And how to make it your Competitive Advantage -
Marketing in Industrials is a Mixed Bag Today
Navigating the world of B2B industrial marketing is often like charting a course with a map that's too simple or just plain wrong. Unlike B2C or B2B technology sectors, marketing in the industrial space is uniquely challenging and often misunderstood, and common marketing advice is helpful but insufficient.
The current state of industrial marketing shows a spectrum of practices that vary widely in approach and execution. Some companies dabble with product management, focusing on optimizing product offerings to meet market demands. Others stick to Marketing as a communications function, emphasizing communication strategies to build brand presence. A segment of industrial marketers simplifies their approach to “application selection,” aiming to select the right verticals and position products effectively for different use cases. And, there are companies that have experimented with these strategies and ultimately decided to run with a sales-only approach.
What sets industrial marketing apart is its complexity. Unlike B2C or B2B technology marketing, the two leading alternative marketing domains, Industrial Marketing operates within key structural differences. First, B2B industrial companies sit farther back in the value chain. This requires a multi-level analysis of diverse customer needs across multiple verticals. Industrial businesses must adeptly manage a variety of applications and address the nuanced demands of different customer segments. Because of multiple value chain layers, product development programs often take a long time to generate feedback and demand signals can be misleading. Additionally, B2C and B2B Tech have simpler buying units, a consumer or household in B2C, and a C-suite-led technology function in B2B tech. Selling in the B2B industrial space involves engaging with a complex buying unit, often comprising large multi-functional decision-making groups, and often multiple sets of these down the value chain. Finally, while marketing is a strategic imperative in B2C and B2B tech sectors, in the industrial world, other capabilities such as operational excellence and effective capital deployment play vital roles in achieving business success, and often companies can function “well-enough” focusing elsewhere.
Marketing as a B2B Competitive Advantage
In the industrial sector, there is a compelling argument for positioning marketing as a stronger strategic imperative. An HBR article looking at why marketing initiatives and CMO’s don’t last articulates two key reasons why industrial companies should elevate marketing to a strategic function: increased uncertainty and the growing challenge of achieving growth. Today, especially in Materials, global overcapacity and demand slowdowns along with significant pull-back in sustainability appetite of customers has put most company growth strategies in question. In the past, companies could pick a few key sectors, and focus on operational excellence and good capital deployment and do pretty well. Today, that type of approach faces a stark reality. Growth is not easily available. And companies should consider their marketing capabilities as a key ingredient to help with this list.
With these hurdles, the question arises: Where should marketing investments be directed? Should the focus be on product management, communications, and brand building, or a combination of these elements? Our experience indicates that to effectively generate growth, two marketing capabilities are critical for establishing a competitive edge. The marketing advantage lies in two pivotal capabilities: understanding customers better than competitors and crafting compelling offers that stand out in the marketplace. These capabilities become the cornerstone of a successful growth strategy, allowing companies to not only meet customer demands but exceed them in ways competitors cannot. Why specifically focus on growth? Because a growth-oriented initiative can often justify the investment required to develop robust marketing capabilities through a positive return on investment.
Actioning the Insight
Deciding to invest in strategic marketing requires a thoughtful analysis of potential growth benefits. First, it's crucial to evaluate the value of growth to your organization. Our research suggests that investing in strategic marketing capabilities can potentially double your current growth rate, yielding a return of 1.5 to 2 times your existing growth figures. In a slow-growth market, the impact may be modest, increasing growth from 2% to 4%, whereas in a higher growth market, growth could potentially leap from 6% to 9-12%. But even a modest lift from better marketing, when added to productivity and cost improvements can compound into a viable growth story. If such an improvement has significant implications for your company valuation or top-line potential, it's certainly worth considering.
The next step is to assess your current marketing capabilities. This evaluation helps determine the scale and nature of the investment required. Understanding your starting point enables you to craft a roadmap that aligns with your growth objectives and maximizes potential returns. It’s not merely about increasing marketing spend; it’s about strategically enhancing capabilities that drive competitive advantage.
Finally, identifying short “sprint” initiatives that can generate return immediately is critical, and selecting the right ones aren’t always obvious. But no one can wait years for a long-term investment to pay off. So breaking up your investment into manageable chunks is obvious, but making sure each sprint generates return is also required.
B2B industrial marketing isn’t identical to marketing in other domains. But growth can be generated even in established markets, with a focus on the right capability investments.
Until next week,
Kendall -
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