Marketing Plan - Matt

8/19/2019 Marketing Plan - Matt

1/22

Marketing PlanInch Taper Roller Bearings

Written by

Matt

5/29/2014


2/22

1

Executive Summary

The implementation of inch taper roller bearings into our vast assortment of

products has a promising future. The taper roller bearing segment is the largest bearing

segment in the United States and has of applications. The taper design allows it to take

axial as well as radial loads from a shaft rotating in its housing. The most popular

applications are gearboxes, wheel bearings and differentials. There are several major

competitors that already supply this type of bearing including Timken, NTN, NSK,

Schaeffler and JTEKT. There is an increased presence of small Chinese manufacturers

that are making their entrance into the US with significantly lower prices.

SKF is the second largest bearing supplier in the US and has an established brand

presence that will help us rapidly gain market share of inch taper roller bearings. With an

established sales force and engineering support for other bearing types, we will have a

strong advantage in entering this market. The targeted customers for this product line

are manufacturers that produce gearboxes, heavy duty trucks, mining, construction and

agriculture equipment. These markets are favorable with our brand reputation because

they tend to specifically look for high quality and excellent support which yield strong

margins. Typically, they are more interested in reducing down time costs then concerning

themselves with a slightly more expensive bearing.

The marketing communication strategy is focused on three primary mediums. The

first is to introduce this product line at several tradeshows. The second focus is to reach

out to magazines and place ads and/or articles that relate to the target markets. The

third is to reinforce the message by providing the sales force technical and documented

solutions to review with new and current customers they service. The overall marketing

costs for the first three years range from $666,070 in the first year to $500,580 in the

third year.

In the first year, the annual projected revenue is based upon gaining roughly 2%

market share of taper roller bearings, which is overall estimated at $2.6 billion, in the

United States. The gross margin for the first year is forecasted to be $17 million and

ramping up to the third year which is forecasted at almost $87 million.


3/22

2

Product Description

The taper roller bearing is one subset of roller bearings. It is one of the largest

and most popular bearings. This particular type was invented in 1899, by Henry Timken,

who was running a carriage making company and was looking to improve the

performance by reducing the rolling friction of wagon wheels to provide a smoother ride

for the carriage passenger (The Timken Company, 2014). Timken continues to be the

leading taper roller bearing supplier in United States, especially the inch size version

(Long, 2007). Today, they are used in millions of different applications and have a very

large market throughout the world. This bearing is very popular among manufacturers of

gearboxes, wheel bearings, and differentials.

The taper design is special in that it can accommodate a radial and axial load on

the shaft. Typically, a roller bearing is used for either axial load like a pivot for a crane or

pure radial load like a rope sheave. This advantage allows the bearing to withstand heavy

forces for its size. The taper roller bearing consists of an inner ring, outer ring and roller

set. The roller set includes a set number of rollers and a cage which keeps them

appropriately spaced and aligned. The rings and rollers are made from 52100 bearing

steel. The 52100 bearing steel is at the higher end of steel quality and price. It’s heat

treated to have significant hardness (~58-62 HRC) while still maintaining its toughness,

or resistance to crack of fracture under tension and compression. The rings and rollers

are machined to extremely tight tolerances in order to increase service life. These

tolerances in some cases are only a few microns in variation (1 micron = 0.001 mm).

The cage is not as important so it is made from stamped unhardened steel because it is

not intended to carry any load.

The focus of this product is offering inch series, which is typically only preferred

and sold inside the United States. The metric sizing is common throughout the rest of the

world. This means the envelope dimensions are in standard inch sizing, such as 1” 1.5”,

2” etc., whereas the metric sizing has an envelope dimensions in millimeters, such at 25

mm, 30mm or 40 mm, etc. The inch to metric sizing appears to be an easy transition yet

it’ s not. The tooling is very precise and would require complete overhaul. The main issue


4/22

3

is customers are trained in the United States to reject the metric system. Many

customers will express great frustration towards the metric sizes and will not tolerate

anyone even attempting to persuade them to switch. The inch sizing is here to stay in

the US for many years to come.

Currently, numerous companies have extensive range of sizes in production.

However, there is only one main company, Timken, producing the inch size taper roller

bearing and another company, NTN that has started producing a decent range of sizes to

compete with them. Since Timken invented this type, it’s their core competency and

they have a significant competitive advantage in this market with a production channel

already in place as well as brand equity. However, Timken has made some mistakes in

the market and created room for competition to enter. They have significantly increased

prices because they know the customer has no choice other than to redesign their

equipment which is extremely costly. In addition, their service level has dropped

dramatically and it’s well known customers don’t like dealing with their sales and

engineering teams.

This shift in the market has given us a strong and viable opportunity. As, SKF, we

have an advantage because we already have the engineering and design knowledge in

producing the metric sizes so we would just need to apply it to the inch size market.

