Boost subcontractor business through Internet tools

Subcontracting companies often claim that the Internet and social media are not so important to their business - if something should be done, it is probably website face-lift. These companies could not be more wrong; digital world opens up new success opportunities also for subcontractors. This post is discussing, how subcontractors can utilise the Internet and social media for business and as a sales and marketing tool to build a successful customer relationships strategy.

Subcontractor business

Although other definitions could be used, here we define subcontracting as activities, where a company produces and supplies its business customers (principals):

• broadly manufactured standard products,
• own special products or custom-made products,
• parts, components or sub-assemblies ( modules ), or
• materials

It is also assumed that the principal uses subcontractor's products as part of the final product or solution. Business logic of companies supplying professional or other services differs quite a lot, so findings of this post can be only partially applied.

Awareness and brand recognition of subcontractors among end users (whether they are consumers or businesses) is quite poor. Thus there are only limited options available to improve subcontractors´ competitive position through end user demand generation. There are exceptions, however, such as well-known Shimano and Intel.

While web based tools are very important also for manufacturing operations, logistics and product development, these are not discussed in detail here.

Regardless of size and industry of a subcontractor, utilisation of Internet tools is built on a traditional model, how a successful company should plan its business strategy: what is the product and the business model and who is the customer. It is also vital to define target customers and understand, what kind of buying process they are using; who influence the purchasing decision and how, what kind of information they need in various stages of the process and where they are typically looking for information. In addition, external parties that affect client companies´ buying process should be identified, whether they are sources of information, reviewers, references or something else. All this is a foundation for a solid customer strategy that uses both well-established sales and marketing tools and new and more effective approaches enabled by the web.

Sales and marketing tools are changing

Subcontractor business is subject to a number of change forces affecting business success and shaping customer buying process. Next we shall discuss in more detail tools to

create and maintain customer relationships and how the Internet is changing their use in various phases of the buying cycle, see also the figure.

Face-to-face sales

Face-to-face selling and resulting customer intimacy is often claimed to be the core of subcontractors´ customer relationships. But principals - as all B2B customers - are engaging later and later with their supplier candidates: recent research indicates that typically more than half of the customers' buying process is completed, before they are ready to directly meet vendor sales rep. In practise, this means that a company must be able to demonstrate to potential customers its offering, references, and other competitive advantages well before the first sales call. The biggest reason affecting this change is the Internet, offering easy-to-use means to look for and evaluate possible solutions and suppliers.

An increasing number of people are involved in companies´ decision-making process, buying process lasts longer, and buyers are better informed of competitive situation - but also busier. Again, the Internet, social media and other new technology tools have largely caused this change, but they have also increased the use of inside sales in B2B businesses.

Inside sales can be used not only to reduce costs, but also to reach a larger number of customers' decision-makers at an earlier stage and to supply them with more information, relevant in decision-making. Especially in the early stages of the buying process, it is possible to do remotely a significant proportion of the activities, earlier requiring face-to-face interaction. And excluding only the most complex products, it is becoming more convenient to also close deals using remote sales. Relative importance of inside sales, compared with traditional field sales, is growing rapidly, both as regards to number of sales people involved and time used for it.

Information

Among other things, company brochures and other printed material, industry trade journals and key influencer reviews and analyses have been instrumental in building target customer awareness. Also, not so long time ago, the main purpose of first customer visits was to introduce the company and its products - as mentioned above, not so successful tactics anymore.

Although most of the companies still provide the baseline information also in printed form, the Internet is by far a superior media, thanks to being always close to up-to-date, affordability and availability of information. On the other hand, it is difficult to be found in the vast data archives of the Internet, but fortunately there are both digital world and traditional methods to influence it; in both cases the key is to motivate and attract potential customers to visit the company website.

Also news, reviews and reports have largely moved online, printed word is complementary, particularly used for comprehensive analysis and report distribution. And since number of available information sources is huge, it is essential to know, where your potential customers and other people affecting customer purchases are looking for guidance and what are the most important professional social media groups to which they belong. On this basis, a company can plan the actions needed to create awareness and positive attitudes among external influencers.

Events

Events, such as trade fairs, seminars and conferences, are becoming less critical as a means to deliver generic information, but still they are very important to directly discuss with target customers and influencers and share with them own point-of-views. As a result of digital tools and application of mobile technologies, the nature of events is also changing. It is possible to explore potential client businesses in greater depth and reach and affect a much larger number of businesses than in the past. For the most advanced B2B companies, events are no longer individual campaigns, but an integral part of continuous face-to-face and online interaction to acquire and retain customers.

