If your company sells to an original equipment manufacturers (OEM), integrators and end-users, then you’ve likely been faced with deciding upon whom to focus on and what sales strategies to adopt. Perhaps your company services all three. However, who gets most of your company's attention and why? Deciding upon your company’s sales strategies will inevitably involve assessing the strengths and weaknesses of each of these customer classes.
Will your company concentrate on the equipment manufacturer who has the installed equipment base and is known as the market leader? Will your company focus on the Integrator who always seems to be around the action, working on projects and installations? Or, should your company focus its efforts on the day to day needs of the end-user who requires your company’s consumables and spare parts?
The Benefits of Selling to an Original Equipment Manufacturer
Every company wants customers who pay their bills, have linear demand and constant order volumes. While not all equipment manufacturers fall under this category, a large number of them do. Sure, equipment manufacturers are often difficult to please, but what customer isn’t? The benefit of selling to a manufacturer is that they are instantly recognized within their market for their technical expertise.
Your company’s success is their success and the manufacturer's name is always front and center in the market. Customers look to them for product innovation. If your company sells to a well-recognized and established manufacturer, it will provide your company with instant market recognition.
These companies have an installed equipment base and an extensive end-user customer list. Selling to them means your business will have consistent order volumes, and not have to worry about fractured and infrequent customer orders. An equipment manufacturer is typically in better financial shape that other businesses, and they tend to respect their contractual supply agreements. When your company is an OEM-approved vendor, it immediately secures a position of importance in the market.
The Benefits of Selling to Original Equipment Manufacturers (OEM)
Benefits of Selling to Integrators
Between the manufacturer and the end-user is the integrator. When thinking of integrators, think of home construction companies who are involved in laying down a foundation, building a house's frame, calling in electricians and plumbers etc. Integrators are essentially installation specialists. They purchase a myriad of products from different companies and then are tasked with installing and integrating all these products into one finished good.
Unfortunately, integrators typically bounce around from one project to the next. Because of this, their demand can be infrequent at best. Dealing with this cyclical demand makes it extremely difficult to plan inventory. Therefore, integrators often don’t provide the same consistent, linear demand that manufacturers do. Because of this, they tend to have issues with cash flow. In fact, the home construction industry is the biggest user of receivables factoring due to a lack of payments during cyclical demand periods.
Regardless of all these issues, integrators can be a very good source of revenue. In addition, they are often keenly aware of the inner workings of the market. They know what’s working and what isn’t. They are also highly valued by end-users for their “hands-on” experience and technical savvy.
Benefits of Selling to End-Users
End-users e are the customers who either purchase directly from equipment manufacturers or from integrators. They need more than just the initial equipment. These customers use the equipment and will therefore need additional technical support, consumables and spare parts. The main concern for these customers is to run the machinery as efficiently as possible. Cost-per-use is their focus, as is longevity.
End-users will typically fall under a wide variety of customer types. Some are strong financially, some aren’t. However, for the most part, they need vendors who can provide more than just the product itself. They need technical expertise.
So, what’s the relationship between all three of these types of customers? Well, it’s not uncommon for equipment manufacturers to sell spare parts and consumables direct to end-users. However, most manufacturers aren’t interested in selling ancillary spare parts because it means they have to carry additional inventory. Sometimes end-users go directly to integrators for their consumables and spare part requirements. This often arises when they lack the technical expertise or know-how and come to rely upon the integrator for guidance.
Whom Should Your Company Focus On?
Depending upon your industry, it might just be good business to actively pursue all three customer types. In some cases, your company may be able to align itself with a manufacturer by providing pricing discounts in return for direct access to end-user customers. In fact, most companies enter into strategic partnerships with equipment manufacturers in order to gain access to these end-user accounts.
The manufacturer avoids the costs of managing additional inventory, gets a better price, and forgoes the burden of managing technicians and service calls. In return, you business must service the end-user’s requests for spare parts and repairs.
The above diagram is taken from the post: Price Skimming Sales Strategies: Remove Middlemen in the Value Chain. The article explains strategies that vendors can use to bypass value-added resellers (VARS), distributors and integrators and go directly to manufacturers and end-users, thereby reducing their market pricing and product-to-market lead times.
In some industries, it makes sense to provide the original equipment manufacturer with the top tier pricing, and then scale the pricing upwards for integrators and end-users. A number of companies make the OEM their top priority, and for good reason. These companies have consistent volumes, are well recognized in their industry, respect their contractual agreements and allow for relative ease of inventory management.
When deciding upon which customer to focus your efforts, and which one should get your top pricing, be cognizant of the size and potential of business at each customer class. It’s a pivotal aspect of both your company’s sales and pricing strategy within your market.
Learn about the importance of defining your value assertion within your market.
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