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6 Trends to Implement for Manufacturing Business Models Growth in 2021

6 Trends to Implement for Manufacturing Business Models Growth in 2021

Summary:

  • Executive survey shows realignment, adapting to new customer preferences and increased remote work.
  • Manufacturers continue to rebound from a sales dip caused by the pandemic. While most firms have recovered from the initial economic shock, they are learning to operate in an uncertain environment.
  • Increasingly, sales operations teams are being expanded into revenue operations to support integrations points between marketing, sales and service.

 

2020 will soon be behind us.  As many executives heave a sigh of relief, they are also preparing for a dramatically different environment in 2021. Recent economic challenges have forced manufacturers to change their business models, seemingly overnight, to stay competitive and prepare for not just recovery, but unprecedented growth. However, it may be difficult for manufacturers to keep up with both a snap-back in demand, and a huge appetite from customers for innovative products and solutions.

Recently, over 60 executives were interviewed as part of a larger research study on industry trends conducted by Alexander Group. The effort was integrated with recent studies on COVID-19 impact, digital and market trends. The report includes responses from over 100 leading manufacturers, and presents here a summary of findings.

Impact of COVID-19

Manufacturers continue to rebound from a sales dip caused by the pandemic. While most firms have recovered from the initial economic shock, they are learning to operate in an uncertain environment. They have adopted priorities that include protecting their current client base, creating a safe environment for employees, and designing contingency plans in the event of a second wave.  Remote work has become the norm for most companies where feasible.

Most every sector, including manufacturing, has invested in and heavily leveraged digital enablement tools to enhance interactions with existing and new customers. While face-to-face interaction will still be required for longer and complex sales cycles, access is also dependent on wary customers who are slowly and unevenly allowing more access to outside sellers. With noted success in virtual selling, manufacturers will continue to increase their digital investments to stay in contact with their targeted customer base, while balancing the safety needs of their employees.

Six Trends to Implement for 2021 Growth

As manufacturers continue to adapt to COVID-19 realities, they are realigning their organizations to quickly adapt, stay competitive, and remain focused.

Trend #1:  Adapt to new customer preferences

The buyer journey is rapidly changing, primarily driven by a flood of data and new, digitally-enabled buying channels. Participants indicated that digital enablement is their top commercial priority, but less than one-fifth saw their organizations as effectively implementing digital tools and sales channels.

ROI proof for increasingly complex products and solutions is a main requirement for digital platforms, according to executives. Companies must help customers not only understand their initial product acquisition costs, but also implementation, utilization, and post-sale requirements –all while simultaneously remaining “easy to do business with.”

In addition, the trend to digital requires companies to add new, technically proficient roles as well as train existing staff on digital enablement tools. Top firms are investing nearly double the amount of their competitive peers in digital enablement tools and training, along with heavy investments in eCommerce platforms. According to a manufacturing VP of Sales, “If we can’t help distributors compete through digital offerings and marketing solutions, they will never survive. The investment for us is huge.”

Trend #2:  Optimize a go-to-market approach for new and strategic offerings

Customer budgets may be restricted, but their need for new products and services remain. Field sellers within manufacturing have difficulty articulating the full value of increasingly complex and integrated products and solutions, especially for Anything-as-a-Service (XaaS) offerings.

The XaaS model, which first emerged in technology and software sales, is gaining a foothold in the manufacturing sector.  XaaS offerings reduce the strain on a customer’s budget while creating recurring revenue for the organization, which quite importantly improves corporate valuation.  XaaS offerings also allow companies to stay connected with customers throughout a product’s subscription life, typically three years or more.  Manufacturers, especially those who offer software, are rapidly expanding their use of XaaS business models.  Manufacturers are expanding sales of integrated products and services and are now tasking distributors to help originate and support software solutions.

Transitioning to innovative selling models, in particular XaaS offerings, requires a shift to integrated commercial functions. To better orchestrate these complex motions, revenue operations is becoming an essential capability.  Companies are investing in advanced specialist and service roles that support customers throughout the lifetime of a solution. These roles are supported by more structured and sophisticated training and collateral. Manufacturers and distributors who invest more heavily in “overlay specialists” and training are driving 27% more new product sales than their peers.

