Printer Friendly

Effective marketing techniques for small industrial companies.

Rather than focusing solely on promotion, effective marketing plans respect equally the importance of product, pricing, and distribution.

Most small companies believe that they have too little time and money for an adequate marketing program. It is not unusual for sales to be highly regional and largely dependent on owner contacts and word-of-mouth reputation. Lack of planning can limit a company's potential for growth, increasing the company's dependence on the success of a regional economy and a few large customers or end-use industries. This article focuses on how small-to-medium-size industrial manufacturers can use low-cost marketing techniques to promote their services and capabilities and ultimately, expand their customer base, sales, and stability.

Characteristics of Industrial Markets

Most industrial markets are geographically concentrated in one or more key regions. The concentration normally occurs because of availability of natural resources, requirements of the manufacturing process, access to skilled workers, and a high concentration of end users for the product. Another characteristic of industrial markets is that in comparison to consumer markets, buyers are relatively few; in most industrial markets, a few large producers and end users tend to dominate.

Normally, industrial products are technically complex and customized to meet specific requirements. A number of professionals are usually involved in the purchasing decision and establishment of basic product and service requirements. Relationships between buyer and seller develop gradually over time and are usually very stable because of the cost and time required to find and evaluate new suppliers. The level of information exchanged both before and after the sale is high; service, delivery, and availability are often critical to the buying decision. Both consumer and industrial marketing have four basic interactive components--promotion, product, pricing, and distribution. Each is an integral part of an effective marketing strategy.

Promotion. The wide variety of means by which a company can promote industrial products includes personal contacts with existing and potential customers; advertisements; press releases; trade show participation; presentation of technical papers; publication of papers in trade journals; literature; targeted mailings; seminars; facility tours; and newsletters. Sales contacts--by telephone or personal visit--are one of the most widely used means of promoting products.

Product. To be successful, a product or service must have value to the purchaser. Different variations of the product or service may be required for different market segments, and new products may be needed to meet changing market requirements and sustain sales growth. A good marketing program helps identify current market requirements, anticipate future needs, and find profitable new opportunities. Close cooperation between the individuals responsible for production, marketing, and product development is needed to optimize the company's product offering, profitability, and potential for growth.

Pricing. Many companies base the sales price of an item solely on manufacturing cost and desired profit margin. Pricing should instead be treated as an important part of business strategy. It should be based on the profit objectives of the company and factors such as market demand, apparent market price elasticity, production and overhead costs, and competitors' pricing strategies. Each market segment and product should be evaluated separately because different pricing strategies may be needed to obtain company growth goals in each market.

Distribution. The unique product and service requirements of industrial buyers provide industrial marketers with fewer feasible channels of distribution than those used in consumer markets. Industrial distribution channels tend to be much more direct, with few layers of intermediaries. If a manufacturer is large enough to support a sales force and the market is fairly concentrated geographically, the manufacturer usually sells directly to the customer. Normally, only one level of intermediary exists between producer and buyer when intermediaries such as industrial distributors, manufacturers' representatives, or dealers are used. Examples of situations in which intermediaries are appropriate are when the manufacturer cannot afford a sales force, the market is highly dispersed geographically, or the market is a relatively minor one for the manufacturer.

Small Manufacturers' Marketing Strategies

Studies of small industrial manufacturers have shown several common characteristics that directly affect their marketing strategies. They often lack marketing expertise, because it is not financially feasible for them to hire experienced industrial marketing professionals. Marketing consultants or advertising agencies may be used, but marketing is normally one more area of responsibility for company managers who are already stretched thin. Most managers of small companies have technical backgrounds and little prior marketing experience. Lack of marketing experience causes many to actively seek advice from other small manufacturers, consultants, advertising agencies, printed media, seminars, and other sources.

The limited financial and organizational resources of small firms often lead them to focus on short term results rather than investing in long term and more permanent development of their market potential. Such thinking can create an over-reliance on manufacturer representatives, which limits the amount of direct contact with customers and decreases understanding of customer requirements and market trends. Less money is available for developing new products or purchasing product liability insurance. Inventory levels are often kept at very low levels and physical distribution facilities may be inadequate for all but a highly localized market. Pricing strategy has little flexibility, causing smaller firms to become highly vulnerable to the pricing strategy pressures of large competitors.