There is already local manufacturing within the United States and a sales team in place.

The engineering and customer service support is also already established throughout the

US and assigned areas based on customers. SKF is the world’s largest bearing company

and thus has a powerful brand name in the market for quality and service. Customers

already request taper roller bearings on a daily basis and can’t believe SKF has no

offering other than to switch to metric. This would just add to the vast assortment of

bearings. The major cost would be investing in new inch size tooling for production. This

would also lead to more inventory costs; however the additional top line revenue would

be very promising.


5/22

4

Most customers use multiple types of bearings in their machinery and prefer to

consolidate suppliers. This will allow the sales team to leverage their current customer to

consider SKF when they have new projects potentially using taper roller bearings.

SWOT Analysis

Strengths (To be leveraged) Weakness (To be reduced)

Already produce bearing type in metricsizes

Need new tooling for each sizemanufactured, expensive

Engineering and sales force already inplace

May lose focus on current bearing products

Large distribution channel already in place Added inventory costs

SKF brand well accepted globally No manufacturing in USA

Warehouse/availability to local marketsMarket Leader (Timken) has full range ofsizes and superior design

Opportunities (To be exploited) Threats (To be managed/secured)

Market is large and only few suppliers Market limited mainly to USA

Current customer inquire frequently aboutinch TRB product

Current competitors have full product linealready in place

Market leader (Timken) is building badreputation with poor support

Imperial (inch) sizes replaced with metricsizes

Current plant's in USA have openmanufacturing lines

Import tax uncertainty on product made inEurope

Leverage SKF brand to penetrate market(build share)

Low cost country entries into the marketgaining share

Target Markets

Taper rolling bearings are a subset of the larger roller bearing market. The United

States has the largest share of the market with an estimated 63% in 2006. According to

the Freedonia group, taper roller bearings in the United States are estimated at roughly

$2.6 billion market in 2011 with estimated growth to make it $3.25 billion by 2016

(Long, 2007). Tapers are the fastest growing roller bearing type and are forecasted to

grow at an annual rate of 5% in the U.S. for the foreseeable future. Given the market

size and growth potential there is opportunity within this bearing category. Tapers are

used in a variety of different industries and applications varying in market size including

aerospace, industrial machinery and motor vehicles. Several of the larger markets


6/22

5

include construction and off-highway equipment, heavy trucks, railway equipment,

gearboxes, food processing, and pulp and paper markets.

Construction and Off-Highway Market

The construction, mining and agriculture equipment is one of the most well-known

and largest markets for taper roller bearings. The United States accounts for roughly

31% of the global market in this industry (ITR Economics, 2013). Recently, the mining

industry has been growing at about 5% annually. Last year this market slowed down to

1-2% growth, however it’s expected to return to full strength by the end of 2014.

Several of the large manufacturers in this market include Caterpillar, Komatsu, Volvo,

Hitachi and Terex. They produce equipment such as front-end loaders, back-hoes,

cranes and dump trucks. Taper bearings make up most if not all of the wheel end (or

their wheel bearings), transmissions, drives and axle boxes. A majority of these

companies use the imperial system to specify most parts on their machines, thus they

basically require inch size bearings. As it becomes more profitable to mine in the US,

there is more potential to increase bearing sales. It’s important to tool up manufacturing

to produce these bearings before this industry takes off.

The customer’s in these markets specifically look for high quality product due to

the extremely high down time cost for their end users. It’s common for the end users of

their equipment to expend millions of dollars in down time if one of these machines goes

down, so paying extra to ensure extended life is worth it to them. This customer and

market aligns with the SKF strategy of high quality bearings with the added value of

technical support teams and resources. This would be one of the most important

industries for this product line to be successful.

Heavy Truck Market

The on-road or heavy truck industry has been using taper roller bearings for many

years. Highways cover the entire United States from coast to coast and they need

bearings for each of their 18 wheels in addition to their transmissions and drivelines.

While there are some heavy trucks that have different and specialty wheel

configurations, the most common is the standard 18-wheeler. This market is estimated


7/22

6

to have a total US potential of $450 million as of 2011 with the potential of $500 million

by 2016 (Long, 2007). One of the biggest advantages to this market is that there are

only several bearing types that make up a majority of the market. The disadvantage is

there are competitors that will drop their price to maintain volume which reduces margin.

The other major risk is if or when the truck manufacturers decide the Chinese bearing

manufacturers have evolved enough to produce ”acceptable” quality. However, currently

this market demands higher quality which is only supplied by top tier quality bearing

manufacturers that have maintained pricing with good margins.

Over recent years there has been a strong push for lower friction bearings to help

their fuel economy. The EPA has been raising the bar for fuel economy restriction on

new trucks. In the past few years SKF has been developing low friction bearings which

play right into this market. Our low friction alternative will help us differentiate ourselves

and penetrate this market taking market share from the existing players: Timken, NTN

and JTEKT.

