Marketing Troubleshooter 002
Welcome to the latest episode of the Marketing Troubleshooter.
This time we’re talking about a steel fabricator who wants to move into a new market: high-end barbecues. This is a real departure for the company because it’s traditionally supplied girders and similarly unglamorous products to the construction industry. So it’s moving from business-to-business (B2B) to business-to-consumer (B2C) and from something that is purely functional to something that’s attractive and desirable (they hope).
The challenges they have to face are:
- Company diversification.
- Advertising a new product.
The solutions we’ll be discussing include:
- Growth strategy.
- Channel Strategy.
- Website product listings.
- Social Media groups and communities.
Here’s the brief as it was sent to us:
We’re a small business employing just under 30 people. We’re well established but we have a very narrow marketplace. We supply steel fabrications to the construction industry. When the construction industry has a downturn, we suffer as badly as they do. We want to diversify into a different market to protect ourselves against downturns in construction.
We know we can build a really high quality barbecue but we don’t know how to advertise it. Should we just use online advertising or is it worth using magazines as well? Or maybe radio?
We could push our budget to £25,000 if we have to but money is tight because the company’s total turnover is still under £1 million.
We don’t have any marketing staff nor do we have a regular agency.
We don’t use any marketing tools.
And, because this is a new market to us, we haven’t tried anything yet.
What I love about this brief is that it raises so many questions. There are so many things to talk about I’m going to struggle to keep it to the usual 30 minutes.
Firstly, let’s take a step backwards and talk about growth strategy. If you refer back to our article on the Ansoff Matrix, you’ll see that you’re taking the Company Diversification route. You’re producing a new product to sell to a new market. That’s the most ambitious and challenging of the four growth strategies available. You need to be aware of that. Are you biting off more than you can chew? Company diversification is a challenge for big companies. Can you support a sustained challenge against the established players in a market that’s new to you?
Before you dive headlong into the barbecue market, just take a little while to be sure that the other growth options won’t work for you:
- Market Penetration: basically, sell more steel fabrications to the construction market. Unless you dominate the market, this is always a possible growth strategy. A little research in your market shows that major projects are dominated by frameworks like Achilles and ConstructionLine. Even if you’re not getting much business from these frameworks, there’s a lot of second-tier work available supplying the big names that dominate them. There’s also a huge amount of work – especially local work – that takes place outside these frameworks.
- Product Development: can you develop another sort of steel fabrication that would be relevant to the construction market? You already do staircases and fire escapes. Is there a marketplace for steel conservatories? Is there a demand for decorative steelwork? The advantage of this option is that you don’t have to introduce your company to a new group of purchasers. You’re already known to the construction industry.
- Market Development: can you sell what you already produce to a different market? The normal reaction to this is “no”. But think about it for a minute. A different market doesn’t necessarily mean moving outside construction. Maybe you could look at smaller, independent builders instead of the bigger names. Maybe you could look at the international market instead of the UK domestic market.
Anyway, those are some other growth strategies you might want to consider. But now let’s look at this challenge about the barbecue market.
In no particular order, we going to look at channel strategy, website strategy, social strategy and timing.
Let’s start off with channel strategy. In short, are you going to sell direct or through resellers? There’s no right or wrong answer but here are some of the factors you need to consider.
If you sell direct, you retain all of the profit. That’s the good news.
There are some big downsides too.
- You’ll be committed to an online model selling products that a lot of people buy when they visit their local garden centre or shops.
- You’ll also be responsible for the despatch and logistics of selling hundreds of products to hundreds of different customers. That’s very different to your existing business model where you’ve been shipping relatively few products to a few customers. You’re moving from high-value, low-volume to low(er)-value, high-volume.
- You’ll also be selling direct into retail with all of the returns, admin and customer care implications that brings.
- If you sell direct, your only salesforce is yourself. Nobody else will be selling on your behalf. Do you have a sales team to support that process?
On the other hand, you might want to sell through distributors or resellers. As I said earlier, people buy lots of barbecues from garden centres, caravan sites, holiday locations, et cetera. You can even buy them from department stores, DIY shops and supermarkets. You’ve got a varied selection of sales channels available to you.
Each of these potential resellers has its own sales resources. They have existing customers. They could immediately promote your barbecues to a far greater audience than you have access to.
Resellers also simplify the logistics. You sell barbecues to them in batches. They handle the individual sales.
But there are always disadvantages.