A company may spend its entire marketing budget on a trade show that very few potential customers attend, even though other methods might be more effective at an equivalent cost. Prospecting for new customers without adequate resources for following up on leads is also a waste of resources. A marketing program that is designed to regularly educate, remind, and persuade current and potential customers is generally much more effective than a once-a-year advertisement or trade show. The relative value of a given technique can vary substantially, depending on the market structure, product, company resources, and marketing budget.

Researchers at Tennessee Technological University recently conducted a study of small manufacturers of industrial products for various industries. Common marketing strategies, frequently used low-cost marketing methods, and the relative perceived value of each marketing method with respect to increased sales were identified. The respondents believed the potential marketing strategies and methods available to them were limited by company size and financial resources. Marketing expenditures were a lower priority than manufacturing expenditures. Many respondents had selected a strategy of identifying and serving a small niche market with products specifically designed to meet its needs. Although a high percentage indicated that they actively sought marketing ideas, tips, and information, respondents indicated that very little information seemed to be available on the subject. Although information is available, most of it is not published in a medium that would be readily available to smaller manufacturers.

The study indicated that the firms used only a limited number of marketing techniques and were either unaware of or ignored other low cost marketing opportunities. The survey covered the following marketing techniques: manufacturers' representatives, mailed personalized sales letters, yellow pages advertising, product catalogs, telemarketing (phone sales), trade show booths, customer plant visits, free product samples, newsletters, news releases in trade publications, cooperative advertising with suppliers, promotional invoice enclosures, workshops/seminars for customers, 800 (toll-free) phone numbers, and WATS lines. The three most commonly used techniques were brochures, manufacturers' representatives, and mailed personal sales letters. The least commonly used were WATS lines, toll-free numbers, and workshops/seminars for customers. The techniques that respondents considered to be the most cost effective were toll-free numbers, product catalogs, and telemarketing. The least effective were promotional invoice enclosures, cooperative advertising with suppliers, and news releases in trade publications. Table 1 summarizes the frequency of use and effectiveness of the techniques.

The data show that the most commonly used marketing techniques are not necessarily the most cost effective. Most of the companies surveyed had used only a limited number of marketing techniques. By not considering others, they may not be using their marketing dollars effectively. In reviewing the results, it is important to note that a broad range of manufacturers were surveyed. Some of the techniques listed as highly cost effective were only used by a minority of the survey group and might have been less effective for other firms if they had been tried.

In Success and Failure in Small Manufacturing, Woodruff and Alexander summarized the difference between the marketing programs used by successful and unsuccessful small manufacturing firms. All the unsuccessful firms that were studied viewed sales activities as a nuisance. In contrast, all the successful firms emphasized sales, and their top executives took an active role in selling the product. Although lack of attention to marketing activities is only one factor in business failure, numerous sources consistently cite strong marketing programs as a common factor among successful companies.

Small companies tend to know less than they should about the markets they serve. Consultants working with small companies repeatedly find that many do not know the size of the markets they are participating in or, therefore, their market share or potential for growth. The companies may even be unaware of important competitors and market trends. Often, important and costly strategic decisions are made with limited competitive market intelligence or planning. For small companies, one strategic mistake could lead to business failure. With knowledge of industrial marketing research techniques, a moderate time expenditure, and a minimal budget, a small company can obtain much of the same market data that their large competitors use to make product development and marketing decisions.

Developing Maximum Pay-Back Marketing Programs

Strategic planning is the first step toward developing an effective marketing program, because it forces a company to analyze internal and external factors that can affect the company's growth and profitability. It also forces the company to make decisions about the markets it will participate in, the products it will produce, and how it will market them. A poor decision can be devastating for a small company. Strategic planning helps reduce this risk by ensuring a good information base for decision making, active assessment of opportunities and threats, and establishment of long and short term goals and strategies. To be most effective, all key members of the organization should be involved in the planning process.

