second-most common overall at 64% of respondents. In terms of annual spending, advertising represented the top expenditure among all sales groups except for the $11-15 million range, where it ranked second. The average expense among advertising foundries was $5024, second only to those exhibiting at trade shows.

Trade Shows-Exhibiting at trade shows was most popular among metalcasters in the $6-10 million range (ranking second); but it is used to a far lesser degree by the larger foundries. Overall, only 29% of respondents participated in shows, ranking seventh out of eight items examined. However, exhibits ranked second in total expenditures in each of the groups except $11-is million, where it dramatically fell off. Among participating firms, trade shows represented the highest average expense at $8680.

Literature & Brochures--This promotion method was the second-most cited tool at 69% of respondents. It was the most popular means among foundries reporting more than $11 million in sales. Among those spending in this area the average expense was $2819. It was first in spending among foundries in the $1 1-15 million group.

Training--Training for sales/marketing staff was not widely practiced overall (at only 32% of respondents), but was relatively high (tied for fourth-most cited) for firms in the $11-is million range. Firms actively training their sales/marketing staffs spend $3492, however.

Website--An internet presence was the most cited tool overall (71% of all respondents) and was the most common tool among operations doing less than $15 million in sales. It required less expense, however, at $2211. It held either third or fourth place in spending in each of the respective sales groups surveyed.

Subscriptions & Memberships-About 59% of respondents considered subscriptions and memberships as part of their marketing development plans. It was tied as the most common tool within the $11-15 million group. The average expense among those citing this method was $1833.

Promotional Items--Promotion items (such as giveaways, logo items, etc.) was most popular among the $16-plus and $6-b million groups. Overall, 60% of respondents budgeted dollars for this activity. Spending averaged $1647 among those utilizing promotional items.

Surveys--The customer survey is not widely practiced (13% of respondents) and represented the least-employed tool in nearly all categories. Surveys also represented the lowest expenditure investment (in all groups), averaging $1339.

Total Budget--The survey results showed that the average marketing program expenditures across the industry (again with a response base dominated by small foundries) was $15,392. This represented allocations from $250 to $115,000.

Interviews with foundry marketing personnel, conducted independent of the survey, provide insight into various tools currently used by marketers. Their thoughts are provided in the following sections.

Website

There is general agreement that the website and promotion of the website can offer the biggest bang for the marketing dollar. Determining and answering customers' questions has always been a time-consuming and lengthy process. Through a well-designed, easy-to-use website, these questions can be satisfied in real-time, at the prospect's convenience.

Gartland Foundry, Terre Haute, Indiana, has secured quality quoting interest from its website. In fact, President Bill Grimes reports landing a sizeable order that more than paid for the recent expansion and development of the firm's website.

Grimes feels an internet presence is required to "play the game" today and noted that some customers use it as an initial qualifier. "I recently asked a purchaser if he had visited our website and he said we wouldn't be sitting at the table had he not liked what he saw. A website certainly doesn't mean you're a first-class foundry, but you might not get a shot with some buyers if they can't easily tell whether there might be a fit for their castings."

Todd Nelson, vice president, Dotson Foundry Co., Mankato, Minnesota, said the internet assists in phone conversations in which both parties can review onscreen information as they speak. The most useful content has been the case histories that show the savings that can be achieved through engineering and design. "Another thing we do is automatically send an email to customers--on whatever frequency they desire--on the status of their orders."

Paul Thompson, president, Willard Industries, Cincinnati, said the web provides the best contacts. While he couldn't say for sure how visitors arrived at his site, he concluded that the "Web visitors have something in mind, a solution they might be looking for."

Advertising

The decision on when and where to utilize print advertising is knowing your target customers and how they gain information and knowledge. If they rely on trade publications and directories for information and to find sources, this route can reach many thousands of prospects in a low-intrusive way.

"We are advertising to the design engineer involved in new product development," said Doug Lee, vice president, Pacific Steel Castings, Berkeley, California. "We want to try and affect that future decision. If we stay in front of them, presumably as time goes on, they'll have enough of an awareness to let us know about design projects."