Advertising

Digital media has taken much of the previous role of trade magazines, and neither TV nor radio are able to effectively target subcontractors´ customers. That's why they are ineffective, as shown in subcontractors´ advertising spending. For example, in the U.S. newspapers' share of the B2B media revenue was 37 per cent in 2008 and only 29.4 per cent in 2012. Digital advertising is the winner, in 2008 11 % and in 2012 16.2%. It has clear advantages: easy targeting, good results to costs ratio and excellent measurability .

Search engine, e-mail and mobile advertising, banners and sponsored content are the most important tools for digital advertising, and all of them are gaining popularity in B2B business. These tools are excellent for raising awareness among potential customers, with the intent to continue dialogue with them by attracting them to move to the company's online premises. Sponsored content on other sites, important to customers, is also an effective way to maintain existing customer relationships and to push customers to purchase more.

Making subcontractor more valuable for customers

As a key part of their strategy, numerous subcontractors try to get rid of bids with detailed customer specifications and heavy competition; their aim is to become a strategic partner with their customers, with joint development of subcontractor´s offering, thereby also contributing to the development of customers´ end products. All strategies, of course, can be successful, and all can effectively utilise digital tools, too. But the more a company is seeking partnerships with its customers, the more important inbound marketing becomes. Thus, inbound marketing can also be seen as a key part of solution selling or consultative sales.

Inbound marketing is built on digital channels, such as making use of blogs, videos, articles, e-books, search engine optimisation and social media. The aim is to create engaging content to earn customers' attention, to make it easy for customers to find the company and to attract customers to the company website to familiarise themselves with company´s expertise and strengths.

Maturity of a company in inbound marketing can be divided into three stages. A basic approach primarily serves company´s own activities, such as product launches and marketing campaigns. In a more sophisticated model, content is directed at the target customers and their needs, in order to provide adequately information to the customers and external influencers and to make them view the company positively. The most advanced companies are seeking to become thought leaders in selected areas that are important for customers, by presenting in-depth and well-founded point-of-views on those areas. Thus, inbound marketing is not just a part of marketing or customer strategy, but a key element of company's business and competitive strategy.

If it is realistic to assume that a subcontractor could affect end customers of its client companies to improve its competitive position, interesting content for the end customers should be placed on company´s own and external websites, too.

When creation of content is rooted in target audience and their information needs, the most important thing is to understand, what kind of information various internal decision-making roles and external influencers need at each stage of the purchase process. At best, traditional marketing and sales roles are mixed and overlapping. Marketing tends to push knowledge and influence deep into client's decision -making process. Sales aims to get close to the customer before there is even awareness of a need, and using various inbound marketing tools, tries to build the purchasing process favourable for the subcontractor.

Business objectives and digital media

Finally, let´s look at some typical business objectives and how digital media tools can help to achieve them.

Retain existing customers and generate new business

With existing customers, it is not only retaining the current business, but also getting them to make additional purchases and to buy totally new subcontractor products.

The most important thing to maintain and grow business with existing customers, is to make customers feel that they have made a good purchase. This is achieved through helping clients to use the product and through external reinforcement. The basic guiding principle of use assistance is the same, as when using content for buying process: first identify critical use phases of customers and main stakeholders that are involved in use of the product. Then for each of the phases and use roles, produce and make available tools and information that help customers to use the product or get more out of it. Positive reviews by industry influencers, publication of new reference cases and other external confirmation convince the key customer stakeholders that your company continues to be a competitive business partner.

Existing customers are known to be the most receptive to company's new products, and smooth cooperation with a customer is an excellent starting point for new deals. If customer employees, affecting on new product purchase, are not yet known, existing contacts can be used to create a connection with them. The goal is again to influence the customer as early as possible, even before the need is materialised. Well-planned and targeted information can convince the key customer persons to notice that the best partner for the new need is the supplier, already well-known.

Acquiring new customers in existing markets

Today, subcontractors no longer need to rely on cold calls, coincidental exhibition meetings or newspaper advertisements to generate customer awareness and interest. First of all, the Internet and social media can be used to identify potential customers and their key influencers, and even those individuals and entities that these influencers trust and rely on. After this, customer targeting is much more focused even with traditional approaches. Another way, often a better one, is to attract target customers to the company's website by providing sponsored content or ads to the sites and communities, where the target customers' key people spend their time.

Creation of interesting and compelling content for customers on company website will benefit new customer acquisition in two other ways: first, references to the content on industry influencers websites generate new contacts and potential customers, and secondly, well-planned content improves search result page position of the searches made by potential customers. High-quality content that directly does not try to sell subcontractor´s products or expertise, is also welcomed free of charge by external web sites, important for customers.