The first stage in the planning process consists of threat, opportunity, and differential advantage analysis. Threat analysis is the identification of unfavorable external trends or developments that could erode market share if corrective action is not taken. Opportunity analysis--the opposite of threat analysis--identifies TABULAR DATA OMITTED favorable external trends or developments that could lead to increased market share if positive actions are taken. Differential advantage analysis identifies, by reviewing the company's past and present performance in the markets it serves, the strengths and weaknesses of the firm relative to its competitors. For differential advantage analysis to be valuable, comparisons with competitors must be unbiased and rigorous.

The following information should be gathered, by means of standard market research techniques, for threat and opportunity analyses: competitor size, products, capabilities, service level, delivery performance, pricing policies, financial stability, and apparent strategies; customer size, growth trends, changing requirements, financial stability, and satisfaction with various suppliers; supplier size, changes in product offerings, service adequacy, product quality, delivery performance, and financial stability. For differential advantage analysis, sales trends should be reviewed by product line, market, market segment, geographic region, and channel of distribution. The cost, profitability, and company's standing relative to its competitors should be assessed for each of these areas. The company's structure, personnel adequacy and performance, production capabilities and efficiency, and overall financial performance should also be reviewed to determine whether additional training or personnel changes are needed.

Based on these analyses, the company establishes quantitative objectives stating what is to be achieved, and by when it is to be achieved. The objectives should reflect short and long term company goals and the various analyses conducted. Marketing objectives might include desired sales volume, market share, gross margin, and desired profitability. Strategies are developed for meeting the objectives, based on the company's determination of which markets it is best able to serve (market segmentation analysis and target market selection). The strategies are based on product, price, promotion, distribution strategies selected in accordance with the budget, available resources, and company goals. To be effective, a marketing technique must be suitable for the market and well implemented.

Courses, seminars, and books covering secondary and primary market research techniques are available. With some basic training, a small company should be able to do most of its own secondary market research (library and database information). Large public and business libraries are excellent sources of information, and many will conduct database searches and secondary market research for a fee. If technical insight is needed, and the company has no one trained in basic market research techniques, an experienced marketing consultant can gather and analyze secondary market research data in a highly efficient manner. Because far more training is needed to conduct primary market research (interviews and surveys), it is strongly recommended that a trained market researcher do the work.


The purpose of promotional activities is to influence the buying decision by increasing product awareness, reminding existing customers of your capabilities, and educating current and potential customers about product and service advantages. Personal selling by company employees or manufacturers' representatives is the most widely used promotional method, but it should not be the only one. Cost effective ways of promoting products are numerous. Ideally, companies should use several means of promotion to increase the probability of reaching and influencing the target audience. Selection of promotional methods should be based on their relative cost effectiveness. Devoting an entire marketing budget to one activity is rarely cost effective, especially if the activity is not year-round (i.e., an annual trade show). The target market should be reminded of the company's product advantages as frequently as possible.

Attractive, informative product literature is an important marketing tool and should have a high priority. Literature should be used to introduce products, answer common questions, and convey a professional image. The wording should be clear, concise, and targeted toward the market being served, and should reinforce the company's image and market position. Companies whose personnel have limited experience in writing product literature or lack strong writing skills should consider obtaining professional assistance. Poorly written literature conveys a lack of attention to detail and quality, and gives prospective customers a negative impression of the company. For a small company, full-color brochures with color photos are generally a waste of money; two-color brochures or data sheets can look very attractive and are a cost effective choice for small firms. A designer who understands the company's budget limitations can create an attractive brochure design for a reasonable cost.

Numerous directories exist, ranging from the yellow pages to professional directories to the Thomas Register. Many directory listings are free or inexpensive. Ask purchasing decision makers which directories they use, and obtain listings in those directories. If advertising is also purchased, it should be designed by a professional for maximum benefit.