"Advertising is a part of our program that helps us reach a wider audience," said Don Schindel, marketing manager-business development, American Railcar Industries (ARI), St. Charles, Missouri. "We've learned to put a regular program in place for at least two years for consistent awareness. We know that advertising in trade publications is working because we ask every new contact how they heard about us."

Thompson shared the impact of cutting back too much on advertising--a common victim in soft economies. "In some years, our ad budget was so low it could have been negative," he said. "We found that it didn't affect us so much in the year that we cut it back, but it killed us two years later."

Targeted List Rentals

Another means that appears to have gained in popularity is purchasing/renting prospect lists by industry classification codes.

Schindel said that his firm's plan was to make contact with firms in specific industries where the foundries have already been successful. "We are a geography-sensitive industry, so we concentrate on firms within a 12-hr drive." ARI's process is to qualify each account in general terms, visit their website for specifics and then send a timed series of letters and/or "sell sheets" (up to 5/yr). This process works toward the ultimate goal of arranging a presentation to purchasing, operations, engineering and, hopefully, management.

It's been said that promotion doesn't begin to be effective until the recipient has been "hit" numerous times, and Schindel admits that his repetitive correspondence and follow-up has been known to annoy. "When we're told that we're doing too much, it's still valuable because we learn how they want to be sold."

Nelson has used industry-code list rentals in a similar way for key industries in specific territories. After a telephone qualification, a letter is sent out to each, and all names are turned over to the account managers. List acquisition costs are minimal, he said, but the investment in the time and follow-up steps is very high.

Prior to embarking on this activity, Thompson offered advice. "It's very important to have a clear qualification and execution plan. Follow-up must be very quick." Admitting that their approach may have been too broad said it "overwhelmed our sales force."

Trade Shows

While obtaining a face-to-face meeting is the goal of most other activities, this objective is inherent to the trade show. With the right preparation, personnel and way to "stop" attendees, this venue can offer a meaningful exchange of information.

As the survey illustrates, trade shows are not inexpensive, and the space expenses in the convention center can be the least of the total costs when one factors in the likes of labor, graphics, furniture and electricity as well as travel and hotels. Schindel said that "if we're going to be involved in a trade show at all, we need to be certain to budget enough to show the proper image."

According to Keith Krook business development, General Foundry Service, San Leandro, California, you must know what you're there to accomplish. "Our approach is qualified interest on a future project. We don't expect quick sales--we want to capture the interest of an engineer who could potentially develop a casting or castings down the road."

"Trade shows are an opportunity to expose us to a lot of new faces in the specific industries we want to target," said Thompson. "We have to be involved in the early stages of design. If we can't get in at the front end, we know we're not going to be there later on."

Have a Plan

A foundry can accomplish just about whatever it wishes with any marketing tool, but again, it needs to determine the objectives. Do you wish to simply distribute a brochure, data sheet or CD-ROM? Collect any and all leads you can? Show an image of a financially-sound supplier? Demonstrate design capabilities? A clear objective is needed to make the best use of each dollar.

No single tool will provide everything you're aiming for, and some require other components to be effective, A firm may spend thousands on a new brochure, but without a good means of distribution to new prospects, these materials are likely to collect dust on the sales manager's shelves.

"The brochures, ads, website, etc. are compounded when you get the face-to-face meeting," said Nelson. "The tools complement one another for an exponential impact."

"There's still a lot you can do without spending a lot," said Krook. "For instance, we believe in simple education--people just don't know the basics of metal castings. We're involved in a number of associations and we sponsor tours at our place, including a lot of work with students. We give a lot of presentations and we'll go anywhere we can get an audience. These things can be as effective as anything. It's what you might call behind-the-scenes marketing."

The choice on where to put your dollars depends on the type of markets you serve and how its decisionmakers are best reached. If you're a small job shop, it's very difficult to try to market to all sectors in any concerted way. Some firms may rotate their promotion to industries from year to year in order to maintain a semi-regular presence without breaking the bank.