Gearbox Market

The most common roller bearing in a gearbox is the taper roller bearing. Based

on the taper roller bearing’s design it makes a sure fit in any gearbox. When a gearbox

manufacturer is looking for a bearing his ideal needs include a bearing that has high

stiffness, load capacity and speed capability. The taper roller bearing can take axial and

radial loads from a variety of different gears and keep the gear teeth in alignment at high

operating speeds making it ideal for gearbox applications.

Gearboxes come in all shapes and sizes and are installed in application from car

transmissions to large wind turbines. They surround us every day in a wide assortment

of devices. This makes the industry very promising to a bearing manufacturer. The

negative to this market is that there is heavy competition for inexpensive gearboxes

using lower quality bearings. The positive to the market is most medium to large sized

gearboxes that are intended for industrial use requires the use of high quality bearings

which our company, SKF, takes pride in offering. The industrial gearbox with larger size

bearings has potential as these are usually produced in smaller quantities and command


8/22

7

higher margins. The exact number of market size potential isn’t easily calculated

because there are too many separate companies producing a vast variety of different

style and types of gearboxes.

Overall risk factors

There are many risks that could lead to be detrimental to this product line. A few

of the major macro-environments need to be considered and evaluated. Starting shortly

after World War II, there has been trouble in the political-legal environment regarding

bearing imports. The legal term assigned to this issue was ”dumping” and it refers to

manufacturing bearings in a foreign market and then selling them in a domestic market

for prices lower than the domestic market’s production costs. Initially, this campaign

was focus on a few Japanese companies to get them to raise their prices (SKF ,” A global

story”, 2007). There has since been legislation put in place to restrict dumping and

ensure fair competition. The laws against dumping have been modified and re-arranged

many times over the years. Currently, the only dumping or import duty restriction is

against manufacturing of Chinese taper roller bearings.

The US economic environment also needs to be considered. The United States

economy experienced a significant contraction only a few years ago. This restricted

expansion and caused most companies to scrutinize capital investment. Recently the

economy has been recovering with a strong indication that growth is in the future. The

European market has been struggling lately and has impacted SKF investments. This will

definitely have an influence on how we want to proceed due to the capital expenditure in

tooling.

The initial focus for SKF to enter the inch taper roller bearing market would be to

target these key markets outlined with a few of the large companies where we have

strong relationships and develop the manufacturing channels. The large OEM

manufacturers typically place larger blanket orders which will allow us to pay for the

tooling costs and assign resources where necessary. These orders typically have low

profit margins but we will have to accept them if we want to get into the market and

become a notable player. From there, we can add other large customers expanding to


9/22

8

different sizes they require and adding channels while paying for tooling for the various

size ranges. As time progresses, we will have several channels with an assortment of

different sizes starting with the medium sizes and expanding smaller and larger when

appropriate. When the product line is working efficiently, we can make larger production

runs with the intention of having availability for the rest of our customers to purchase.

The SKF reputation for quality and support should speak for itself when we have a

full product line. The important decision will be selecting the right companies to partner

with to introduce ourselves into inch taper roller bearings. We will need to leverage our

brand position in other bearing type to pull inch taper roller bearings up to the SKF

standard.

Competitive analysis - Market Overview

The roller bearing industry is very large and last year was reported on SKF’s

website to be just under $50 billion globally with $10 billion from the US consumption.

The taper roller bearing accounts for about 20% of the overall global bearing market.

This results in heavy competition. There are five main competitors that make up about

60% of the bearing industry. The five companies include: NTN Corporation, NSK Ltd, the

Schaeffler Group, Timken and JTEKT Corporation. NTN, NSK and JTEKT are all Japanese

based companies, the Schaeffler group is a German based company and Timken is based

in the United States. Another 20% is made up of smaller regional bearing manufacturers.

The last 20% is made up of a group of Chinese bearing companies. In particular, the

Americas account for about 20% of the global bearing industry (SKF, “Bearing Markets” ,

2014).

Timken

Timken is a fairly large company, about 19,000 employees. The company overall

has revenues of $4.3 billion in 2013 which is split between steel production and other

manufactured products (Timken, "Annual Report", 2013). The other manufactured

products include bearings, gears, seals, couplings and services. The bearing segment is

the largest part of their business and it’s the only American based bearing manufacturer

in the big six companies that dominate the market. Their sales are heavily focused in the

US, which accounts for 66.5% of their total sales globally. In regards to inch taper roller


10/22

9

bearings, they are the market leader and have been since they invented it over a

hundred years ago.

The main business focus is on only a few bearing types, specifically deep groove

ball bearings, taper roller bearings and spherical roller bearings. They are very strong

and well known bearing manufacturer inside the United States. Their main core

competency is taper roller bearings and they have considerable capital already invested

in a vast assortment of different sizes. The designs they offer are cutting edge and

outperform any other bearing manufacturer. Since they lead innovation in tapers, they

command the highest prices which are supported by their manufacturing quality.

