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According to recent Alexander Group research, top manufacturers and distributors drive 40% of sales from innovative products, services and software.

However, new revenue streams require a different approach to customer engagement and additional investment compared to traditional strategies.

Alexander Group recently held two virtual roundtables with industry leaders to discuss how to best optimize their firm’s go-to-market plan for new and strategic offerings. The interactive discussion focused on:

  • Defining which products, services and solutions merit additional focus
  • Understanding the go-to-market dynamics to effectively interact with different, often new buyers and influencers
  • The product, marketing, sales and service teams collaboration needed to support new commercial models

Defining New and Strategic Products

Innovative offerings range from advanced products and services such as industrial automation, robotics and inventory and project management, to true software solutions including systems integration for buildings, artificial intelligence and machine learning.

Participants were asked which advanced products/solutions they were planning to bring to market in 2021. Results led with new/innovative products at 73% followed by advanced service and software at 55% and 36% respectively.

The reasoning? Innovation counteracts commoditization and increases differentiation. Leading manufacturers and distributors realize the need to invest in innovation to stay ahead of the curve. Subsequently, solution selling becomes critical as firms develop offerings that span across products, software and services. And as buyers continue to demand added value, companies are pursuing service and software solutions for higher growth and margin. As one manufacturing executive shared, “COVID has changed the buyer journey. Our new and existing market is going very strong right now. People want the appliances in their homes to be interactive. We believe it’s important to lead and compete in this. We can also serve remotely to provide faster service.”

Selling Products to Selling Solutions

The key manufacturing and distribution mandate remains: legacy firms must convert traditional product “feature/benefit” sales to full solution offerings. And these new revenue streams demand a more dynamic sales coverage process. Establishing unique customer segments and the products and services that are attractive to them is step one; determining the appropriate sales strategy, messaging and coverage for each segment follows. Sales and service models must adapt as products and services become more complex. Though not for every manufacturer or distributor, some of the most advanced companies are taking a page from high tech and developing robust recurring revenue models. Alexander Group’s research shows that these companies who move from a “CapX” to an “OpX” sales model through Anything as a Service (Xaas) models realize 35% higher gross margin compared to the traditional manufacturing sales model.

A participant from a private equity firm stated, “Recurring revenue models are critical for any investment thesis. If we look at a business that doesn’t have recurring revenue today, a key part of the investment will be around increasing this.”

Whether organizations are doubling down or new product offerings, increasing service selling models or developing “XaaS,” to bring these innovative solutions to market, leading manufacturers and distributors are deploying specialized and overlay roles to assist with the selling process. Roles focused on digital lead generation to fuel the sales engine with new opportunities while decreasing time to market, along with industry specialists who craft unique solutions and value propositions by industry, are the most prevalent. When polled, 67% of participants have deployed or are considering deploying these emerging positions.

Additionally, the move to service and software selling for recurring revenue requires investment in product/IT specialists, specification sellers and customer success managers to provide higher-value to customers. With the inclusion of these new roles, however, challenges remain. Per a manufacturing leader, “We implemented a success manager after-the-fact to ensure customers are engaging with our tools to positively affect retention rates. The biggest challenge involved in enacting these new roles is leadership and management struggling with giving up control.”

Alexander Group’s research was echoed by the manufacturing and distribution leaders who participated in the roundtable – the route to market ecosystem is becoming ever more complex multiple stakeholders. For most, there will continue to be a symbiotic relationship between manufacturing and distribution; today’s innovative sales modes require collaboration.

Collaborating for Success

Leading manufacturers focus on three collaboration points to coordinate selling new and strategic offerings: Partner Training, Partner Programs & Incentives, and Specialist Roles.

  1. Partner Training: Manufacturers invest in specialized training for their partners by providing sessions, on-call technical specialists and online collateral. Distributors then leverage the coaching, incentives and dedicated resources to fully take advantage of the training.
  2. Partner Programs & Incentives: Manufacturers annually review a robust, multi-tier partner program focused on monetary (e.g., MDFs, rebates) and non-monetary (e.g., exclusivity, dedicated service) for their partners who drive incremental sales and product introductions.
  3. Specialist Roles: To sell advanced offerings, manufacturers supply dedicated overlay vertical, product or technical specialist roles and distributors provide complementary roles and expertise.

For more information on how to optimize your go-to-market approach for new and strategic offerings, please contact an Alexander Group manufacturing or distribution practice leader. Additional insights on this topic can be found by downloading Alexander Group’s whitepaper, Manufacturing: Poised for Growth.

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