Advertisements, press releases, and articles in periodicals that are widely read by the market of interest can be an excellent way of attracting new business, establishing credibility, announcing new services, and reminding customers of capabilities. Full-page color advertisements are not practical for a small company. However, smaller black-and-white advertisements can be practical if the publication is likely to be read by a large portion of the target audience and the company can afford to run them frequently. Advertisements should be informative, stressing product advantages, company capabilities, and quality, and should always contain the company logo. After reading the advertisement, the reader should know what the product is and how to reach the company. Cuteness, photos unrelated to the product, and anything that could be offensive should be avoided. Advertisements should be designed by a professional for maximum effect. Press releases should be sent to magazines and current and prospective customers when new products, services, or capabilities are added. The only costs for press releases are for paper, stamps, and time, and they can generate new business and increased name recognition. Magazines are always looking for articles that will be of interest to their readers; the only costs are the writer's time, and perhaps, the assistance of a professional writer. The editor of the magazine should be contacted before an article is written to find out whether the magazine is interested in the topic. Articles should be clear and concise; writers who are unsure of their skills should consider obtaining professional assistance. A poorly written article may not be accepted for publication, and if published unedited, it will create a negative impression of the company for prospective customers. Reprints of articles make excellent credibility-building company literature.

Speaking at professional organization meetings, such as chapter meetings or international conferences, can be a fairly low-cost method of reaching people who influence the purchasing decision. Many speakers use the same presentation over and over again, with minor modifications, for both professional organizations and customer seminars. The speaker must feel comfortable in front of a group and must take the time to prepare a polished presentation. It should always be remembered that the audience sees the speaker as an embodiment of the company. Be sure to allow plenty of time for question and answer sessions; speakers who are able to tap the experience of the audience by turning presentations into brainstorming sessions generate valuable information about the market, and often, ideas for new products.

Trade show participation can be expensive and is often not a cost effective promotional tool for a small company. Participation in the show should be considered if the show attracts a high percentage of the products' target audience, and if participation does not use the entire marketing budget. It is best to attend the show prior to participating, to find out who attends, who exhibits, and whether competitors are generating valuable sales leads. If many potential customers exhibit, it may be more cost effective to attend and make contacts than to exhibit.

Targeted mail campaigns and telemarketing can be effective ways of reaching potential customers because they put product information into the hands of decision makers, provide a means of answering questions, and assess the value of sales leads. Potential customers can often be identified by reviewing directories or by purchasing mailing lists. If mailing lists are purchased, the buyer should be careful to make sure the information is recent. Purchased mailing lists should be reviewed carefully before they are used, and unwanted names eliminated. Ideally, the mailing should include an introductory letter, a means of requesting additional information, and basic product information. A brief survey can be used as the means to request additional information, and is an excellent way to identify prospects who may not have an immediate need for the product. If the mailing is small enough, everyone who was sent a mailing should be contacted by phone. For large mailings, telephone calls should be made to all large companies and companies requesting additional information. All the companies should be contacted if adequate resources are available. A mailing list of prospective customers should be developed from the information gathered.

When new services or products are added, articles published, new brochures completed, or key personnel changes made, a mailing should be sent to current and potential customers. Mailings of this type reach potential customers directly, are relatively inexpensive, and can generate new business. Newsletters have been used effectively by service oriented businesses. To be valued by customers, newsletters must be informative. Most successful newsletters focus on new technologies, applications, and industry trends; they generally require a significant amount of production time and are not cost effective for small manufacturing companies.

Customer visits and open houses can be a good means of establishing credibility, particularly if new capabilities have been added. If company facilities are well maintained and equipment is modern and efficient, customer visits and open houses should be considered for potential customers whose only barrier to purchasing products is concern about capabilities. If the company's facilities do not compare favorably with competitors, customer visits should be avoided.

Free product samples can help overcome the hesitancy of a potential customer, but they can be an expensive undertaking for a small company. Before giving away a free sample, a company should determine the sales potential and estimated pay-back period of the sample. If the probability of securing the sale is high, and the pay-back period reasonable, a free sample could be a good investment. Another alternative is to provide the sample at a reduced or shared cost. Both buyer and seller share the risk, and the seller avoids the risk of taking a loss. The potential problem with this alternative is that it can affect the buyer's perception of what the product should cost. Successful use of this promotional method requires a clear definition of the normal price and reason for the reduction. If the product is a new piece of equipment, the manufacturer may want to structure the deal so that the equipment can be used as a demonstration model.