Expansion into new market areas

When expanding into new market areas, awareness of a company is very low compared to the ones, where the company is already active. Therefore, development of new markets should start early enough with content that is interesting for the new regions and also localised; for example, also available in local languages. The same tools as described above, when acquiring new customers, can be successfully used in this context, too. Special attention should be paid to influencers, who are not directly present in the new target areas, but who nevertheless have a significant impact on subcontractors´ potential customers. For example, internationally-oriented industry websites and important reference customers often create fertile ground for new market penetration.

New product launch

When a company is still only planning to launch a new product, it is vital to get feedback from current and also new customers. The aim is to test and iterate important go-to-market elements, such as customer value proposition, product features, business model, target segments and key marketing messages. At the same time, this step is also beneficial to prepare markets for the product launch and to produce right type of content related to the new product. Since a company is a newcomer in the markets, it needs to show its expertise in the areas related to the use of the product; and, to be considered as a thought leader, a subcontractor needs to introduce new approaches to customer jobs to be done. For example, a subcontractor may introduce a new product that is supported by a tool that assists product use or by a modelling software that can be used to evaluate benefits of the new solution before it is bought.

Modern inside sales boosts B2B business

Too frequently occurring situation: you are back from sales trip, with empty hands, results zero or negligible. The customer did not need your product, he is still in very early phases of his purchasing process, costs of dealing with a potential customer far exceed anticipated revenues - there are multiple reasons. Modern inside sales methods and tools are transforming the way, how B2B businesses are operating and boosting their sales. Companies should seriously consider deploying them as part of their overall sales activities.

Modern inside sales

Modern inside sales is about professional B2B selling of medium- to high-valued goods or services, where customers are not met face to face but remotely, using various communication tools. These sales conversations cannot be scripted, and it typically requires multiple contacts before the agreement is reached. In parallel with the term inside sales, we can also use remote or virtual sales. Traditional field sales, or outside sales, is often seen as the opposite of inside sales.

Inside sales image has been dominated by telemarketing, i.e. often hastily educated people selling low-value goods or services to consumers, using ready-made scripts and trying to close a deal in one call. Telemarketing is outside of this post focus.

Insidesales.com estimates that in the United States, remote sales already employs more sellers (2.34 million) than traditional field sales - and the growth continues. The same study found that also field sales force uses remote selling in their work: 24% of their time is spent on inside sales, 35% on outside sales and 15% on customer related travelling. Inside sales force, in turn, uses 63% of the working time by doing remote sales and 5% by field selling. Growth of inside sales thus means that both time spent on inside sales and number of inside sales employees are growing.

This post focuses on remote sales and in particular on its use in demanding B2B sales and marketing cases. Inspired by successful references, numerous B2B companies are investing large sums of money to build inside sales capabilities and resources. Next section deals with drivers behind popularity of this phenomenon.

Drivers of inside sales growth

General cost awareness favours the growth of inside sales, key drivers being increase in the time used for selling, lower travelling costs, lower sales staff salaries and increasing the efficiency by using the most appropriate tools.

Remote selling professionals use relatively more time to actual sales than their field sales counterparts, due to time needed for customer travel by the latter. Also, travel costs are a major cost item, especially with foreign customer accounts. Median salary in inside sales jobs in the United States is less than 70 per cent of that of field sales, and also in demanding B2B sales, differences are significant. In Europe the situation is similar. It is widely alleged that inside sales is growing due to these wage differentials, but probably the greatest cost benefits are brought by always being able to use the most appropriate sales methods and tools.

Globalised markets accelerate inside sales growth by making sourcing and sales context global, by harmonising markets and by tightening of competition.

Globalisation of sourcing and purchasing processes - search and comparison of solutions and acquiring them worldwide, forgetting borders - has lowered the threshold to use electronic communications means, especially in the early stages of buying process. Vendor companies have been forced to follow the trend and their customers, only very few B2B players can count on serving only domestic clients. Markets that previously have been local are also becoming quite uniform: same technologies, standards and processes are in place across industries, globally, making it easier to present and offer products through remote sales. Globalisation has also brought competitive pressures, favouring inside sales: for example, a company might be competing not only with traditional local competitors, but also with large international companies, emerging country businesses and new players seeking to disrupt the industry through innovations and business model changes.

New communication and information technologies are the practical tool to enable inside sales. Also, buyers´ increased ability and willingness to use these technologies are paving the way for the growth of remote selling.

