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Planning for the future.

In our industry, the business environment has changed dramatically in the past 15 years. We used to be fat, with business readily available. Now, in order to survive we have had to assume a lean-and-mean mode and fight hard for every dollar of sales revenue.

Unfortunately, the good old days aren't coming back any time soon. To sit back and wait for things to return to "normal" is inviting economic disaster.

It is an unpleasant but obvious fact that our markets are shrinking because of the nation's declining output of capital goods and many of our major customers' diversifying their operations offshore. Not a week goes by that we don't hear of one of our major customers establishing facilities or joint ventures to produce components, assemblies or finished products overseas. And, of course, this means that most or all of the attendant castings also are going to be produced abroad.

Develop a Marketing Plan

One of the best ways to successfully cope with the sales and marketing changes that face our industry is to develop a comprehensive marketing plan. This plan should assess all facts relevant to your marketing function in order to identify sales, profit opportunities and obstacles. After defining the foundry's strengths and weaknesses, the plan sets forth realistic and achievable goals, and concrete action programs to realize these objectives.

In its most simplistic form, the plan forecasts sales volume and profit contribution by specific customers five years into the future, and spells out how you're going to make it all happen--the hows, the whos and the whens. Properly done, the plan assesses alternative strategies for coping with marketing problems and capitalizing on opportunities to increase volume and profits.

Most foundries have profit plans, typically going out three to five years. Unfortunately, most of these are simply wish lists because the volume and profitability of sales figures that are plugged into the plan usually have no firm basis. Nevertheless, these profit plans look good and are impressive documents until some banker or board member questions the sales forecast and wants to see a marketing plan. If a good one isn't available, management certainly loses credibility.

Our industry has huge excess capacity, and this situation will continue for a long time into the future--at least to the end of the century. Consequently, pricing will remain fiercely competitive and profit margins will be slim. Given the proposition that there will not be enough business to go around, those foundries without effective marketing programs will have to get used to short work-weeks and lean profits.

Since foundries are very volume-sensitive businesses, adding sales volume above the break-even point does dramatic things to improve profitability. Operations with good marketing programs have learned that their investment in developing and implementing marketing plans that work really pays off. And it's just as practical to calculate the ROI on marketing expenditures as it is on those for facilities.

Apply ROI Concept

A good marketing plan applies the ROI concept to marketing expense. It indicates what dollars are required to achieve specific goals and helps eliminate the problem of not knowing whether you're spending too much or not enough in this critical area of the business.

How does a well-thought-out marketing program figure into the survival scenario? We find very quickly that it requires us to take a good look at where we best fit in the marketplace--or if we fit. Are we competitive? Will we be able to match our capabilities with the casting needs of specific prospects in specific markets? What are those markets? Where are our best prospects?

What the marketing plan does for us first is to provide some answers to these critically important questions. The next step is setting realistic sales and profit objectives. Finally, we make it all happen with innovative programs.

Do you have a marketing program? Probably. But if it's not well planned, it's undoubtedly not very effective. The "get out there and sell" philosophy that has been so prevalent in our industry is as passe today as smokestack sales prospecting. If you don't have an effective marketing program, don't lose hope. It's not too late to put one together.

But, don't take for granted that your sales/marketing manager will register much enthusiasm for developing a detailed marketing plan. You will probably encounter these problems: he is just too busy now to take on the gut work involved in this kind of project; he doesn't really have any idea how to put a good plan together; or perhaps he'll quite naturally resist the whole idea of being put on point to achieve stated objectives within a specific time frame.

Understandably, you don't hear much about successful foundry marketing programs. These are well-kept secrets. But you do see the results of them in foundries with higher operating rates and much higher levels of profitability. Just take a look at arrayed industry profit data and you quickly see the "M" effect in action.
COPYRIGHT 1992 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:foundry marketing programs
Author:Warden, T. Jerry
Publication:Modern Casting
Article Type:Industry Overview
Date:Jul 1, 1992
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