It's suggested to consider the "total cost per reach" (or individual) for each of the methods available. Tracking and measurement is also an important part of the process to evaluate what is and is not working.

According to Thompson, it can take a year to hear back from an initial contact. "The point is, we have to stay in their heads for when a project arises. That's when we want to hear from them, when something's about to happen."

Said Grimes: "Foundries need to keep impressing upon people what they do well. If someone doesn't know about what you can bring, it doesn't matter if you're the best foundry on earth."

For More In formation

Visit www.moderncasting.com to view the survey write-in responses to questions about the most effective use of marketing resources.

AFS Market Opportunity Study for the Metalcasting Market, Primary research for the AFS Marketing Services Div., conducted by Alexander Marketing Services, Schaumburg, IL. American Foundry Society. Des Plain, IL (1998).

"Marketing Castings for the New Millennium: Cast Metals Institute Course," to be held May 5-6 at the Crowne Plaza Hotel, Clark, NJ.

Expenditure Item        $0-5 Million    $6-10 Million    $11-15 Million
                        (Min./Max.)     (Min./Max.)      (Min./Max.)

Print Advertising       $2097           $2805            $4450
                        ($45/$24,000)   ($200/$20,000)   ($2500/$12,000)

Trade Shows             $1516           $2083            $600
                        ($150/$25,000)  ($2000/$20,000)  ($1000/$5000)

Literature & Brochures  $759            $1227            $4700
                        ($100/$4420)    ($1937/$10,000)  ($1000/$15,000)

Website                 $1066           $1175            $1990
                        ($120/$15,000)  ($1468/$6000)    ($600/$10,000)

Training                $385            $1483            $1300
                        ($200/$10,000)  ($300/$25,000)   ($500/$5000)

Subscriptions &         $545            $1792            $2320
Memberships             ($50/$6000)     ($150/$10,000)   ($200/$6000)

Promotional Items       $284            $1113            $1900
(pens, apparel, etc.)   ($25/$2500)     ($200/$10,000)   ($100/$10,000)

Surveys                 $92             $90              $75
                        ($250/$5000)    ($100/$1000)     ($100/$500)

TOTAL MARKETING         $7769           $16,040          $22,490
EXPENDITURES            ($250/$41,500)  ($500/$141,000)  ($3000/$51,000)

Expenditure Item        $16-Plus Million  Industry  Average
                        (Min./Max.)       Average   Expenditure *

Print Advertising       $5653             $3249     $5024
                        ($1000/$30,000)

Trade Shows             $5350             $2488     $8680
                        ($1000/$30,000)

Literature & Brochures  $4256             $1954     $2819
                        ($200/$20,000)

Website                 $2850             $1577     $2211
                        ($100/$25,000)

Training                $2267             $1117     $3492
                        ($500/$15,000)

Subscriptions &         $1224             $1075     $1833
Memberships             ($50/$10,000)

Promotional Items       $2078             $988      $1647
(pens, apparel, etc.)   ($300/$10,000)

Surveys                 $422              $170      $1339
                        ($200/$10,000)

TOTAL MARKETING         $28,551           $15,392   $16,146
EXPENDITURES            ($900/$115,000)

* Average Expenditure reflects the average spending by the metalcasting
facilities actually spending on the specified activity. As an example,
when expenses for "training" are calculated across all respondents, the
average is $1117. However, the average expenditure for those actually
conducting sales/marketing training is $3492.

Average Expenditures By Net Sales


Print Advertising

$0-5 Million              $3302
$6-10 Million             $4007
$11-15 Million            $7417
$16-plus Million          $8848

Web Site

$0-5 Million              $1643
$6-10 Million             $1468
$11-15 Million            $2488
$16-plus Million          $3800

Trade Shows

$0-5 Million              $6231
$6-10 Million             $6944
$11-15 Million            $3000
$16-plus Million        $13,757

Literature & Brochures

$0-5 Million              $1195
$6-10 Million             $1937
$11-15 Million            $5875
$16-plus Million          $5107

Dedicated Sales & Marketing Staff

Net Sales         Sales Staff  Marketing Staff

$0-5 Million         1.16           0.87
$6-10 Million        2.75           0.8
$11-15 Million       2.7            1.22
$16-plus Million     5.17           1.29

Operations of less than $10 million typically don't employ a dedicated
marketer.