Improved communication means are closing the gap between remote selling and face to face interaction, essential when selling demanding B2B products. Besides telephony and e-mail, new technologies, such as conference and video calls, instant messaging and other social media tools have been taken into use. Internet and extranets, again, are a superior way to share up-to-date information, ranging from basic product information to customer-specific proposals. On top of these communication and information technologies, there are also versatile tools available that assist expanding inside sales: e.g. sales configurators make it possible to define features of more and more demanding products remotely, either by customers themselves or in cooperation with the seller. To support remote selling, there are also a number of integrated software packages available, e.g. Salesforce.com, Insidesales.com and Lead Desk offerings.

How to use inside sales

Most B2B companies use both field and remote selling in their sales processes. The optimal division varies, depending on, inter alia, nature of the product or service, distribution strategy, marketing and sales processes, as well as level of company globalisation. Next we shall discuss various ways to organise inside sales for demanding B2B business; real implementation can, of course, be a combination of these.

Product or service based approach: Remote sales is used to sell offerings, where customer risk is relatively small. Typically, these do not require on-site assessments or definition of delivery content. Also modular, customisable solutions can be sold remotely, provided that interaction can be supported by sales configurators and relevant guidelines. Complex solutions, often requiring consultative and value selling approach or in-depth customisation, favour meeting customers face to face. When selling services, the more standardised they are, the better for inside sales.

Phase of customer engagement process: Remote selling methods are extremely well suited to verify and crystallise customer needs. After this field sales can continue, having better quality cases to work on. Also, up-selling or cross-selling of goods or services can be conveniently done remotely.

Market segment approach: Small and medium-sized enterprises, whose purchases are not large enough and the buying process is relatively simple, are often taken care of with inside sales. Customers with large potential, complex needs, complicated buying process and involvement of large amount of people in the process, require face to face interaction. Many vendors use channel partners to handle customers with smaller potential and then allocate inside sales to support distributors and resellers. When planning, how to approach an individual company, a vendor needs to actively listen to its customers: a client might favour, for operational or other reasons, different kind of approach than planned by the vendor. For example, a large potential customer may object face to face meetings and prefer buying online for cost and resource saving reasons.

Geography based approach: Remotely located customers that are non-strategic are typically inside sales targets. When a company is expanding internationally, a new country can be first served through remote selling, before setting up a local office.

Some execution challenges

Finally, a few words about the challenges that a company often faces, when it begins to use inside sales. Organisation, skills development and the role of outsourcing are among the most important ones.

When a company is defining inside sales responsibilities, practises and the roles of sales people in the new operating model, old field sales traditions and bias will inevitably start to affect. For example, client meetings and associated travel, new methods and tools, as well as reward and recognition are topics that cause strong reactions, either not letting go or rejecting ones. This is why implementation should be planned well, by engaging and motivating existing staff, as well as reasoning any changes thoroughly.

Skill and competence development is absolutely essential to achieve results. Persons doing inside sales, whether they do it on full-time or part-time basis, need to learn the new processes and tools, besides understanding the strategic premises of the new operating approach. Especially, when demanding B2B solutions are concerned, tools as such are not enough: there should be thought out guidelines on how to effectively use them to convince customers and to close deals. Also field sales skills must be further developed: all need to understand, what are the roles of inside and outside sales, and on the other hand, the field force needs to be capable of taking more consultative sales approach, away from routine sharing of information.

There are potential outsourcing partners that can assist in inside sales, too. Often their core expertise, however, is in more traditional telemarketing. In B2B sales, relatively simple products can best be outsourced, but the more demanding products are, the bigger organisation and skills development challenges.

8 tips to sell an unknown product and brand to retailer

LG has just made a time-limited, exclusive distribution agreement with Best Buy on newest TV model sales in the United States. But few vendors have strong enough brand or enough marketing money to easily recruit retailers or especially retailer chains to sell vendor's products to consumers. In summary, strong bargaining power of retailers makes building of retail channels one of the most challenging go-to-market activities.

Retail Business

Retail business models vary widely depending on the role a retailer takes, i.e. what functions of product retailing and services a retailer delivers to an end customer. This post will focus on product sales, where services are primarily in a supporting role.

In order to make a retailer a compelling cooperation proposal, it is important to understand, how retailer business model works and what the key measures to evaluate success are. Put simply, the three main measures are sales, margin and productivity, more information can be found e.g. here.

Revenue growth is a key objective in retailing. To affect it, among the most important levers are product mix and its promotion, store format and location, customer profile, retailer positioning and pricing.

