One Company's Budget: Trading Trade Shows for Dealer Marketing
When Orem, Utah-based x-ray company Aribex saw signs of the recession starting to eat away at its pockets, executives knew they had to cut cost. They had just released their unique handheld x-ray gun, the NOMAD Pro, in early 2008. Scaling back research and development spending was an easy cut because the product was complete, so the team decided to shift their focus to payroll and marketing. They lost two senior engineers who they couldn't afford to replace and were forced to implement a six-month furlough program, in which each of the 31 employees took one unpaid day off every two weeks. To top off the overhaul, all of the employees took 10 percent pay cuts for six months -- 20 percent for the CEO. But payroll changes wouldn't help sales: the company needed a way to trim its budget while simultaneously boosting revenue. All avenues pointed to trade show expenses, which had been exorbitant. Aribex depends on industry trade shows to market their products and foster relationships with others in their fields, but executives didn't always consider reasonable alternatives to travel. Here's how the company trimmed its trade show costs and realigned its marketing budget.
|RESEARCH AND DEVELOPMENT BUDGET||$679,000||$438,000|
|MARKETING AS PERCENTAGE OF REVENUE||11.5 percent||5.7 percent|
|MARKETING BUDGET BREAKDOWN|
|LARGER TRADE SHOWS||$75,000||$78,000|
|VETERINARY, INTERNATIONAL, AND SMALLER SHOWS||$95,000||$30,000|
|TRAVELING FOR SHOWS||$82,000||$21,000|
Larger Trade Shows
In 2008, Aribex focused on marketing directly to consumers or doctors as a way to generate demand for the product, says Cindy Dayton, administrative manager. However, the company actually sells through dealers rather than directly to consumers. So in 2009, the company shifted marketing dollars away from consumer advertising to dealer advertising--marketing directly to those who are at trade shows selling the technology. Since the cost to enter trade shows can range from $3,500 to $9,000, the company reduced its presence at the smaller shows, and was able to invest more toward increasing its presence at the larger ones.
Veterinary, International and Smaller Shows
Many small shows, such as those for veterinary products, still represent a viable market for Aribex, whose primary industry is dentistry. So, to develop a presence at those shows while not actually attending them, the company partnered with Janesville, Wisconsin-based TigerView, a digital imaging company, to represent their product. Dayton suggests finding a partner with a "complimentary product," which makes it easier to sell both companies' goods as a package.
Instead of dispatching corporate employees to cross-country locations such as Florida and Washington for trade shows, as well as shows in London and Australia, Aribex began using contracted regional sales representatives, or 'AIRS' -- Aribex independent representatives. After previously spending as much as $1,500 on hotel expenses and $2,000 on airfare and taxis per trade show, Dayton says that outsourcing sales reps is cost- and time-effective. The representatives are paid on sales commission, and the company sends its national sales manager to introduce the reps to the equipment. "They're sales reps, so they already know how to market the product," says Dayton.
Dealer Catalogs and Consumer Advertising
Switching the focus from consumers to dealers also resulted in shift in advertising strategies. The company wasn't receiving positive results from consumer ads in magazines such as Dentist Today, so they invested in medical and dental distribution companies with dealer catalogs, such as Henry Schein and Patterson Dental. Dayton hopes to motivate dealers to suggest Aribex products to consumers, rather than trying to reach consumers directly. Aribex's 25-plus dealers all receive a certain percentage of product sales--a significant incentive for them to sell aggressively. "Motivating [dealers] to push [The Nomad Pro] isn't as costly as buying a one-page ad in a trade magazine and hoping dentists realize they need your product," she says.
The company also opted to scale back its sales incentives or dealer promotions. While rebates and coupon mailings remained intact, executives decided to end an equipment upgrade program it had with customers. Months before the NOMAD Pro was released, doctors were able to purchase the previous version with the promise of being able to upgrade to the Pro for $500. The program generated sales, but became costly, so the upgrade incentive was nixed when demand for the new Pro increased.