Industrial enterprises have tended to give marketing the short shrift, but for private equity firms looking to take such businesses to the next level, it’s time to make “true” marketing a priority of their value creation efforts.
It’s only natural for industrial companies to have certain misconceptions about marketing. Like a lot of B2B businesses, they’ve been spared that full brunt of digital disruption that’s revolutionized retail over the last twenty years. But that grace period has come to an end, and not just because COVID-19 forced everyone on to Zoom for the last year.
The pandemic only sped up trends that were already underway. Reports from McKinsey & Co. and Gartner find that B2B customers are relying on digital channels for every stage of the buying process, and those trends were in full force before the world went on lockdown. Gartner’s research report, “The Future of Sales: 2025” finds that by that year, 80% of B2B sales interactions between buyers and sellers will take place on digital channels and 60% of B2B sales organizations will transition from experience and intuition-based selling to one driven by data.
For private equity firms investing in industrials, they’ll need to do more than add a digital sales strategy, but revolutionize how industrials think about marketing. Industrials tend to discount the idea of marketing as ad spend, websites, trade shows and brochures. But marketing as a discipline is so much more than that, and buyout firms do their industrial investments a disservice by not placing a thoughtful, robust marketing effort at the center of their investment thesis.
If there’s any doubt about where selling is headed, let’s take a step back and recall that Millennials aren’t in college anymore. Many are pushing forty, and increasingly in roles with the authority to dictate purchasing decisions. In that same Gartner report, 33% of all buyers want a “seller-free experience,” and that preference goes up to 44% for Millennials.
They are not interested in being taken to lunch, and they’re not interested in getting on the phone. When they want to learn how to solve a problem, or buy what they need, where do they go first? They go online. And as these people age, that trend will only continue. They won’t suddenly want that lunch date when they turn fifty.
Still, private equity firms may find an uphill battle in changing how Industrials view marketing as a discipline. Many of these businesses may have a VP of Sales & Marketing, but the “marketing” half of that title is managed by a young assistant who handles the logistics for trade shows, and relationships with vendors for the web site and other collateral materials. And that might have been sufficient in years past, but there’s no room to treat marketing as an afterthought any longer, even if the company thinks they’re doing great.
That’s because if the buying process takes place online, the sales staff doesn’t become part of the conversation until much later- if at all. Someone might be able to do a search relevant to that industrial business, and never come across that site, or when they do, there isn’t a clear, differentiated value proposition to keep them interested in that seller. These are sales that industrial business has no idea they’re losing, until of course, they find a competitor enjoying growth that dwarfs their own.
To be clear, marketing shouldn’t be conflated with a digital campaign per se. This isn’t the time to tap some firm specializing in search engine optimization. The only way to make the most of this brave, new world is to appreciate that marketing isn’t a series of tactics but a strategy. Without an informed strategic direction, that brochure or web site is exactly as disposable as many Industrials think they are.
Instead, private equity firms need to invest in marketing as a C-suite level discipline, where the marketing head reports directly to CEO. The first step isn’t the web site, but a cold hard look at the company’s customers, market and competitors. There is so much data available that if one company isn’t looking at it, one can be assured that company’s competitors certainly are.
Start with these insights, and understand the value that your company is bringing to the table, even if it’s a manufacturer of some kind of commodity-type part, or a provider of a commoditized-type service. Understanding who the target market is, and why the company is more relevant to that market than that competition, helps serve customers and stake out a real and differentiated position in the marketplace, vis-à-vis the target customer.
Once the value proposition is developed from those insights, that will inform everything from messaging, to product development, to even the pricing strategy. Most industrial companies are very operationally focused, and the whole management team is devoted to improving process, quality and metrics, but that’s very much confined within the four walls of the business. But if that product or service isn’t what the customer wants, that company has just wasted a lot of money delivering something that’s irrelevant to the customer.
In the worst-case scenario, that industrial business goes plodding along, proud of progress on that product or service that customers don’t care about, all the while the competition quietly nibbles at their market share until it’s too late. And as more of the buying process is rooted online, the ignorance of digital behavior can lead to a rude awakening.
But by taking the time to take an in-depth look at the customer, the market and the competition, marketing becomes a welcome reality check, providing invaluable perspective to vet the assumptions of every other department. And then it’s about acting on those insights to meet customers where they are now: surfing the web.
This is not to argue that sales staff is suddenly irrelevant, in fact, they’re as vital as they ever were. There still needs to be someone to get the customer across the finish line. But marketing shapes how the customer runs that race. But each discipline needs to respect what the other does best in the current environment. For example, sales staff shouldn’t be conducting the market research. One, because they often have bias in interpreting customer feedback, and two, customers know that the sales person has an agenda; that order book in their back pocket.
But sales and marketing need to be symbiotic, with the sales staff reinforcing the value proposition as crafted by the marketing team. My favorite definition of the relationship is this: marketing is bending the company and its products and services toward the mind of the customer, where sales is bending the mind of the customer towards the company and services.
And right now, the best industrial businesses are focused on excelling at both. Luckily, there are still companies in the sector that are stuck in 1989, which means that a buyout firm can make huge strides by bringing their industrials portfolio into the 21st century, by appreciating that marketing today is so much more than an SEO campaign or revamped web site; it’s the roadmap to growth.