Profitability is monitored, above all, through gross margin and net profit, both in money and percentage terms. Gross margin is a measure of retailer´s value added, a difference between the price paid to suppliers and the price obtained from end users. Net profit is gross margin minus overheads, such as advertising and promotional costs, store costs, distribution and logistics, as well as administrative and financial costs.

Inventory turn as well as sales and profit per used store space (m2) are the most important productivity measures.

After a retailer is identified as a potential partner to complement vendor´s channel strategy, the next task is to analyse in more detail retailer´s strategy and business fundamentals, as well as its opportunities as a seller of vendor´s products. On this basis, strategy, tactics, and business case are developed, aiming at merchant to accept vendor´s cooperation proposal. In the following we introduce 8 building blocks that can be used to assist in formulating a lucrative offer, matching with merchant´s sales, margin and productivity objectives. The ideas are best suited to tackle retail chains with physical stores, but they can be adapted to create argumentation for online retailers, too.

Positioning for growth

If a product takes a merchant to new growing businesses, it becomes much more interesting. A product may spearhead use of some new technologies that are about to be introduced also in many other product categories. On the other hand, a product may be the first one in emerging and significant product category or market segment. In addition, a product may primarily generate demand among consumers, who are the most lucrative customers, because of their regular large or high margin purchases.

A vendor needs to explicitly document, how the future lucrative market will emerge and also numerically justify opportunities for retailers. A retailer is thus getting coaching, what kind of new business opportunities are looming ahead and how to develop necessary skills and competences necessary for them. If a vendor is also able to lean on success cases from other countries or market areas, it has a chance to be considered as a valuable cooperation partner, beyond basic supplier role.

Creation of new demand

Being able to appeal new customer groups that have previously been non-customers, in other words hesitating, refusing or not explored ones, is an extremely interesting message for retailers. To convince a merchant, a vendor must be able to clearly demonstrate the elements and features in its offering that are appreciated both by current customers and non-customers. A vendor may also bring in new customers by introducing a product that offers less features than competitors´ ones, but still enables new customers to get their jobs done, all at a lower price (low-end disruption).

Reaching new customers

By doing active and well-designed inbound marketing, a vendor may be able to generate plenty of consumer attention and interest around its products. For example, social media presence can create a community that actively increases consumer pull through word-of-mouth and viral activities. Correspondingly, product functionality can be extended with an application that also gathers a lot of information about customer needs and requirements. A well-thought-out way to link acquired customer interest and insights to serve also retailers, is a valuable asset in getting them engaged.

More sales to existing customers

It is often possible that a vendor can sell complementing products or services to existing customers; complementing offerings assist in using the basic product functionality or enhance the offering to get new jobs done.  This kind of additional product utilities make merchants more important to their customers and increase their share of customer spending. Accordingly, a vendor product may be complemented by some other products or services already sold by a retailer, in order to form a complete, easy-to-deploy solution. In both cases, it is vendor´s job to identify and communicate the opportunities.

Exclusive sales rights

From retailer profitability perspective, it would be best to have no competition in product selling, so that pricing could be done as independently as possible - in other words, a retailer would have exclusive rights to sale. For a vendor, this is very rarely a desirable situation, due to suboptimal pricing decisions, marketing support or market coverage. Exclusive rights for a limited time is an often used compromise, sometimes requiring stronger sales commitment from a retailer in return. If it is possible to make an exclusive version of a product that only a retailer can sell, at least some of the benefits of exclusive deals can be achieved. For example, in mobile phone sales, dominated by operators in most of the countries, both of the above approaches are widely used.

Sales mix margin improvement

By selling more to existing customers, not only increases revenues but might also lead to a higher gross margin percentage, a very nice message at least for a person responsible for the category. For example, accessories and supplies in strongly competed personal computer and laptop sales bring plenty of margin Euros, thus increasing also overall profitability of the category.

Also, if a vendor product has higher margins due to barriers to competition, such as patent protection or proprietary technologies, this should be clearly highlighted when communicating to retailers.

Utilisation of vendor resources

Bringing vendor´s know-how and resources available for retailers improves both profitability and productivity. In order to be cost-effective for the vendor, and to benefit retailers significantly enough, it is good to target the resources only at the most critical success factors and to avoid too long commitments. In the same way, vendor´s partners can be utilised to bring their own know-how, especially if the vendor has privileged access to partner resources.

Business model that supports retailers

Finally, you have to remember the significance of a business model that cleverly supports retail business. The model needs to be developed early enough and recognise the vital role of retailers in economic success of vendor´s product. This needs to be further built in to all business model elements - to assist retailers to reach their key objectives, increase sales and improve margin and productivity.