The Buying Game
Goose Island Beer Co., a Chicago brewpub and regional brewery, had its work cut out for it three years ago when it decided to sell beer to wholesalers and retailers in other Midwestern states. The market for specialty beers, while flourishing in the Pacific region, had floundered in the Midwest, and many beer companies had gone out of business trying to break into the market. But in its first full year of business, Goose Island sold more than 20,000 barrels of beer, an achievement almost unheard of in the industry.
"Goose Island Beer Co. is the only Midwestern microbrewer to have grown into a regional producer in its first calendar year in business," says David Edgar, director of the Boulder, Colorado-based Institute for Brewing Studies, a division of the Association of Brewers. "You just don't grow that big that fast."
What did Goose Island do that other brewers trying to edge into the Midwestern market did not? Goose Island president and founder John Hall attributes much of his company's success to good marketing-not to consumers, but to wholesale and retail buyers. "A product only makes sense if it makes sense to the buyer," says Hall. "To sell a product, you have to understand what the buyer wants."
Many tips for selling to buyers are industry-specific. For example, catalog companies such as Lillian Vernon Corp. in Rye, New York, need shippable products, so the company requires prospective suppliers to prove they can package their products well. But other companies, such as retail stores that display products on the shelf and "gourmet of the month" clubs that repackage products themselves, care more about the label than the box.
Some tips span industries, however, so we asked successful manufacturers and buyers who work with small businesses what it takes to get a product on the shelf. Here are their 8 steps to success:
1. Develop a Quality Product
This step may sound like a given, but many manufacturers underestimate the importance of the quality of the product they're selling.
In some industries, such as software, a quality product with great market potential will virtually sell itself. "The most important thing is to have a good idea that you can execute well and that someone with the ability to distribute and market sees an audience for," says Harry Gottlieb, president of Jellyvision Inc., a software developer in Chicago. "People doing full-blown software demos are rare, so publishers tend to be fairly willing to look at people's material."
Some manufacturers argue that it's more difficult to get a product to buyers in other industries. QVC Inc., a West Chester, Pennsylvania-based TV shopping channel, looks at 80,000 sample products per year but puts only 12,000 to 15,000 on the air. Many of the products that don't make it are good products. Even in the most competitive industries, however, ingenuity and quality can go a long way.
"Never underestimate the importance of a good product and word-of-mouth," says Bert Suarez, founder and president of Diesel Radiator Inc., a Melrose Park, Illinois, manufacturer of heavy equipment radiators. "About 25 percent of our new customers are referred to us by other customers."
2. Understand the Market
According to Hall, one reason for Goose Island's instant success was its complete understanding of the industry. "We asked ourselves why what was happening in the other regions didn't happen here," Hall says. "That showed us what others did right and wrong, and gave us a big advantage. If other companies had looked around like we did, they would have seen and done the same thing."
It may also be a good idea to start small. Before approaching buyers at large companies, entrepreneurs should try selling to a local store. According to Judith Barker, president of American Traditional Stencils, a Northwood, New Hampshire, stencil manufacturer, this creates awareness among larger buyers. "We spent years selling to individual stores that were part of chains," says Barker. "It was only recently that we contracted with the corporate headquarters of those chains. Selling to the smaller stores probably played a part in getting the corporate contracts."
"Find any store in your area-not more than one in an area if you're in the gift industry-and sell something as a brand-new product," says Mary Anne Johnson, co-owner of The Chandlery, a Roswell, Georgia, gift shop. "Develop some accounts that give you enough capital to figure out what really sells. After you know your product is salable at the retail level, and after you have the capacity and efficiency to fill orders, then you can approach buyers on a grander scale, such as at trade shows."
3. Create a Marketing Plan
Retail and wholesale buyers don't exist in a vacuum-they know the market and usually recognize products that have potential. But small businesses without track records have no credibility. That's why they need a marketing plan.
Case in point: Goose Island. Before approaching buyers, the company crafted a marketing plan that left no question in buyers' minds about the potential success of its brews. In addition to solid research showing the profits that could be gained in the fledgling Midwestern specialty beer business, Goose Island's plan showed buyers the microbrewer would follow through. "We made sure buyers were aware that the category was growing and that there were good margins for buyers in it," says Hall. "Then we showed them how we envisioned taking the product to market."
Hall advises entrepreneurs to develop a plan that works for everyone in the supply chain. "Your plan has to work for distributors, because they have to feel confident that retailers are going to order your product, and it has to work for retailers, because they have to feel confident that consumers are going to buy it," says Hall. "Our plan worked because it supported the entire distribution chain, from packaging to advertising."
4. Develop Collateral
According to Pam Marker, a Greenwich, Connecticut, marketing and design consultant and former small-business owner, one of the best ways to grab and keep a buyer's attention is to put together a catalog to display your products. "[A catalog] is your best salesperson," says Marker. "Hundreds of your competitors are contacting the same buyers you contact. You want to give buyers something they can keep so they'll remember you."
Catalogs and other materials, such as presentation kits and price sheets, don't have to be glossy, expensive brochures. The key is to look organized, says Johnson, who is impressed when her suppliers have product specification sheets, price lists, order forms and invoices.
5. Target Buyers
When looking for a buyer, your first step is to find the right buyer for your particular product. If you're selling gifts, try visiting gift shops in your area. If you're a software developer, locating a potential buyer might be as simple as walking through a computer software store. "With a CD-ROM game, you need to know whom the publishers are, so you go to software stores and look at the backs of the game boxes," says Gottlieb.