Another influential strength is the engineering support team is knowledgeable and well

trained.

One main weakness is they are very focused on the US market with inch size

tapers making them weak globally. Recently they have been implementing significant

price increases specifically in some of the uncommon sizes. This strategy increases

current profit margins; however it invites competition to enter the market.

The Schaeffler GroupThe Schaeffler group is the second largest industrial manufacturer in the bearing

industry. They employ roughly 79,000 people and had overall revenue of $15.3 billion in

2013 (Schaeffler, “Annual Report”, 2013). They sell a variety of different products

including transmission components, automotive components, roller bearings, linear

technology, and maintenance and monitoring systems. They are organized very similar

to SKF in regard to diversifying into linear technologies, maintenance and monitoring

systems. Their presence in Europe is very strong, yet North America held their own and

accounted for 17% of overall sales in 2013. However, with their heavy presence in

Europe and use of the metric system, they are a market follower when it comes to taper

roller bearings.

The brand name is very strong in the bearing industry. They have strong

engineering and sales support team covering the US. Their diverse range of products


11/22

10

help them to acquire customers for one reason which later allows them to offer and sell

the customer on several other products down the road.

Their major weakness is the taper roller bearing is not their core competency. For

Schaeffler is more of an afterthought or a me-too product. They have the customer base

interest from other bearing types that allow for easy market penetration. They currently

only offer high volume size inch tapers. The resources they have are strong and would

present great competition if they were to fully commit to enter the inch taper market.

Chinese Manufacturing companies

The Chinese manufacturing companies, both large and small, make up

approximately 20% of the global market and 7% of the US market (SKF, “Bearing

Markets”, 2014). The Chinese companies are all fairly similar and have a common

strategy. Their main goal is to capture large orders with a low price. In the US, these

companies would be considered as market followers with increasing presence.

Their advantage to the market is very low cost with little brand recognition and

minimal overhead. They don’t have the added cost of support teams of sales

representatives and engineers to back up there companies. There are many different

applications that don’t need engineering support or high end quality such as ceiling fans

and power drills. Their quality is increasing quickly and enables them to attempt to enter

the market with these low demanding applications.

A major setback is the association with China, which has a reputation for poor

quality. In the US, many manufacturers like to pride themselves on quality and will not

even consider using the Chinese products. Many of the companies have no quality or

tolerance standards which can lead to early failures and high warranty claims.

Pricing Strategies

The pricing of inch tapers needs to be thoroughly analyzed before the product is

introduced into the market. The pricing needs to be priced on the high side of the

competitive offering to align with the overall SKF pricing strategy. The SKF standard

pricing strategy is value-based which makes us among the highest or most expensive

manufactures in the bearing industry. Many customers have bought into the value-


12/22

11

added proposition that goes with our products. Part of that proposition means the inch

taper roller bearings have to be up to the same quality as other bearings we

manufacture. At the same time, we will need to offer discounts and promotional

programs to create interest and develop demand for this bearing line. We will want to

make it clear that these special pricing offers are time and volume dependent. Initial

programs will be focused on gaining market share and taking up shelf space until we

have a sustained demand for this product line.

The standard list price for these products should be consistent and have similar

margins as the metric taper roller bearings. The average list price is around 200% of

manufacturing costs which will be a good baseline for establishing an initial price. The

list price is intentionally greater than the actual sell price so there is room for negotiation

within the buying process. The first strategy will be to institute penetration pricing giving

special discounts to large OEM customers that place large volume orders. The goal of the

lower prices will be to take our competition’s business and attract large orders to get the

production lines operating. The large volume orders will also help with initial tooling

costs. The tooling is very costly so we will want to evaluate which orders make sense

and can be used for other customer’s future orders. These prices will only be offered to

large volume orders that allow for large production runs.

The discounted prices for large orders will provide little operating margin and

won’t allow us to see returns on our investment. In the bearing market, the prices are

elastic for small volumes and inelastic for large volumes. In most instances, there is

minimum order quantities needed to justify even making a production run for a particular

size. With that in mind, we will plan to over produce on the large production runs to

have inventory for lower quantity requests. For small quantity requests, we can charge

higher pricing and increase our margin. These days no one wants inventory, but we will

need it to gain market share from our competition.

The distributors are willing to buy and hold inventory but they are looking to sell it

within 6 months. This inventory turn is one of their most measured goals. They pass

most of the cost onto the end-user, only marking up product pricing 5-15%. The


13/22

12

distributor pricing will be closer to the list prices with little discounts which will assist in

our overall profitability. The use of our distributor network will be helpful in determining

bearing demand. We will need to use our leverage as their largest supplier to obtain

general competitor prices as well as knowledge for determining required new sizes. The

distributors can be the most loyal and ruthless customers. Their goal is to satisfy the

end-user and keep them happy, so our focus needs to be helping them with end-user

problems. This strategy has been successful for our other products. The value pricing

may need to be modified on an individual case by case basis but we will need the support

of the sales and support teams to justify our prices.

