For many years now, too many that I want to count, I have been a real pain in the neck advocating that all board shops need marketing. They need to advertise, send out newsletters, hire, manage, measure, and motivate salespeople. They must also create forecasts and account plans and pay attention to their customers’ needs.
Interestingly, up until a few short years ago there were only a few Tier 2 contract manufacturers who were doing this. I know, because I worked with these few, rare companies who were willing to invest time and money into their own sales and marketing efforts.
I was never sure why so few CEMs were interested in sales and marketing. There are over 1,800 contract manufacturers and the clear majority are less than $15 million in annual revenue, in fact, most of them are under $10 million. So, I wondered, what was the deal here? Why did so many contract manufacturers feel little or no need to pay the slightest attention to the sales and marketing end of their business?
One reason is that they didn’t really need to go out and find new business because it always came to them one way or another; they always had all the business they needed. So, I dug a little deeper—why did they have all the business they needed to stay busy and keep making a profit?
It did not take long to discover that many of them started their business to service a larger company that needed a special unique assembly. Often, the people who started their own contract manufacturing company had done so at the request of a larger company, often one they worked for. Often, the person who started the CEM had run the assembly department of that larger company, or they had been responsible for a specific product line that the larger company was producing, and that finally the powers that be decided that it would be more economical for them to have those products built outside of their company by a smaller company they would help launch. It was amazing how often this was the case.
And then, from that guaranteed base of business, the new contract manufacturer grew by adding just one or two other customers a year to the level where they always had enough business. In fact, the company that had originally helped launch them did not want them to have too many other customers.
But now all of that has changed. These companies have grown to where they now must maintain a certain level of business just to handle their overhead costs. The original projects that had started them in business have disappeared. They now find themselves in the position of having to get out there and find more business.
Unfortunately, this is proving to be a daunting task for a couple of reasons, the first one being that they do not have the sales and marketing infrastructure to grow their business. They need to hire salespeople and develop and implement sales and marketing plans. The second reason is that the sales cycle—the time it takes to acquire a new customer—is a long one in their business. It can take from eight months to a year to find and win a new customer, and then in many cases it takes at least six months to scale that customer up to production levels. It is also much more difficult for a contract manufacturer to handle a lot of customers. By the very nature of their business, they are structured to handle only a few good customers at one time. At least most of them are.
Because of these factors, contract manufacturing companies need as much help with sales and marketing as board shops do. So, with that in mind, I am going to focus my next two columns on contract manufacturers, helping them to develop sales and marketing programs that will help them kick-start their sales efforts and get started on the road to successfully filling their shops.
In next week’s column, I’ll be talking about how to find and hire the right sales people. And then how to manage, measure and motivate them. I’ll talk about incentive packages that assure results and how to keep sales people focused to success. I’ll also discuss the pros and cons of direct sales people versus independent sales reps.
The following week, I’ll talk about marketing, including creating and implementing great marketing and branding packages that will help contract manufacturers stand out in their marketplace. We’ll talk about social media, advertising, newsletters, and all other aspects of marketing your contract manufacturing company.
And sometime in the next several weeks, I’ll dedicate a column to selecting the best possible PCB vendors for your specific needs, a topic that is near and dear to my heart. It’s going to be fun and good for you, too.
It’s only common sense.