Manufacturing advisor Martin Hyman explores how manufacturers can find success after COVID-19 by maximising opportunities in existing markets, finding new customers and identifying opportunities to diversify into new products or services.
Very few manufacturers have proven immune to effects of the COVID-19 pandemic. For some, the world has been turned upside down and production has ground to a halt, while others have switched to new products to survive or been sent into overdrive by rampant demand for critical supplies. At both ends of the spectrum, now is the time to take stock and find new ways of getting to market for long-term success.
Start with your existing clients
Speaking to your customers should be right at the top of your list of priorities. In order to understand what the future looks like for your business, you need to understand what the future looks like for them. Will they survive the pandemic in their current form, or are they going to have to change the way they do business? What knock-on effect will this have on you? If your customers have had to pivot into other markets, find new sources of supply or diversify their product range, will that affect their demand for your products and services? What additional products or services could you offer them now?
Keep an eye on competitors
If you can no longer depend on the same level of demand from existing clients, you need to devote time and energy to finding new sources of income. There may already be opportunities opening up in existing markets. Look at your competitors – are any of them likely to go out of business? While no one likes to see a company fail, gaps opening up in the market are an opportunity for your own business to grow. It’s not just customers that could be up for grabs; competitors closing down could also be an opportunity to purchase valuable kit and equipment at fire sale prices.
Turn swords into ploughshares
Whether by hook or by crook, many manufacturers have diversified into making new products during lockdown. Engineering firms have been making ventilator parts, garment manufacturers have been making scrubs and distilleries have been making hand sanitiser. These may just be temporary examples, but there’s a long history of diversification in industry following periods of economic upheaval. After the Second World War, arguably the last time we’ve had economic disruption on a scale as large as today, a significant number of manufacturers had to pivot away from military goods to new products designed for peacetime, resulting in companies like Bristol Motors – a luxury car brand formed out of fighter plane manufacturer the Bristol Aeroplane Company. As the biblical saying goes, we had to turn ‘swords into ploughshares’, and the same will be true for many manufacturers post-COVID-19.
Diversification can help to spread risk and increase profitability, but it needs careful planning. To decide on where to focus your efforts, use the Ansoff Matrix. It splits business growth into four different strategies: market penetration (expanding sales of existing products in existing markets); market development (expanding existing products into new markets); product development (introducing new products into existing markets); and diversification (introducing new products into new markets). This will help to identify whether you have opportunities to penetrate further into existing markets or find more customers for existing products before attempting something new.
Maximise existing products and services
The lowest risk growth strategy is to find new customers by expanding your reach into existing markets. If you only supplied locally or domestically pre-virus, now is the time to re-evaluate whether to cast your net wider.
Don’t be afraid of the concept of exporting – we can provide the in-depth insight and guidance you need. In some sectors, such as food and drink, most of the growth in recent years has come from overseas.
Use the Runners, Repeaters and Strangers concept to analyse the demand for existing products and identify which ones to focus on. Traditionally it’s been wise to focus on your high-running Runners and Repeaters, but in the wake of COVID-19 perhaps there’s now more opportunity to chase after low-running Strangers. Take the car industry for example; it could be surmised that people will be travelling less and keeping their vehicle for longer in future. This may constrain demand for new cars, but automotive companies could find new opportunities in previously low-running products and services like after-market parts and care.
Specify your ideal customer and UVP
Deciding who to sell to and how to sell it is just as important as deciding what to sell and where. Start by targeting your ideal customer. Size and level of likely demand should be taken into account – you don’t want customers who are going to demand huge orders you can’t fulfil, or at prices you can’t make a profit on. Similarly, selling 100 units to a single, reliable customer is much easier than selling a single unit to 100 different buyers who come and go.
You should take time to understand and re-evaluate your unique value proposition (UVP). What can you do that nobody else is doing? Too often you’ll hear companies give general statements like “we’ve got great staff” or “we make high quality products”. These are a given now. Try to find a proposition that isn’t a ‘me too’. Undertaking a SWOT analysis can be a useful exercise, but don’t just focus on yourself – analyse your competitors too. Their strengths and weaknesses may help you to identify your own niche.
It’s also important to consider what your customers may value differently in the post-virus world. Moving forward, companies are likely to place higher value on close and collaborative working relationships and may be willing to pay a premium for locally-produced products.
Use future-proof sales channels
Understandably, some routes to market have proven more resilient to COVID-19 than others. Face-to-face interactions have been put on hold and there’s no guarantee when they will return, or whether they will be the same once they do.
In this environment, it’s never been more important to have an effective online and social media presence. According to new research from McKinsey & Company, digital interactions are now twice as important as traditional sales to B2B businesses in the UK. Digital is now the preferred method for researching suppliers, overtaking meeting with a sales rep, and ‘self-serve’ online ordering is now the preferred order method.
Some manufacturers are seeing the benefit of adopting e-commerce. A local example is Cosatto, a Bolton-based manufacturer of pushchairs, highchairs and car seats, which has switched from B2B to directly selling to consumers via its website. E-commerce is a huge opportunity for many businesses, although it’s suitability depends on what it is that you’re selling and who you are selling to. Online sales tend to suit low volume, low value and standardised products which do not require inspection before purchase.
COVID-19 is also likely to have a permanent effect on trade shows and exhibitions. I think we can expect an increasing number of shows to move either partially or fully into the digital arena in future; something all manufacturers should prepare for.
If you’re considering expanding into new areas or overseas markets, evaluate the distribution landscape carefully. Instead of direct B2B or B2C, it may be more effective to sell to a wholesaler or distributor who will buy the stock off you. Alternatively, a sales agent may be able to bring the right customer to your door. Our International Trade team can advise you on the best route to take.
We’re re-designing our services to help you
As we emerge into this brave new world, we’re busy looking at new ways to provide manufacturers with remote one-to-one support. If you need help with any of the issues raised above, contact us and one of our specialist advisors will be in touch.
Martin Hyman, Manufacturing Advisor
Martin leverages the skills and knowledge gained from over 38 years’ experience working in and supporting aerospace, aviation, engineering and manufacturing companies, to now assist Business to Business (B2B) manufacturers across a broad range of Sectors, to achieve their development and growth ambitions.
He works with Company Owners, Directors and Senior Management teams, to understand their needs and ambitions, diagnosing and identifying areas for improvement across the areas of Finance, Manufacturing Strategy, Marketing, New Product/New Process Introduction, Operational Efficiency (KPIs/Lean/5S Principles etc), and Supply Chains, as appropriate.
To view Martin's full profile including technical capabilities and industry experience, please click here.