The overall pricing strategy needs to be allocated among the different customers

in order to add value to the company. This product line can’t be sustained with all large

OEM customers or only distributor customers. The production lines should expect to

produce large volume OEM orders at reduced prices 40% of the time. The distributor

pricing that requires smaller volumes but more sizes should make up another 30-40%.

The rest should be captured in other medium and smaller OEM orders with a similar

pricing strategy to the distributors which increase our margin.

Channels of DistributionThe placement of this product line when we go to market can arguably be the

most important of the”4 P’s”. We will need to consider the overall picture and how we

bring this product line into the market. Initially offering only to direct channels or indirect

channels could cause significant conflict. They may feel it’s not fair or that we’re holding

out on them if we don’t offer it to both channels. This product line will have to be offered

in a hybrid channel using both indirect and direct channels. This will ensure that both

channels of the businesses we sell too feel they are being treated fairly. This will align

with the majority of our other product lines that are also sold direct and indirectly.

Direct ChannelsThe direct channels where we sell directly to original equipment manufacturers

(OEM) typically buy a minimum of $25K a year. We sell to larger OEM’s through a

different sales force called strategic business units and the threshold for these customers


14/22

13

is usually around a half a million dollars in annual purchases. The larger OEM’s should be

our initial focus because they will be able to purchase higher volumes of each bearing

which will help capture a return on the expenditure for tooling costs. The other

advantage to starting with the larger purchasers is they almost always place blanket or

production orders up to 5 years in advance. This will gives us valuable lead-times for

planning purposes and help maintain lower inventory levels.

In order to make our launch successful, we will need extended training on taper

roller bearings for our sales force and engineers. Today, we sell metric taper roller

bearings. With the sales teams we currently have in place, we should have the resources

for the initial product launch. In time, we may need to increase the support teams with

sales resources, engineers or customer service representatives but we can continue

monitoring the support requirements. The sales teams will need more training on taper

designs and their applications as well as the inch taper part numbering systems which

are set up very different from the metric part numbers. It’s important for the support

teams to be confident and fluent in this terminology. The sales representatives will need

a solid 2 days of training to learn the basics of the inch system and also understand the

markets and applications where we want to focus. The engineers will need a week of

training as they will be required to know the products at a high level and be able to

answer difficult questions. The customer service representatives should have at least 1

day of training focusing on the part numbers.

Indirect ChannelsThe relationship that we have with our indirect channels consisting of

intermediaries or distributors is a strong market advantage of SKF. In the United States,

the Freedonia group estimated that the aftermarket or MRO demand bought

approximately $1.92 billion in 2011 in bearings. In 2006, it was estimated that SKF had

sold $480 million that year when the overall market was at $1.78 billion (Long, 2007).

The big distributors are essential to improve profitability of this product line after the

tooling and production lines are in place. This channel will not necessarily be added

second, but won’t be the primary focus. We should overproduce the OEM’s specified


15/22

14

quantities which will provide additional inventory to support sales through distribution

initially. As we expand the product range and grow market share in the MRO channel

then we can begin to emphasize this channel.

The support teams for this channel which are setup similar to the strategic

business units will need the same training. However, these teams will get second priority

to the OEM support channels. We will need to concentrate on how we approach and

convey this new product line to the distributors as to not show any favoritism towards

the OEM accounts. When we can accommodate a variety of the product range and shift

more focus to MRO sales we will need to use both the push and pull strategies in this

channel.

CompensationThe support teams will need motivation to buy into this new product line. The

most important strategy will be to entice the sales representatives because they are the

responsible party for hitting sales targets for their accounts. They will help to push and

pull the rest of the support team to work on this product line. One strategy aimed at the

sales representatives is a monetary supplement such as a bonus for each new high

volume order that can pay for its own tooling costs. Another strategy would be to have a

dollar value threshold of new inch taper sales over the next year or two for which the

compensation would be a car upgrade on their new company car or upgraded options.

These days a heavy majority of sales representatives have company cars and the ones

that get upgrades see it almost as a status for being an outstanding sales representative.

A strategy to involve the entire support team would be to offer a paid vacation to the

team that sells the most inch TRB’s in the next fiscal year.

Market Communications

The marketing programs will need to be carefully thought out before the launch of

inch taper roller bearings in our assortment of products. These programs will need to

send a consistent message to the potential customers to enhance their effectiveness.

The use of multiple programs will help to reach the most amounts of potential customers.


16/22

15

The most important programs we need to focus on include tradeshows, direct mailing

and promotional literature.