Trend #3:  Integrate marketing, sales, and service

80% of respondents feel that ‘customer persuasion’ now spans marketing, sales and service, and that these functions can no longer operate within silos. Sales and marketing functions are being integrated to improve the line of sight into customer data, utilizing a variety of new digital avenues, including social media. Successful companies are using account-based marketing (ABM) armed with data analytics and actionable insights to gain more value from traditional marketing functions.

Many study participants are introducing a variety of integrated commercial roles including:

  • Sales development representatives (SDR) to qualify leads and to leverage new outreach tools and technologies
  • Digital marketing managers to drive broad-based development of digital tools and roles
  • Customer success managers to expand sales opportunities with subscription-based customers
  • Digital customer service representatives to increase responsiveness and make sellers more productive

However, many of the executives interviewed are just discovering the merits of integrated functions, especially for marketing. These leaders are beginning to re-organize commercial models and request more investment in both hybrid marketing and service roles. Per an SVP of Global Sales, “We have been integrating under a CRO model and are strongly aligned from a customer perspective.

Trend #4:  Evolve direct and indirect channel strategies

As face-to-face customer contact diminishes, manufacturers are re-thinking their channel strategies. Approximately 20% of manufacturers have their own ecommerce channels, while others are prioritizing distributors with full online capabilities. With direct channels, manufacturers are expanding enterprise programs and increasing efficiency with sales specialists and hybrid insides sales roles. As digital roles and business development representatives expand, so does the breadth of inside sales roles.

Despite the rise of digital channels, manufacturers are not moving en masse to purely direct selling models. Approximately 60% of manufacturers surveyed rely fully on channel partners or use a mix of direct and indirect selling channels.  However, manufacturers are demanding more from their indirect channel partners, and only 10% feel that they are well-aligned strategically.

Trend #5:  Align talent and compensation to growth strategy

In recent years, manufacturers have endured a highly competitive job market for commercial roles. Despite economic conditions, firms still find themselves competing for exceptionally talented, digitally proficient employees. Since 2017, manufacturers have experienced a 0.8% jump in the cost of sales compensation as a percentage of revenue. A looming retirement cliff is exacerbating the pressure on talent, with many executives indicating that they will lose a high percentage of field reps to retirement within the next two years.

Field reps will still be required to develop and maintain key customer relationships as customer access opens in the future.  Therefore, companies must retrain and often redeploy these key positions to accommodate today’s needs, combining them with inside sales and marketing roles.  Sales compensation programs are also being re-designed to incentivize and prepare for coming growth.

As companies turn to eCommerce and virtual engagement, they search for digital and technical specialists to fulfill emerging roles. Redesigning their organizations to include these tech-savvy roles can also mean investing in comprehensive talent development programs while crafting new career paths. Future growth favors specialist roles as they provide a customer-facing touchpoint for high-value opportunities.

Trend #6:  Invest in Revenue (Sales) Operations

More companies are formalizing and centralizing sales operations with expanded charters to cover more than just account segmentation, account planning and sales resource allocation. New sales operations teams are enabled, often with marketing, to drive digital seller effectiveness and customer engagement, and also with service, to garner new insights and impact recurring/renewal revenue streams. Top focus areas overall for revenue (sales) operations include:

  • Sales compensation management
  • CRM system oversight and continuous improvement
  • Business reporting and insights
  • Enablement tools

Increasingly, sales operations teams are being expanded into revenue operations to support integrations points between marketing, sales and service. Many departments are moving into advanced analytics and consultative support, areas that traditionally sit in marketing. Approximately half of study respondents see “cross-functional collaboration” as a leading challenge for revenue operations teams. Formalized sales/revenue operations can drive efficiency and productivity as the level of complexity in commercial models increases and enablement tools proliferate.

Never in recent history have manufacturers transformed their organizations so quickly, and so decisively. The COVID-19 pandemic accelerated many trends that were already appearing within commercial models.  While still living with great uncertainty, manufacturers are revising their strategic business models to reflect a new reality: the buyer journey has changed, and they are responding accordingly through broad-based commercial initiatives and investments.

 

Article originally published by Industry Week


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