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 and manage, measure, and motivate sales people, create forecasts, and account plans and pay attention to their customers’ needs. Interestingly enough, up to a few short years ago there were only a few tier two contract manufacturers who were doing the same things. I know, because I managed to work with the few of these rare companies who were willing to invest time and money into their own sales and marketing efforts.
I was never sure why there were so few CMs interested in sales and marketing. There are over eighteen hundred contract manufacturers out there and the vast majority of them and I mean a real vast majority of them are under fifteen million dollars in annual revenue, in fact, most of them are under ten 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 of the reasons was I came up with was 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 them to produce a special unique assembly for them. Often the people who started their own contract manufacturing company had done so at the requests of a large company, often one they worked for. Often, the person who started the CM company had run the assembly department of that larger company, or they had been responsible for specific product line that the larger company was producing and that finally powers that be decided that it would be more economical for them to have those products built outside of their company by another 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 where now they have to maintain a certain level of business just to handle their overhead costs. Often the original projects that had started them in business in the first place have disappeared. So now they 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 sales people and develop and implement sales and marketing plans; and the second reason being 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 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.
Because of these factors it is apparent that contract manufacturing companies need as much help with sales and marketing as the board shops always have. It’s only common sense.