Situation

The US subsidiary of a European B2B industrial component supplier was experiencing several years of stagnant sales growth (0 to 2 percent per annum) despite favorable market conditions (growth more than 10 percent per annum). In addition, the subsidiary’s customer base was excessively concentrated, with one customer representing approximately 85 percent of revenue.

Solution

A NextLevel partner, as the CEO, completed an analysis of North American market potential that revealed a highly concentrated industry, with 80 percent of potential revenue concentrated in 10 major OEMs (over $50 million sales), with the balance split between mid-range OEM’s ($5-50 million sales) and small individual customers. The partner then conducted consumer focus group research to determine the significance of the company’s components on product selection, and concentrated product development effort on products for the 10 largest OEMs. He also restructured sales activities to support a multi-channel approach to the market and implemented a structured needs-satisfaction selling methodology, replacing an existing “relationship only” approach. Finally, he reduced promotional expenditures (trade shows, advertising, etc.) aimed at mid-range OEMs and small customers.

Results

Within two years the company had:

  • Moved to a dominant position in the market with a 60 percent share,
  • Balanced customer concentration with the largest customer reduced to 35 percent of revenue, without losing any sales.

Subsequently, the company achieved 10 years of sustained 20 percent per annum sales growth, at operating margins averaging 24+ percent.

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