Many companies use free gifts such as calendars, pens, and coffee mugs to remind customers of their products. However, unless the gift is unique or an item that everyone needs, it could become a waste of money by ending up in the trash. An inexpensive gift will not convince a potential customer to buy a product. If the gift is kept, it will serve as a regular reminder of your company name, phone number, and, perhaps, key products. Those who offer inexpensive gifts should carefully select the item. Usefulness of toll-free numbers and WATS lines varies with the industry and customers' expectations. Those who are considering installing such services should determine their importance by surveying customers prior to installation.

In addition to the fairly common methods discussed above, many creative, cost effective methods of marketing industrial products exist. Selection of marketing techniques that generate maximum sales relative to expenditure is the key to cost effective marketing. It is important to carefully evaluate the success of marketing techniques to determine which have been most effective. Marketing programs of competitors and suppliers can be an additional source of ideas.


The two primary goals in developing product strategy are to ensure that the company's products meet organizational and marketing objectives and to establish guidelines for developing new products and services. Products should be designed to satisfy customers. If the firm is to survive, any change in customer needs or requirements must result in a change in product offerings. All products go through a life cycle that includes growth, maturity, and decline. Throughout the life cycle, sales and profits that a product generates are subject to change. Often, the growth stage can be extended through product modifications. Because all products' sales eventually decline, companies must develop new products to take their place. During all stages of the product cycle, it is important for a company to obtain customer feedback about product attributes, quality, service, changing requirements, and competitive products. Company personnel, distributors, and manufacturers' representatives should be sources for new ideas.

With this information, companies can determine the causes of poor product performance and identify new product opportunities. Most small firms are not in the position to fund, without outside assistance, the extensive research associated with developing "new to the world" products. If the company pursues a joint development program with a raw materials supplier or a major customer, the cost can be reduced. In some cases, government research grants may be available. Most new products are actually revisions or improvements to existing products rather than totally new products.


Price should be an important part of a marketing strategy. Find out what competitors charge for equivalent products: Are the prices similar? What are the differences? Pricing strategy should reflect the company's position relative to its competitors. The strategy should be uniform for all of the products offered by the company, and may be tiered to reflect special situations such as differences in material requirements or exceptionally fast delivery times.

The four primary business objectives in which price becomes a major strategy are as follows: 1) For industries in which high levels of overcapacity exist, competition is intense, or customer needs are changing, and in which low prices are intended to reduce inventories and keep a factory operating, the goals are simply to survive and cover basic costs. 2) When a firm sets prices to maximize current profits, cash flow, or return on investment, it is emphasizing current financial performance rather than long term performance or increases in sales volume. 3) When the goal is to achieve market domination, in the belief that it will provide the lowest long term costs and the highest long term profits, prices are set as low as possible. 4) When the goal of the company is to achieve leadership in product quality, prices must be set to cover the added raw material, production, service, and R&D costs necessary to achieve top quality. High quality products and excellent service command a price premium. A common compromise between the second and third strategies is to select a marketing and pricing strategy with the goal of attaining a certain percentage gain in market share (e.g., an increase in market share from 10% to 15%). This will provide higher current profits than the third strategy and lower market share than the second strategy.


The distribution method should be determined by the firm's resources, customer requirements, and location of the markets served. Companies can select dual or single channel strategies. A company using a dual channel strategy sells directly to customers and also uses distributors and manufacturers' representatives; a company with a single channel strategy uses only one distribution channel. Middlemen are more likely to be used when the product is relatively simple and inexpensive, the customers' purchase volume is modest, and the market is geographically dispersed.

If the market requires fast delivery or exceptional service, and the manufacturer is not in a position to provide them, a distributor who can fulfill these requirements may be needed. From the customer's perspective, the most important factors in selecting a distributor are dependable service, adequate inventory levels, price, technical capability, and product range. Distributors should be evaluated for what they can contribute, not what they cost. The right distributors can help a company expand the markets in which it can participate. It is not unusual for a manufacturer to sell directly in its local market and use distributors in other parts of the country or for specialized markets. For small companies with limited resources, manufacturers' representatives are often a popular choice, because they represent no cost other than commissions on actual sales. They usually have numerous contacts in the market and are experienced salespeople. Besides the lack of direct control, the most commonly cited problems with representatives and distributors are that they sometimes handle competitive products, their performance does not always meet expectations, and they can be unwilling to prospect for new business.

