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Instant Revenue: Marketing and Mergers

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How can companies generate revenue right now? An industry expert shares his advice.

Milton Chang, Incubic Management LLC

Given the current state of the economy, any practical discussion of marketing and business development should focus on revenue generation, here and now. What can photonics companies do right away to increase their bottom lines?

It is wise to examine the job descriptions for the people who handle sales, marketing and business development to know who is responsible for what, so that nothing falls through the cracks. My personal belief is that work demarcation should be blurred: Everyone in the company should be working as a team to get the job done – in this case, to make more sales.

The center of sales activity is direct customer interaction. Marketing reps are in touch with customers, too, for sure – to understand trends – but that is one step back in the selling process. Marketing is responsible for building the brand, deciding on new products, getting the word out to customers, and doing whatever is necessary to gain customer acceptance and start the buying process.

Business development, which makes it possible for the company to conduct business in the future, is even further back. People in business development think about long-term strategy and decide what direction the company should take, such as what markets it should enter, what strategic alliances it should form and what companies it should acquire.

My belief has always been that every product must carry its own weight. That is, we should never forget that a good business is the result of having good products. But if you already have good products, what can you do to increase revenue?

The quickest way to increase sales is to crank up your sales force. You can debate whether or not this works for the photonics industry. I have always believed that people in this industry buy what they need and are knowledgeable enough to know whom to call. Also, out of respect for my customers as colleagues, I always used to be reluctant to “bug them” or to prompt them to place an order, thinking it wouldn’t sway them anyway. Not so! When we hired a CEO to run New Focus, sales increased at least 20 percent simply because we followed up more actively.

Promotional materials

In the near term, marketing can make a big impact on revenue in a matter of a month or two just through advertising and promotion. Getting the word out is an important first step in the sales cycle. Customers can’t think of buying your product if they are unaware of its existence and certainly won’t buy unless the product’s merits are known.

This is such an important aspect of marketing – and, frankly, I think this is an area where our industry can use some improvement. I enjoyed making ads when I was running both Newport and New Focus for close to 30 years, and here is what I learned.

Arguably, print ads may be the most direct form of advertisement because they put information in front of customers. Their effectiveness can be further enhanced by connecting them to your Web site. That is, you can provide interesting tidbits in the ad as a hook. This can get a reader to pick up the phone to start the sale, or to click onto your Web site to find out more. If your ad is really interesting, it could even spread the word to begin what might be the most effective marketing tool: viral marketing. And then your message can spread like wildfire.

Remember, when you prepare an ad, its sole purpose is to prompt readers to take action. With that, anything else you get – such as name recognition – will be a bonus.

I find that many ads in our industry are either too busy or they are irrelevant. Many are jammed so full of information that they become unattractive, rendering them ineffective. Less is definitely more in this case: Readers will skip over unattractive ads. Some advertisers try so hard to make ads creative that they wind up making them irrelevant. Do I need to look at an elephant to realize the product is compact? Valuable space that could have been used to convey a meaningful statement is wasted. Of course, you must have a “clean” and visually pleasing ad to imply that the company is a class act, and you want to repeat the message multiple times so it can sink in.

An ad has to be brief, simple and straightforward, because no one in this age of information overload has spare time to read a convoluted argument about why the product is clever. No single ad can convince a customer to place an order without further interacting with the company, but customers are one click or one phone call away, really, if you give them a good reason to act. To me, that’s a fair exchange: useful information for their attention.

My all-time favorite advertisement is a long-ago Rockport ad with just a snapshot showing a pathetic-looking guy in running shorts wearing a pair of leather shoes. The banner simply stated something like, “I just ran the New York Marathon in my DresSports.” Intrigued, I quickly went to a shoe store to see if that shoe could keep my feet from being sore when I had to stand all day at trade shows. Had it been a pitch about how well the shoe is constructed to solve my sore foot problem, I would not have read it. But the ad created what professional marketing people call “a pull” for me to come up with my own reasons to buy the product.

Partnering and acquisition

These are unusual times. The US federal funds rate and the London Interbank Offered Rate, or LIBOR, may be very low, but credit is really tight and hard to get, which makes corporate borrowing expensive.

One way to get around this problem and to keep business development active is through partnering. This, in essence, allows participating parties to make more effective use of existing resources and infrastructure – with the hope that the sum is more than the parts.

In the case of combining two established businesses, the decision is relatively straightforward. The major consideration is that financial numbers have to be accretive. Most importantly, the per-share earnings should increase by being more effective in the operations, sometimes by eliminating duplications.

Getting acquired makes sense for an embryonic business because it eliminates the need for a major infusion of investment capital to build out the business, in addition to avoiding the resultant dilution of ownership. The reality is that technology is now quite mature in the photonics industry, which implies that businesses are competing less on technology and more on execution: branding and marketing, and operational efficiency. Innovations often are achieved by adding incremental product features instead of developing new technology. At this stage, size and financial muscle do matter. This means that it is harder for start-up companies to compete with established ones.

In the case of an acquisition, an established company can enter a new market quickly, with both technology and market risks resolved by acquiring an early-stage company, sometimes at a lower cost than would be involved in developing the technology in-house. Revenue can be obtained without having to make a big investment in business infrastructure by adding onto existing operations. It’s a win-win, especially when the cost of capital is high.

There is so much to gain by partnering, and there is no downside that I can see. Partnering, or growth by acquisition, has proved successful in many industries, including photonics. Synopsys, a leading semiconductor design automation software business that employs more than 5000 workers, has acquired 15 companies in its 23-year history, for example.

Partnering obviously is already going on in the photonics industry. The question is: Could there be more? I envision us as a community – a business ecosystem where established companies play a nurturing role to incubate technology in universities and start-up businesses, sometimes with the help of government grants. We’re not there yet, but this ideal is possible.

Business is not a zero-sum game because opportunities are open-ended. By working together – instead of wasting energy beating each other down – we can build on each other’s ideas to develop more applications opportunities. By pooling resources, we can make effective use of funds that in recent years have been limited in the photonics industry. And we will all be better off with a stronger photonics industry.

Meet the author

Milton Chang is semiretired, working with portfolio companies and mentoring entrepreneurs. He has been an investor in the photonics industry and was CEO and president of Newport Corp. and New Focus Inc. prior to forming Incubic, a venture capital firm. He is a fellow of the IEEE, LIA and OSA, and he is past president of LIA and LEOS. He is a Caltech trustee, a member of the Committee of 100 and a director of Precision Photonics; e-mail: [email protected].

Photonics Spectra
Oct 2009
The technology of generating and harnessing light and other forms of radiant energy whose quantum unit is the photon. The science includes light emission, transmission, deflection, amplification and detection by optical components and instruments, lasers and other light sources, fiber optics, electro-optical instrumentation, related hardware and electronics, and sophisticated systems. The range of applications of photonics extends from energy generation to detection to communications and...
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