Tradeshows

The inch taper roller bearings need to be featured in a few of major trade shows

this year and next. This will create customer awareness in the bearing industry. Today,

customers are trained to know that we don’t offer inch size tapers, but going forward

they need to be updated about our recent development. The intention of these shows

will be to inform and draw interest towards this new product line. The trade shows need

to be aligned with the initial targeted markets.

The construction, mining and agriculture markets have several well established

trade shows. The biggest show for construction and agriculture companies is known as

”CONEXPO-CONAGG” which is offered every three years with the next one in the Spring

of 2017 (CONEXPO, 2014). The largest show for mining in the United States is

the”MINEXPO” which is held every 4 years with the next one in the fall of 2016

(MINEXPO, 2014). These shows will be important in years to come, however with the

initial launch we will need to investigate other trade shows as well. These shows will

inform and remind customers that we offer inch taper roller bearings.

The heavy truck market has a few trade shows that need to be considered. One of

the major or more important shows is, heavy duty aftermarket week (HDAW), which

focuses on expert presentations and seminars as well as time to walk the exhibits. This

show has over 250 exhibitors and more than 1500 attendees (HDAW,”Fast Facts”, 2014).

The show is held every year in the spring, which will align perfectly with our production

start early next year.

We will also need to participate in trade shows for the gearbox manufacturers to

build awareness within their market. One of the more well-known tradeshows is” Gear

Expo” which is held every fall (Gear Expo,”Exhibitor Information”, 2013). The next show

is in the fall of 2014. This will be an important tradeshow to build momentum if we start

production early next year. This show is run by the American Gear Manufacture

Association or the AGMA.


17/22

16

Another trade show that would be worth evaluating is the ” Iron and Steel

Technology Expo” which is held every year in the late spring. It’s also known as the

Steel Show and focuses on steel manufacturing equipment which uses taper roller

bearings. This will build awareness with OEM’s in steel industry as well as end-users.

Direct Mail

The use of direct mail may not be the most effective but it still adds value and is

useful in disseminating information. In the past, SKF has participated in advertising in

technical magazines and contributing to articles related to products made by SKF. If we

wrote an article and could get it featured about this new offering in a couple of the larger

technology magazines it would be ideal. Fee publicity is more believable than paid

advertising and the cost is insignificant. The main magazine we will want to focus on are

”Power Transmission Engineering” , ”Machine Design” and ” Engineering and Mining

Journal”. Power Transmission Engineering focuses on bearings, gears and electric

motors. It reaches approximately 15,000 engineers throughout the industry (PTE,

” Media kit” , 2012). Machine Design touches approximately 134,000 design engineers for

an average between 65-75 minutes (Machine Design, “Media Kit” , 2014). This magazine

is then passed along through about four other engineers before its retired. Engineering

and Mining Journal will reach engineers and purchasing agent in the mining market. This

magazine produces over 35,000 copies a month with an average of two to three readers

per copy (E&MJ, “Media Kit”, 2014).

We also produce and distribute our own magazine for customers, named

”Evolution”, which we will want to take advantage of since it’s at our disposal. The

magazine was first created in 1994 and is now at over a half million recipients

throughout the world and is printed in twelve languages (Evolution, 2012). This vital

resource is sent to customers that are logged in our CRM database. The magazine is

sent mainly to our existing customers but once new customers are added to our

database, they get added to the list of recipients.


18/22

17

Promotional material

We need to develop promotional material for customers to read about our new

product offering. The promotional material can then be distributed at tradeshows, in

advertisements or brochures for direct mailing and for use by sales representatives. The

tradeshows typically have several key focal exhibits which then have brochures and

success stories. These documents or flyers can then be taken with the customer or

emailed so they remember what they saw at the particular show they attended. The

success stories can be used in articles for applicable magazines. We will need to work

with engineers and sales representatives to gather a few stories about how customers

have used our taper roller bearing with success and how SKF offered a value added

solution. The success stories need to be focused on the target markets, so the goal

would be to get at least one story for gearboxes, construction, agriculture, mining and

heavy duty trucks.

A brochure highlighting the product’s advantages and the anticipated product line

sizes would be useful in addition to the success stories. These brochures will be used by

the sales force. This gives the sales representative another reason to set up a meeting

and meet with the customer. The sales representative is there to show them the value in

purchasing from SKF and close the sale by getting them to take action and place an

order. Even if the customer doesn’t buy taper roller bearings at that time, they may

uncover other business that we can capture that might have otherwise been missed. For

the initial launch, each sales representative should have thirty copies of the technical

brochure and thirty copies of two success stories that are market specific based on their

customer base.

Other possible tactics

The tradeshows will need inch taper bearing exhibits designed specifically for the

targeted industry. The use of these exhibits in a couple of our lobbies in the different

offices will also draw attention. Many customers visit our offices while utilizing services

provided in our Solution Factories. This would be another opportunity for us to display


19/22

18

our new inch taper offering in a variety of applications and provide them with some of

the brochures or sales material. Again, this will build awareness of the new SKF offerings.

Budget2015 2016 2017

Year 1 2 3

Estimated Revenue $ 52 000 000.00 $ 104 000 000.00 $ 156 000 000.00

Cost of goods sold $ 34 320 000.00 $ 51 480 000.00 $ 68 640 000.00

Gross Margin($) $ 17 680 000.00 $ 52 520 000.00 $ 87 360 000.00

(%) 34% 51% 56%

Marketing expense $ 666 070.00 $ 571 410.00 $ 500 580.00

Contributing Margin $ 17 013 930.00 $ 51 948 590.00 $ 86 859 420.00

Estimated Revenue

Taper rollers bearing come in many sizes and the part numbers for this product

line can be in the hundreds if not thousands. Timken the market leader claims to have

over 26,000 different part number combinations (Timken, “Taper Roller Bearings”,

2014). The best practice in this industry would be to forecast market share growth based

on overall market potential. The goal by year three would be to have 6% market share

of the total market in the United States. This will be achieved in 2% increments over the

three years. The market size in 2011 was $2.6 billion which puts our 6% target by year

three at $156 million.

Cost of goods sold

The production costs are also difficult to estimate by individual part numbers. The

estimated forecast can be better estimated by expected gross margin as a percent in the

first year. Based on other products, we hope to make an operating margin of 15% on

large OEM orders which will account for roughly 40% of the goods produced. The

distributor pricing has a rough operating margin of about 55% which will account for

35% of the goods produced. The medium and small OEM’s have a rough operating

margin of about 35% and will account for the last 25% of goods sold. Combining these

margins puts the average gross margin at 34% for the first year.

After the first year, there is an expected increase in produced products as well as

more efficient production lines. The first year we are anticipating considerable waste or

scrap from initial setups and employee process training. The year two cost of goods will


20/22

19

increase by 50% over the first year with additional goods produced. Then in year three a

similar effect is expected and the cost of goods sold will increase another 200% over

year 1.

Marketing expensesTradeshow costs

Year Gear Expo HDAW Min ExpoCON-

EXPO(CON-AGG)

Iron and Steelshow

2015

Exhibit Costs* $ 15 000.00 $ 15 000.00 $ - $ - $ 10 000.00

DemonstrationPiece

$ 12 000.00 $ 20 000.00 $ - $ - $ 13 000.00

Shipping (Demopiece and othermaterials)

$ 35 000.00 $ 50 000.00 $ - $ - $ 30 000.00

Promotional printeditems(includes give

a ways)

$ 5 000.00 $ 8 000.00 $ - $ - $ 5 000.00

Support team ($3k ahead)

$ 15 000.00 $ 15 000.00 $ - $ - $ 12 000.00

Sub-Total $ 82 000.00 $ 108 000.00 $ - $ - $ 70 000.00

2015 Total $ 260 000.00

2016

Exhibit Costs* $ 15 000.00 $ 15 000.00 $ 20 000.00 $ - $ 10 000.00

DemonstrationPiece

$ 12 000.00 $ 20 000.00 $ 24 000.00 $ - $ 13 000.00


$ 35 000.00 $ 50 000.00 $ 60 000.00 $ - $ 30 000.00

Promotional printeditems(includes gives

a ways)

$ 5 000.00 $ 8 000.00 $ 10 000.00 $ - $ 5 000.00


$ 15 000.00 $ 15 000.00 $ 21 000.00 $ - $ 12 000.00

Sub-Total $ 82 000.00 $ 108 000.00 $ 135 000.00 $ - $ 70 000.00

2016 Total $ 395 000.00

2017

Exhibit Costs* $ 15 000.00 $ 15 000.00 $ - $ 20 000.00 $ 10 000.00

DemonstrationPiece

$ 12 000.00 $ 20 000.00 $ - $ 24 000.00 $ 13 000.00


$ 35 000.00 $ 50 000.00 $ - $ 60 000.00 $ 30 000.00

Promotional printeditems(includes gives

a ways)

$ 5 000.00 $ 8 000.00 $ - $ 10 000.00 $ 5 000.00


$ 15 000.00 $ 15 000.00 $ - $ 21 000.00 $ 12 000.00

Sub-Total $ 82 000.00 $ 108 000.00 $ - $ 135 000.00 $ 70 000.00

2017 Total $ 395 000.00

*Exhibit costs = Floor space + Society costs + Perks(TV's, Nicer carpet and scanning devices)


21/22

20

Direct Mail

2015 2016 2017

Magazines # of Ads Total cost # of Ads Total cost # of Ads Total cost

Power Transmission Engineering 24 $ 2 595.00 12 $ 2 595.00 6 $ 2 595.00

Machine Design 24 $ 3 060.00 12 $ 3 060.00 6 $ 3 060.00

Engineering and Mining Journal 24 $ 6 150.00 12 $ 6 150.00 6 $ 6 150.00

Advertisement Creation 6 $ 10 000.00 3 $ 10 000.00 3 $ 10 000.00

Total $ 343 320.00 $ 171 660.00 $ 100 830.00

Promotional Material

There are approximately 95 sales representatives that would need material. Each

sales representative would receive one technical document highlighting features and

benefits and two success stories (30 copies of each). It would cost about $50 per sales

representative after writing, printing, shipping and handling, so roughly $4750 per year

in literature. The writing of the one technical document $8,000 and 5 success stories are

at $10,000 a story.