When approaching a buyer yourself, the key is understanding the buyer's needs. "Specialty stores [such as family-owned gift stores] are most concerned with quality and fashion. Department stores look mostly for fashionable items, but price is important as well. Mass merchants look primarily at price," says David Richardson, president of DHR & Co., a manufacturer's representative company in Atlanta.
If you're not succeeding using the direct approach, or even if you've made a few sales this way, you might want to go where buyers are looking for products. That's where trade shows come in. For example, Lillian Vernon attends almost 25 trade shows worldwide each year, including the Chicago Housewares Show, the New York Gift Show and the San Francisco Gourmet Products Show. And The Chandlery's Johnson visits five to 10 per year. "If a manufacturer is going to get to me, it will be at a trade show," says Johnson. "That's where you can find the most buyers in the shortest span of time."
If you need a bigger sales effort, you can also turn to manufacturer's representatives for sales assistance. Representatives act as a contract sales force-they agree to sell your product to buyers in return for a commission on sales. In addition to having their own showrooms, they also take products to buyers. You can probably find a rep by visiting a trade show, where most representatives have booths. According to Richardson, you should look for a reputable firm with many repeat customers and an account base in your region.
6. Pitch Your Product the Right Way
"The key to approaching a buyer is to know whom you're pitching," says David Hochberg of Lillian Vernon. "Everyone's requirements are different. We're immediately turned off if we see the product in every major catalog in America. Suppliers sometimes come to us and say `We're in 80 catalogs!' thinking that's great. But for us, that's a negative thing. Why should we sell it if everyone else has it? If we do, we lose our exclusive edge."
After you know whom you're pitching, the biggest hurdle to overcome is the fear of cold-calling. "You think `Good grief, why would they talk to me?' " says Bruce Irvine, executive vice president of Irvine Flexible Packaging Inc., a Rock Hill, South Carolina, packaging company. "But if you have something to offer, you can get to the right people."
Keep in mind, though, that the initial phone call should only be used to determine if the company is accepting samples and to get a contact name. In most industries, it's standard to send a sample with a catalog sheet. "Some wholesalers with catalogs send us just the catalog tear sheet. But that's just one more piece of paper in a massive pile of mail that arrives every day. It's easy to ignore or misplace," says Hochberg. "[If you] actually send a sample, we see a tangible product that's hard to forget."
Never try to charge buyers for or be stingy with samples. "That's a real turnoff," says Bob Beaubien, COO of Merchant Direct, the Chicago parent company of five mail order "gourmet of the month clubs" that sell coffee, beer, wine, cigars and spa products. "Some people send us one bottle of beer instead of a six-pack or a case. We're not being wasteful when we ask for a lot of product-we have many tasters, and the more product we have, the better we can get a taste of the product."
A follow-up phone call is appropriate after sending a sample, says Hochberg; just don't badger the buyer.
7. Prove Your Production Capabilities
Across industries, buyers look for manufacturers who follow through. To that end, name recognition and industry references go a very long way. "With beer, we find out if they've won medals. With cigars, we look for rankings in Cigar Aficionado magazine," says Beaubien. "But even a start-up can have name recognition and references. For example, we'd buy beer from a start-up brewery if the master brewer had a track record at another brewery."
But small businesses often don't have the track record to obtain name recognition. If that's the case, many buyers look at production capacity.
"We only buy half the quantity of projected sales before the catalog is mailed. It's the obligation of the supplier to fill reorders quickly," says Hochberg. "To find out if they can, we pull the Dun & Bradstreet [report] to make sure they have financial resources and manufacturing capability."
If you're a small company without a proven history and without financial resources, one way to break into the market is to take advantage of what you can do that bigger, more established companies can't. "What small companies can offer are short lead times, quick responses to modifications in design, and smaller quantities," says Suarez. "They should capitalize on those abilities."
This technique has worked for more than one small business. "We knew one larger packaging company that had a backlog of 12 weeks," says Irvine. "They needed a partner that could quickly turn products around. So we said to them, `Let us do the stuff you don't want to do.' "
8. Handle Negotiations Like a Professional
Many buyers, regardless of the industry, say one of the biggest turnoffs occurs when manufacturers have almost sealed the deal. Manufacturers act like they've sold the product when they enter negotiations, but negotiations are still part of the selling process.
"Manufacturers often enter into negotiations with a higher price than is realistic in the industry," says Beaubien. "They need to be cognizant of how much the buyer knows about the industry. If manufacturers start with an unrealistic price, we know what they're doing and we immediately cut them down, but we also feel like they've wasted our time."
Beaubien also dislikes when a company with which he's negotiating tries to substitute a different product during negotiations.
"It happens all the time," he says. "For example, we may have been looking at a brewery featuring beer X, but a couple of weeks into negotiations, the brewery says `Hey, why not use beer Y?' and puts a positive spin on it. That indicates that the brewery is incapable of production or not organized enough to handle production within our time frame."
We Think You Can, We Think You Can
Goose Island succeeded, in part, because its owners knew something that all good manufacturers know: Selling your product to retailers can be just as significant as developing a good product and marketing it to customers.
But perhaps the best advice for manufacturers approaching buyers is to try, try again. Even the phenomenally successful Goose Island didn't succeed the first time. "We've had some challenges," says Hall. "For instance, in Chicago, we did well because we had name recognition there; our brewpub had been operating in the city for years. As we've branched out into other states, it wasn't as easy. But we kept trying. When a buyer said no, we went back again. And we succeeded. So if you don't [make it] the first time, it doesn't mean you won't be able to succeed at all."
Julie Schaeffer is a freelance writer in Chicago.