The biggest disadvantage is that every seller demands a discount. If you’re talking retail (as you are), don’t be surprised to find this at 50%. That’s a big chunk to be cut out of your profit margin. Can you afford it? Do some simple calculations.
High-end barbecues seem to sell for £1,500. Is that profitable for you if you give the retailer a 50% discount and you want to make a 100% margin yourself? Do the maths. A retailer getting a 50% discount would buy a £1,500 BBQ for £750. If you want to make 100% margin, you need to make it for £375. Is that what you can make it for?
I am spending a lot of time on channel strategy for this challenge because I think it’s critically important for you. Because of the way you’ve done business in the past, you don’t have a sales team per se. That’s going to make it really difficult to sell barbecues in a retail environment. You can’t expect a website to do everything.
So if you’re going to sell through resellers, how are you going to persuade them to take your barbecues? Make yourself the company they want to do business with. This is the slogan we used when I worked for a small engineering company in the West Midlands. I’m not sure we actually ever achieved that goal but it was a worthy target to aim at!
It’s in my disadvantage column but it could be an advantage if you do it right. You can really differentiate yourself from competitors in this field because most suppliers treat their resellers appallingly.
The first thing a reseller will want is margin. They want to know they can make money by selling your product. We’ve already covered this subject.
The second thing a reseller will want is sales support. They want to know that people want to buy your barbecues. They want you to make it easy for them to sell them.
The good thing about the barbecue market is that there are no established leaders. I don’t know anybody who could mention three barbecue manufacturers. I don’t know many people who could mention one. So you probably don’t have to commit to a massive and expensive advertising campaign that’s designed to knock existing market leaders off their perches.
But you may have to advertise in a different way – this loops right back to your original question about how you advertise your barbecues.
If you sell through resellers, your advertising will be done through those resellers. You’ll need to provide the photos and descriptions they need and, critically, you’ll have to give financial support (often called “co-op funding” or Market Development Funding – MDF).
In the fullness of time, you’ll be able to attach some strings to your funding. You’ll be able to vary the amount you give according to the amount the reseller sells, for example. But when you’re a new supplier you’ll have to take the reseller’s terms.
Beyond advertising, it’ll be important for you to provide the resources that will help your reseller sell your barbecues to the people who walk into their site. This will vary from reseller to reseller so you need to produce a portfolio of resources from which they can choose.
- Demonstration units: This will be a significant expense for you because every venue that sells your barbecues will need a demonstration barbecue. You’ll either have to supply them for free or at an outrageous discount. You’ll also need to have spare parts on hand they always look brand-new. You may also need to supply ancillary products like cooking gloves or barbecue tools to make the demonstration unit look a bit more realistic and less sterile.
- Reseller staff: You may also need to dedicate a person to visit each site demonstrating your products to make sure that the products look perfect and deal with any issues the resellers have. As the old saying goes, “the biggest overheads walk on two legs” so this is going to be another significant expense for you.
- Point-of-sale materials: People aren’t going to buy a £1,500 barbecue on a whim. They’re going to look at it, go away, think about it and then, if you’re lucky, come back and buy it. Make sure they have something to take away with them. Make sure that you have banner walls or something similar to draw attention to your demonstration unit. Some sites have enough space for a video display through which you could show why your barbecue is so much better than the competition. Make sure you have a compelling video.
- Sales training: Why would somebody pay £1,500 for a barbecue when they can get something perfectly adequate for £150? The staff at your resellers have got to be able to answer this question. And they’ve got to do it persuasively and naturally. And you’ve got to make it easy for them to understand. That’s your job, you can’t leave it to them to work out. I’m no expert on barbecues but you need to be able to describe:
- Functional advantages: Why the features on your barbecue are better than the features of your competitors.
- Emotive advantages: Will this barbecue help the purchaser hold better parties than a lesser barbecue? Does it cook a wider variety of foods? Does it offer of wider variety of cooking techniques? Does it keep food warm as well as cooking it? Is it easy to set up? Is it easy to clean afterwards? Is it impressive enough to become a talking point in its own right?
Make your purchaser imagine the fantastic garden parties they’ll have with your barbecue. Make them realise how inadequate the party would be if they bought somebody else’s barbecue.
Your job is not only to come up with these messages but also to package them in such a way that your resellers’ staff can deliver them. You’ve got to help them sell. They are the sales force, not you. You’ve got to pass your passion on to them.
In the old days, we used to do this with what we called a Sales Support Book. In the digital age, it’s probably better delivered online via video. With video, it’s easier to show your enthusiasm for your barbecues than it is through the written word.