22/22

21

References

1) Timken.(2014).Company History . Retrieved May 20, 2014, from

http://www.timken.com/en-us/about/Pages/History.aspx

2) Timken.(2014).Taper roller bearings . Retrieved May 28, 2014, from

http://www.timken.com/en-

us/products/bearings/productlist/roller/Tapered/Pages/default.aspx

3) Long, K. (2007). Industry Study 2207 Bearings. : The Freedonia Group, Inc.

4) SKF(2014) Bearing Markets . Retrieved May 21, 2014, from

http://www.skf.com/group/investors/bearings-market

5) Timken: Annual Report 2013.(2014) Retrieved 29 May 2014, from

http://www.timken.com/en-us/investors/FinancialReports.

6) Schaeffler: Annual Report 2013.(2014). Retrieved May 20, 2014, from

http://www.schaeffler.com/remotemedien/media/_shared_media/09_investor_rel

ations/dokumente/publikationen/2013_6/20140320_Schaeffler_AG_GB_EN.pdf

7) SKF: Annual Report 2013. (2014) Retrieved May 20,2014, from8) SKF (2007). A global story . Retrieved May 21, 2014, from

http://investors.skf.com/skf-a-global-story/7-the-era-of-transitions/anti-dumping-

legislation.php

9) GearExpo(2013) Gear Expo Exibitor Information. Retrieved May 25, 2014 from

http://www.gearexpo.com/exhibitors/

10) HDAW. (2014). Fast Facts. Retrieved May 25, 2014, from

http://www.hdaw.org/HDAW2014/public/Content.aspx?ID=285&sortMenu=10100

3

11) CON-EXPO. (2014). The Construction World Converges at CONEXPO-CON/AGG

Retrieved May 25, 2014 from http://www.conexpoconagg.com/Attendees/

12) MIN-EXPO. (2014). Welcome to MINExpo International . Retrieved May 25, 2014

from http://www.minexpo.com/

13) PTE (2012) Media Kit . Retrieved May 25, 2014 from

http://www.powertransmission.com/images/media.pdf

14) Machine Design (2014) Media Kit . Retrieved May 25, 2014 from

http://hydraulicspneumatics.com/site-

files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-

%20Rates.pdf

15) E&MJ (2014) Media Kit . Retrieved May 25, 2014 from

http://www.e-mj.com/home/media-kit.html

16) ITR Economics (2013) Market Forcast Report: North America and Europé. PTDA-EPTDA
http://www.timken.com/en-us/about/Pages/History.aspxhttp://www.timken.com/en-us/about/Pages/History.aspxhttp://www.timken.com/en-us/products/bearings/productlist/roller/Tapered/Pages/default.aspxhttp://www.timken.com/en-us/products/bearings/productlist/roller/Tapered/Pages/default.aspxhttp://www.timken.com/en-us/products/bearings/productlist/roller/Tapered/Pages/default.aspxhttp://www.gearexpo.com/exhibitors/http://www.gearexpo.com/exhibitors/http://www.conexpoconagg.com/Attendees/http://www.conexpoconagg.com/Attendees/http://www.conexpoconagg.com/Attendees/http://www.minexpo.com/http://www.minexpo.com/http://www.minexpo.com/http://www.powertransmission.com/images/media.pdfhttp://www.powertransmission.com/images/media.pdfhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://www.e-mj.com/home/media-kit.htmlhttp://www.e-mj.com/home/media-kit.htmlhttp://www.e-mj.com/home/media-kit.htmlhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://hydraulicspneumatics.com/site-files/hydraulicspneumatics.com/files/uploads/2014/04/2014%20Media%20Kit-%20Rates.pdfhttp://www.powertransmission.com/images/media.pdfhttp://www.minexpo.com/http://www.conexpoconagg.com/Attendees/http://www.gearexpo.com/exhibitors/http://www.timken.com/en-us/products/bearings/productlist/roller/Tapered/Pages/default.aspxhttp://www.timken.com/en-us/products/bearings/productlist/roller/Tapered/Pages/default.aspxhttp://www.timken.com/en-us/about/Pages/History.aspx

Documents

Marketing Plan - Matt