From MAGNET: Market Diversification
Each month we’ll be featuring a blog post from our friends at MAGNET (Manufacturing Advocacy & Growth Network). MAGNET’s mission is to support, educate and champion manufacturing in Ohio with the goal of transforming the region’s economy into a powerful, global player. You can visit MAGNET online at manufacturingsuccess.org.
This post originally appeared on MAGNET’s Manufacturing Success blog and is reposted with permission.
Market Diversification: What Value Do You Bring? Part 1
By Ken Walker, Senior Business Consultant, MAGNET
You’ve made “The Decision.”
No, I’m not talking about LeBron leaving Cleveland—I’m talking about the decision to move your company’s products and services into a new market.
Maybe it’s an allied market that uses the same type of products you produce. Or maybe you’re selling the exact same product but to a different kind of customer, for example consumer instead of industrial.
You’ve decided that, for the strategic growth of your company, you are willing to make the investment necessary. You’ve researched this new market’s key customers and key competitors. Your organization is primed, ready and willing to conquer this new territory.
However, before you go charging off, make sure the “new land” is receptive to your invading horde. In other words, in this new market, is anyone willing to buy what you are selling?
Consider: Why Might Customers Choose to Change?
When you decide to enter a new market, unless its an emerging technology market, it is very unlikely that you are the only supplier to the market. In most instances, existing suppliers will have been established for years. Even in markets where the barriers of entry are relatively low, it’s not easy to get customers to change without a compelling reason.
Here are some important reasons why a customer might be willing to change or add to their supplier base:
Not enough suppliers: Some industries have trouble maintaining a vibrant supply chain. The aerospace industry is an example of this, particularly if they are bringing to market a new plane. If you can meet standards or requirements, like AS9100 certification, a me-too product just might be successful.
Dissatisfaction with current supplier: Poor quality. Overpricing. Late deliveries. Poor service. These missteps can sink a supplier with any customer. For example, Motorola created the cell-phone market. But its lack of vision allowed new entrants to invade this exploding market space. The result: Motorola was marginalized in the market it created. Opportunities such as these can be exploited, allowing your company to be successful with a me-too product.
Supplier diversification: Sometimes customers just want to diversify their supply chain. If a customer is not comfortable having just one or two suppliers for a key component, they may be willing to slice up the pie and let you in.
Price: Customers are always looking for lower prices—and high value. If you are willing to compete on price, you may be able to buy market entry in some cases—until someone else is willing to undercut you. And there is always someone else.
Better value: In the end, customers are going to buy your products and services for the value they perceive. In most cases, believe it or not, this value goes beyond price. Yes, you have to be competitive, but if a lower price is all you have to bring, you won’t be at the table long. Someone will undercut you. Or you’ll find out that, in the long run, this market just isn’t worth your effort.
Define Your Company’s Value Proposition
So how do you define your value proposition for a new market or customer?
First, understand your own company’s core competencies. Understand what it is you do better than anyone else in your current industry.
Are you the low-cost manufacturer of widgets? Do you provide just-in-time service? Are you the technology leader? Does your product provide better performance? Lower cost of ownership? Easier to maintain?
Talk to a number of people in your organization to gain consensus on this important point. You’ll find different departments may have different perceptions on the reason for your success in your current marketplace.
Once you really understand your company’s key value proposition attribute, translate it into why customers currently buy from you, why customers keep buying from you and why new customers would want to buy from you.
Here are some examples of major corporations, core competencies and how they translated them into value propositions:
- Core Competency: Manufacturer and Distributor of coatings and related products
- Value Proposition: Equipment, supplies and solutions to get the job done.
- Core Competency: Creating expressive ideas in words and images
- Value Proposition: Enhancing consumers relationships through social expression
- Core Competency: Applying technology to real world customer needs
- Value Proposition: Harnessing Innovation for your benefit
So what is your company’s core competency? What’s your value proposition?
Once you know and understand these critical attributes, it’s time to effectively communicate them to the new market and go after those new customers.
We’ll cover that in Part 2.
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