Working with either distributors or manufacturers' representatives requires good communications, training, compatibility, and the setting of realistic goals. Compensation must encourage a strong sales effort, and technical support must be provided. The distribution channel(s) and inventory policies selected must enable the manufacturer to meet the service requirements of its customers and must be compatible with company objectives and strategies.

Gaining Marketing and Strategic Planning Skills

The primary barriers to starting or improving marketing and strategic planning programs are training and experience. Marketing knowledge can be increased through seminars, books, articles, and courses. Because of the time and money associated with attending a seminar or course, the qualifications of the instructor, class size, and applicability of the course materials should be reviewed carefully. A well-prepared, highly interactive seminar or course that is directly applicable to the attendee can be very valuable. The retention level of the student is normally higher for courses because the learning process occurs over a longer period of time. Both provide valuable interaction with the instructor and other students.

The least expensive options are books, articles, and audio and videotapes on industrial marketing and strategic planning. College text books and books written for entrepreneurs are available and can serve as valuable sources of ideas and reference materials. Helpful articles covering marketing and strategic planning for small manufacturers occasionally appear in business publications and marketing journals. The U.S. government has several useful publications. Table 2 lists some of the publications available.

Even if one of the previous options is chosen, marketing professionals can be very helpful in analyzing markets, developing strategy, and implementing marketing plans. The most common ways of enlisting professional help are to use a marketing consultant as an advisor, for conducting in-house strategic planning/training sessions, or for marketing activities that require a high level of expertise. Judicious use of a consultant can be far less expensive than hiring an additional person. It also adds an outside perspective, substantially increases available resources, and can be highly cost effective. Consultants give small companies the marketing expertise of a professional without the long term commitment that a full time employee entails.


1. H. E. Brown, R. Shivashankar, and R. W. Brucker, "Requirements Driven Market Segmentation," Industrial Marketing Management, 18, 105-12 (1989).

2. D. Carson, "Some Exploratory Models for Assessing Small Firms' Marketing Performance," European Journal of Marketing, 24 (11), 5-51 (1990).

3. S. Greco, et al., "Do It Yourself Marketing: How Smart Companies Are Selling More and Spending Less," Inc. Magazine, November 1991, pp. 52-68.

4. D. J. Lincoln and W. B. Warburg, "The Role of Microcomputers in Small Business Marketing," Journal of Small Business Management, 25 (2), 8-17 (April 1987).

5. A. J. Magrath, "I Think I Need a Marketer," Sales & Marketing Management," 142 (12) (October 1990).

6. R. Price, "Do You Worry Enough About Your Market Share?" Industrial Marketing Digest (UK), 13 (1), 165-70 (1988).

7. R. R. Reeder, E. G. Brierty, and B. H. Reeder, Industrial Marketing: Analysis Planning and Control, Prentice-Hall, Inc., Englewood Cliffs, N.J. (1987).

8. R. F. Smith, Entrepreneur's Marketing Guide: Bigger Sales Power for Smaller Firms, Reston Publishing Co., Reston, Va. (1984).

9. D. J. Weinrauch, et. al., "Marketing Strategies of Small Industrial Manufacturers," Industrial Marketing Management, 20, 251-59 (1991).

10. E. C. Williams, "Product Publicity: Low Cost and High Credibility," Industrial Marketing Management, 17 (4), 355-59 (November 1988).

11. A. M. Woodruff and T. G. Alexander, Success and Failure in Small Manufacturing, University of Pittsburgh Press (1958).
COPYRIGHT 1992 Society of Plastics Engineers, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Marketing
Author:Houska, C.M.
Publication:Plastics Engineering
Date:Nov 1, 1992
Previous Article:Machinery & controls.
Next Article:Weight-reducing composites for auto air-bag inflators.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters