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Strategy for Networking

July 2004 Selling

From the numerous books, articles, and lectures on the subject, it is clear that face-to-face networking at business professional gatherings is as relevant today to business development as it was when our grandfathers were in business. Furthermore, the proliferation of alumni meetings, industry associations, chamber of commerce shows, and subject matter event series provides evidence that businesses continue to demand face-to-face networking in the pursuit of sales. Should networking be a high priority for all businesses or should its priority vary? Is the only strategy in networking to meet as many people as possible or is there another approach? From informal interviews, observation, and experimentation, our research sheds light on networking strategies.

This research examines networking for business development purposes at regional, industry, or subject matter professional gatherings. Networking for personal reasons such as job exploration is not considered, nor is networking in non-business related forums. While these forms of networking can bring great satisfaction and, at times, personal gain, they lie largely outside of the scope of sales and marketing or formal business development efforts. At issue is when should a business structurally include networking as a sales activity or marketing mix ingredient and what approach should be taken in networking to develop business?

Networking for Whom?

The priority of networking among businesses varies widely. Some rely heavily upon networking as an approach to business development while others largely ignore networking in favor of other sales and marketing activities. The priority that executives place on networking reveals itself in the amount of time they require themselves and their subordinates to attend networking meetings and the business expenses they are willing to cover to accomplish the effort. Some businesses require all employees to join associations and cover all expenses related to professional networking, whereas others leave employees to make their own decisions and manage their own costs.

The strategic determinant for setting the business priority of networking is the level of professional trust required to facilitate purchases. As the level of professional trust required prior to purchase increases, the value of networking for business development increases.

Professional trust is a larger issue with service-oriented firms than with product-oriented firms. In service-oriented markets, where the value-deliverable is highly mutable, customers express concern with the ability of suppliers to deliver an acceptable solution in a timely fashion with minimal cost overruns. Professional trust developed through direct contact belays concerns over the ability to deliver professional services. Contrast this with product-oriented markets. Brand recognition and technical data sheets communicate the ability of products to perform as claimed by the sales and marketing team. Trust remains a factor in product markets, but whereas trust in service markets is 100% dependent upon the people involved, trust in product markets is largely embedded in the tangible product delivered. Thus, networking is a higher priority for service-oriented firms than for product-oriented firms because the development of professional trust requires face-to-face interaction.

Networking How?

The approach people take to networking at professional meetings and associations is expressed through two extremes. At one end, the “Butterfly” approach relies upon interacting with as many people as possible. At the other end, the “Rooting” approach relies upon the assumption of a contributor role within the network.

In the Butterfly approach, the Butterfly interacts with as many people as possible, each time catching their contact details for a possible follow-up letter or phone call. In its extreme form, the Butterfly attends multiple networking events a week while consistently remaining a visitor. In its essence, this net-worker is a Social Butterfly.

Strategically, the Butterfly approach works best when marketing a ubiquitous product or service such as printing, insurance, or staffing. Ubiquitous used in this sense implies that the demand for the offering spread through a number of vertical industries. Ubiquitous value offerings are easily comprehended by prospects and experience somewhat consistent demand, thus simply capturing a prospect’s attention is the key to capturing a customer. The Butterfly approach delivers sales in ubiquitous value offering markets because it maximizes the salesperson’s contact with prospects.

In the Rooting approach, the Rooter identifies a strategically important organization and contributes to that organization as a committee member, chairperson, or board member. A strategically important organization is one which hosts events wherein the overlap between attendees and the target market is maximized. In its essence, this net-worker takes root within the organization.

Strategically, the Rooting approach works best when marketing a specialty product or service such as professional consulting or a specialized industrial product. Specialty used in this sense implies that the demand for the offering is concentrated in a targeted, specialty market. Most prospects within this target market will purchase the specialized offerings, but their purchases or supplier switching frequency may be infrequent. Thus, the Rooter’s strategy relies upon developing a strong relationship with members of the network and waiting for their purchasing goals to be activated.

Strategic Networking Matrix

This examination of networking “For Whom” and “How” reveals the two dimensions of the Strategic Networking Matrix. Using the business’s market as dimensions, the role of networking in creating sales is determined.

The vertical axis of the Strategic Networking Matrix represents the value offering types as product or service oriented. The horizontal axis is the breadth of the market that the offering serves varying between ubiquitous to specialty. Depending upon the quadrant that best describes the business, the type of networking and its priority is revealed.

Practice

Businesses that use networking to deliver sales can be identified in each of the four quadrants of the Strategic Networking Matrix.

  • A business executive at a mid-sized industrial marketing communications firm requires each of his subordinates to join a trade association and sponsors their membership. After three years with this firm, each employee is expected to be a chair or committee member within the association that he/she joined. This marketing communications firm places a high priority on networking and encourages Rooting behavior among its employees.
  • A business executive at a mid-sized utility product firm joined a trade association and participated in the planning committee for their annual conference. She did not require any subordinates to join the association, though her firm did sponsor the conference. She used her position on the planning committee as a means to create introductions with potential speakers who were also prospects, as well as shape the future of the industry. The utility product firm had placed priority on networking, but in contrast to the marketing communications firm, a comparatively lower portion of its overall sales and marketing budget went to networking. This is another example of Rooting.
  • A mid-sized printing company sponsors numerous local conferences for multiple industry organizations. At each event hosted by these organizations, one or more salespeople attends. The printing company accumulates numerous prospects from each event, many of which later places a print job order. This printing company has placed a priority on networking and encourages Butterfly behavior.
  • An industrial supplier of MRO goods, (Maintenance, Repair, and Operations) sells most of its goods through catalog, phone, and web orders. Although it does sponsor selected events, it rarely encourages its sales and marketing team to join specific trade associations. When individuals from this company are present at events, they are usually visitors. The MRO supplier places a relatively low priority on networking and consequently members of that organization are at most Butterflies.

Implementation

Networking as a means to create sales and market a value offering is one of many potential tools. The importance a business places on networking is determined by the type of value offering they provide. The approach a business takes to networking is determined by the breadth of demand for its value offering. The described Strategic Networking Matrix reveals when and how businesses use networking as a means to capture customers and create value.



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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