When you’re producing your sales support materials, it’s important to remember how sales actually work. Nobody gets to deliver a pitch then take an order two minutes later. Every salesperson has to deal with objections and questions. Make sure your sales resources tell them how to handle these objections and answer the questions. Make sure they know how to prioritise their sales discussions. If they only have 30 seconds, give them a great elevator pitch.
If you’re selling through resellers, it’s critically important that you understand how your reseller runs its sales and marketing operations. Adapt to suit them. If they have a newsletter, give them photographs and text they can insert into that newsletter. If they have a Facebook group, give them videos and words they can add to it. If they keep in touch with their customers through email, give them resources they can send through email. Whatever sales channel they use, make sure you can be a part of it.
Direct, resellers or both?
One of the questions that might have occurred to you is whether you have to sell direct or through resellers? Can’t you do both?
Well, yes, you can. But it’s a strategy that’s fraught with problems. Resellers hate competition and the competition they hate more than any other is when they have to compete against their own supplier. I know this first hand.
Years ago, I was the channel marketing manager for Kyocera, a printer and copier manufacturer. We sold through resellers. One of our main selling points was that we only sold through resellers. We didn’t sell direct. This gave us a huge advantage over Ricoh, Canon, Xerox and all of the other manufacturers because they sold direct as well as selling through resellers. The resellers were incredibly frustrated when they got a sniff of a good deal, only to find that their main competitor was that manufacturer they were trying to represent. With Kyocera, they knew this would never happen.
If you sell direct as well as through resellers you need to set up a mechanism that’s acceptable to your resellers. The best way to do this is to set a minimum price under which you will not go. This gives your resellers the chance to sell the same product for a lower price. It’s not an ideal situation but, if you put enough distance between your price and the resellers’, it’s workable.
Okay, that was probably enough information for an entire episode of Marketing Troubleshooter on its own but we’ve only just started. Let’s move on to some different aspects of how you could approach selling barbecues.
Let’s look at your website. If you’re selling direct, it will be critical. And there’s some great news on this front. I’ve done a bit of research on high-end barbecues that cost £1,500 or more, and the way they’re presented on the web is absolutely crap. It’s brilliant. For you, that is.
Take a look at some of these.
- This is a £2,000 barbecue and the only thing they’re doing to try to persuade you to buy it is give you a picture you can zoom into, a short list of specifications and a couple of downloads. Are they completely mad? That’s the kind of information I’d expect to see if I was paying £200 for a barbecue. If you want me to spend £2000, you’ve got to tell me why. Epic fail.
- This one is even more expensive – £3,000 – and you still get hardly any information. You get three photos (well, two photos and one artist’s impression). And you get a little bit of text.
- Here’s something a little bit better but not so much better that it should scare you off. This is a specialist reseller of barbecues. At first, the site looks very transactional. It’s offering a discount. It’s telling you you get a free cover with your £2,200 barbecue (big deal). But then it does at least include a video on what’s great about this barbecue. And it’s a good video to, if you can forget the American voice which is bound to put off a certain proportion of the British market.
What they haven’t done is made their promotion personal in any way. There’s no emotion there. No enthusiasm. No passion. It leaves the market wide open for somebody who actually cares about the barbecues they sell. And let’s face it, if you’re going to spend £2,000 you care about barbecuing. Shouldn’t your supplier too?
These sites are working on the assumption that you’ve already decided which barbecue you want to buy and you’re trying to decide who to buy from. In that battle, there’s only one thing that really matters: price. You don’t want to get into that battle.
The Best Barbecue
The battle you want to fight is which is the best barbecue.
So the content on your website needs to be different. I don’t know what features you’re going to offer on your barbecues but make sure you illustrate how better barbecues and better parties are only possible with those features. Make the occasion the star and show how the feature fulfils a supporting role. Don’t promote the feature in its own right.
So, if you were the manufacturer in that previous video, you’d want to show someone successfully barbecuing in the dark rather than a studio shot of controls that glow.
It’s also worth creating several short videos that hone in on the benefits of one particular feature rather than one long video that tries to cover everything. You don’t know what’s going to interest different purchasers. You can’t assume that everybody is going to watch a two-minute video. If you’ve got five things that could hook them, make sure they can quickly focus on the one that appeals to them.
If you’re selling direct, we should discuss advertising. It was your original question, after all.
Whether you’re advertising traditionally or digitally, targeting is crucial. Place your adverts in places where your target audience will see them. Don’t advertise where most of the people who see your advert won’t care. Don’t advertise in supermarkets. Don’t advertise in newspapers or magazines which go to anybody and everybody.
Even if they’re not your resellers, consider promoting and advertising your barbecues through garden centres, holiday parks and caravan centres. You know that most of their visitors barbecue as if eating in a warm room had been banned by papal decree.
The second route for your advertising is a little tangential. It’s inspired by McLaren’s approach to selling its F1 supercar way back when. McLaren didn’t target supercar buyers. That was a heavily contested market. Ferrari and Porsche were already there.
Instead they looked at places where the super-rich bought their toys. They looked at super-yacht sales. They looked at executive jet sales. They looked at the way people with more money than sense bought the gimmicks they wanted but didn’t need. That was their market.
You’re not selling a supercar but you are selling a luxury product that’s about ten times more expensive than a basic equivalent. Where do people who buy that kind of product hang out? What do they do? You’ll find they play golf and tennis, not football and pool. They have horses not cats. They holiday in their own villas not hotels. This is where you find your buyers. That’s where you place your adverts.
Digital advertising could be more problematic. It has the advantage of being targetable and measurable but it isn’t so well suited to high-end products. If you target your adverts to barbecue buyers you’ll get traffic from people looking for a £99 unit from Homebase. You might even attract the disposable barbecue buyers who usually go to the Co-Op.
You can try adding “luxury” and “high-end” to your targeting but such phrases are totally devalued. As often as not, “luxury” means the £2 model instead of the £1 version.
You could also try combining certain features into your search terms to make a long-tail keyword: “barbecue with luminous controls”. This will limit your traffic to the people who really want your sort of barbecue but the numbers will be few and you’ll have to create lots of adverts. But it’s a viable option.
The last thing to discuss is digital platforms. You’re considering selling B2C, business-to-consumer. This means FaceBook and Instagram advertising instead of LinkedIn. And they, to be honest, are platforms we don’t use. However, I will point you towards Ascendancy Internet Marketing, a great agency who can handle anything you need to do on those platforms.
The idea of selling barbecues leads you down another avenue that will be completely new to you: social media. There’s not really much you can do on social media when you’re selling steel fabrications to builders. It’s not a natural fit. Social media comes alive when you’re talking about a subject people enjoy, a subject that excites them.
Barbecues fit social media perfectly. Your challenge is to find somebody who could host a social media group or channel dedicated to barbecues and outdoor parties. Because of what you do, you obviously want them to talk about barbecues but, if you want the channel to be a success, you need the subject to be broader. You need it to talk about everything to do with outdoor parties.
- Great new drinks.
- New things to cook.
- What to do when it rains.
- Outdoor games.
- Funky utensils.
- Outdoor tableware.
- How to barbecue the perfect cheeseburger.
- How to produce haute cuisine from a barbecue.
- If you keep on answering “How do I…?” questions, your audience will grow.
If you’re thinking of manufacturing high-end barbecues, that host could be you. You probably cook outside several days a week already. Make the channel an extension of your life. And don’t concern yourself too much with production quality. This channel should be personal. It should be real.
The downside of a social media strategy is that it’s a long-term project. Audiences don’t grow overnight. And this particular audience certainly won’t grow at the moment. We just heading into winter.
And that brings us neatly onto the final section of this episode of Marketing Troubleshooter: timing. We had a few discussions with you about this project at the beginning of July. At that time, you were really enthusiastic because you knew you could design and build the barbecues really quickly and were hoping to make some money this year.
That was just the wrong time to start thinking about this project. Building a market isn’t as quick as building a product. SMEs like you can build new product or services quickly. Only monsters like British Aerospace take decades to design and build new products. For SMEs, sales and marketing take longer than design and manufacturing.
But good marketing is vital in this kind of situation and not just because it helps you grow sales. Before you start designing your barbecues (or anything else that’s new), it’s marketing that tells you whether you should be building that product at all. It’s marketing that tells you whether there’s a market for it and whether you can compete profitably in that market.
Go right back to the beginning of this episode. Think about the financial considerations of selling through channel resellers. If you do that research and discovered that you’re only going to make £5 a barbecue, you’ll save yourself a huge amount of heartache and wasted resources by canning the project.
This type of market research – you could call it just commercial common sense – is what stops the shiny shiny syndrome, the irresistible urge to pursue every great new idea that comes to you in the shower.
By the way, what we haven’t covered in this episode is a proper New Product Introduction process. That’s a really exciting topic – but it’s a topic for another day.