RELATED ARTICLE: AFS 2003 Marketing Benchmarking Survey

Audience: U.S. Foundries' Sales/Marketing Managers

Usable Responses: 150 (9.4% response rate).

Responses by Net Sales

$0-5 Million: 74

$6-10 Million: 30

$11-15 Million: 10

$16-Plus Million: 36

Why Market Today?

"For so many of our customers, particularly the OEMs, the business has a certain product life, so if you don't capture new work, you'll wither away. We know we need to be far more aggressive today than in the good old days. When business aims down, that's not the time to diminish sales and marketing. It can be a tough sell to management, but that's the time we heed it most."

"With this current wave of imports, we must keep a constant presence in front of buyers. Our big message is leadtimes. We can help customers reduce inventories and we'll keep safety stocks for their just-in-time objectives. We can't compete on price with some of the foreign foundries no matter what we do, but if we ship parts quicker to reduce the customer's inventory, that can be more important than having 10,000 of something and sitting there."

--Doug Lee, vice president, Pacific Steel Castings, Berkeley, California

"For years we just sat here and waited for people to call. Today, you just have to make more contacts. We've had to change how we think about marketing just like everything else we do."

--Bill Grimes, president, Gartland Foundry Co., Terre Haute, Indiana

Pounding the Pavement 

--Paul Thompson, president, Willard Industries, Cincinnati

"The best investment for both marketing and sales is still shoe leather, said ARI's Schindel. "If you're not getting your shoes resoled twice a you're doing something wrong." Shown below are the survey results on sales-related travel expenses (not including any rep travel).

                  Average  Minimum   Maximum

$0-5 Million        $5665     $100   $30,000
$6-11 Million     $16,900    $2000   $76,000
$11-15 Million    $24,556    $3000   $80,000
$16-Plus Million  $48,672    $8000  $250,000

'Never Waste a Slow Business Cycle'

Contrary to popular belief, slow business cycles can be a "marketing gift," according to an integrated communications agency experienced in metalcasting. Such cycles can be the best time to attract new customers, reinforce existing relationships and draw attention to your firm to improve credibility, said Scott Champion, The Champion Agency, Virocqua, Wisconsin.

Why? Below are two such reasons Champion shared at last October's AFS Marketing Conference.

1. Potential new customers are more receptive to your sales message when the economy turns down. When times are good and plants are running at full capacity, firms tend to focus on keeping their heads above water. But when times are slow, customers are looking for new ideas and ways to improve products and save money. They're hungry for information and they have time to improve.

2. Fewer people advertise when business is bad. The reality is that the marketing budget is one of the first things to get cut when income is down. Let your competitors' mistakes work to your advantage, With fewer people advertising,. there's less "noise" competing for the attention of information-hungry customers. By default, you can get more attention than when the economy is rolling hot.

Direct or Indirect Sales Force? That is the Question.

The smaller the foundry's net T sales, the less likely it is to use independent sales reps (32% of $0-5 million facilities use no reps whatsoever). Among foundries exceeding $16 million in sales, 4 out of 5 use reps to some degree. In nearly all sizes of foundries, reps are generally used to service only a small percentage (1-15%) of total net sales.

"The cost of putting a direct sales guy on the road today is huge," said Dotson Foundry's Nelson, noting that the keys are finding the right people in the right--and limited--territories. "We don't treat our reps, or the work they bring in, any differently. Reps must live up to the same expectations we have of direct sales

Below is the industry average of net sales serviced by independent sales reps.

33%  1-15% of Sales
17%  16-30%
 6%  31-45%
25%  46%-plus
19%  None

Note: Table made from pie chart