Why Now is the Time to Diversify Markets & Customers
Charlie Alter
article courtesy of allbusiness.com 

Some might think that the worst time to evaluate and pursue new markets is during a severe recession, such as businesses world-wide are currently experiencing. After all, your sales and profitability are probably down at least 25% during the last year, cash is tight, you're doing more with less and hunkering down trying to survive until this is over. However, forward-looking companies of all sizes are using this time to get Leaner, stronger and develop new products and services that will allow them to penetrate new market segments and find new customers.

If you own or manage a manufacturing firm of any size, you should be concerned that some of these forward looking companies may be your competitors, and they want your customers. So what are your options?
  Hunker down and play defense and try to hang onto the customers and markets you have now, or
  be prepared to go on the offense, so that when markets open up again your company will be
    poised to take market share and customers from your competitors in your existing or in new
    markets.

The decision you make will likely define the fate of your company for the next five years or more. This article, and the ones to follow as part of this six-part series, are meant for those company leaders who are prepared to go on the offense and are determined to grow, even in the current difficult economic times.

Our Current Condition
To understand the "current state" as accurately as possible, the following econometric data from Bank of America / Merrill Lynch economist David Rosenberg on April 15, 2009 paints the picture of the reality of the current condition for most US manufacturers:

Small Business Optimism Sinks to a New Low
  The NFIB index is a monthly survey of small business sentiment, for March it declined for the
    fourth month in a row to 88.7 from 90.4 in February. The last time it was this low was back in April
    1980. 
  In terms of the top concerns facing small businesses today, 31% cited "poor sales" while a mere 6%
    referenced "inflation." 
  Small business plans to expand slid to a mere 1% in March and Capex plans were also trimmed to
    their lowest levels since 1975. 
  At the moment it appears that the only areas left that can possibly sustain a renewed and
    sustainable expansion would seem to be exports and government spending.

Record Slack Within Manufacturing Sector
  Overall capacity utilization dropped from 70.3% in February to 69.3% in March, both rates
    surpassing record lows first recording during the 1980s' recession.
  Utilization in the manufacturing sector fell to a historic low (for the third straight month), to
    stand more than 10 ppt below its 5-year average. 
  Within the auto sector, utilization remained extremely depressed, at 42.8% versus 38.3% in
    January, when the industry shut down.

Unemployment Rates & History
  History tells us that the unemployment rate peaks six months after the recession ends. If the
    unemployment rate peaks "early next year" as the Fed predicts, it would peg the end of the
    recession sometime in the fourth quarter of 2009. 
  Rosenberg also found that the unemployment rate peaks seven months after the bear market
    ends. So, again that would peg the bottom in the S&P 500 some time around September-October
    (when most bear markets end).

Growing & Declining Sectors from the Federal Reserve in April 2009
  The Fed's Beige Book offers up some of the timely, on- the-ground information on the state of the
    US economy. The current situation shows that for every positive sector mention, there were
    three negative sectors. The Federal Reserve analysts were able to pinpoint a handful of sectors
    that garnered positive reports and quite a few more on the negative: 
   
    Positive:
    Food production, pharmaceuticals, petrochemicals, defense equipment, healthcare products.
    Negative: Oil and gas, healthcare services, business consulting, travel and tourism, agriculture,
    commercial real estate, aerospace, electrical equipment, shipping/transportation, luxury goods
    retailing, restaurants.

What Does This Data Mean?
This data simply confirms what we already know, that the US and global economy is in the tank and unlikely to improve much in 2009. However, if you believe the Federal Reserve's projection that the recession will end in late 2009, then 2010 has the potential to be a decent year for manufacturing and related sectors.

For forward-looking companies, now is the time to make plans for business growth in 2010 and beyond, and finding new markets and new customers should be at the top of the list. Some of the expanding markets listed above may represent short-term opportunities for companies that already have a foot in the door and can marshall their forces to move quickly.

For most companies though, 2009 will be a year to work on your plans for top-line growth in 2010. This should focus on the following:
  Uncovering new opportunities with your best customers
  Learning how to make marginal customers more profitable
  Improving existing or developing new products and services for all markets served
  Finding profitable new market segments that your company can penetrate effectively
  Selecting the most profitable customers to serve in these new market segments
  Improving your sales and marketing process to support this strategy
  Seeking dependable outside advisors to help your company accelerate this process

Market Diversification Articles to Come
This will be a six part series of  articles on practical approaches to market diversification. I will provide case studies of companies that have successfully navigated the path and diversified their markets, as well as highlight best practices in MEP centers around the country. The likely topics to be addressed in the future are:
1. Customer Analysis: Determining your current most valuable customers, markets, products &
    services
2. Demand Iinovation & finding hidden assets to grow
3. Finding specific market segments and target customers for growth
4. Integrating marketing & sales strategies to produce results
5. Developing and executing your plan for 2010

What Can You Do Today?
Make the decision today that as a leader of your company you are committed to grow and diversify your markets and customers. Understand that it will be a time-consuming process and must be done accurately and completely to be effective. If you choose to pursue this path, I recommend that you do the following:
  Discuss market diversification as a path to growth with the management team in your company
    and challenge them to develop an effective plan for 2010 and beyond in 2009.
  Form a small cross-functional team internally which will be charged with developing your
    company's plan.
  Contact Jack Crane, CONNSTEP's Growth Services Advisor at 800.266.6672.

As a first assignment for the team, answer the following six questions as completely as possible:
1. Can you identify the best customers to sell to now and in the future?
2. Do you know which market segments and niches (customer groups) to focus on now and in the
    future?
3. Do you know what kinds of products and services your best customers want?
4. Can you compare your products to your major competitors' products in terms of price, delivery,
    and key features, model by model?
5. Do you know the specific reasons you are losing orders to competitors for every known lost order
    in the last year?
6. Do you know if you are making adequate margins on each product line, model, of job?

Best of luck on your journey.

The second article in this six-part series is available now, "The Customer Analysis"