Getting Your Industry Eggs OUT of One Basket: Product and Service Development
By Tracey Meyers, Sales & Marketing Manager, Pennsylvania Correctional Industries
Pennsylvania Correctional Industries (PCI), like all correctional industry programs, operates in a tough market with competitive pressures from private industry, a customer base faced with ever-shrinking budgets, mounting raw materials costs and an inmate labor force that works … on average … 4.5 hours a day, while civilian staff is paid for a 40-hour week. Sound familiar?
In an effort to wring some sales out of this challenging time, PCI reached into an old-school bag of tricks … Igor Ansoff’s product/ market matrix, first published in the Harvard Business Review in 1957 … as a way to think about how to grow our business.
Found in most marketing and strategic management textbooks, and with very little modification this matrix as shown here has proved to be a useful roadmap to increased sales for PCI.
PCI operates without a state-use law and we are restricted from selling to private companies and individuals. While we work hard every day to reach our customer base to offer them our 2,500 products and services, we know that we have to keep looking for quality items to produce, offer these items at competitive prices, and make sure that we fill a need for our current customers. And since our market isn’t growing, we need to develop new products and services.
Product Development – Growing Sales in a Current Market
In a nutshell, new product development (NPD) involves selling new products and services to your current customers. Accessories, add-ons and completely new products can all be a part of this strategy. Additionally, cross-selling by using existing communications channels, is an effective way to execute it.
PCI has taken on three broad product line expansions in an effort to position ourselves for a sales environment that we project will continue to be challenging for us.
While PCI provides standard laundry service of personals and linens to Pennsylvania state agencies including the Department of Corrections, we discovered customers who were contracting with private vendors to supply a full-service linen management program at rates that we just knew we could be competitive with.
A long-time laundry services customer of ours, the PA Department of Military and Veteran’s Affairs Southwest Veteran’s Center, had a secondary contract with another vendor for laundry rental of their bed linens and towels. When that contract was due to expire, we saw an opportunity to expand our service. Our laundry service customer satisfaction surveys have always been very positive and we took advantage of our strong relationship with this customer to ask for the additional business. Because of their familiarity with our quality, service and pricing they were willing to entertain our proposal.
The Southwest Veteran’s Center became PCI’s first linen management customer with an ambitious program of multiple inventoried par levels of items that our own apparel factories could produce. This resulted in added inmate hours for the product line of patient gowns, towels, sheets, pillowcases and laundry bags. Other items were procured from state contracts at very competitive rates after we made the tough decision to accept the fact that we could not provide 100% of the customer’s requirements in-house or because our own product line was not cost-competitive.
We worked with the institution that houses our largest laundry to secure additional storage room and worked out the pick-up and delivery schedule with our customer while also managing a myriad of details including quarterly physical inventories to determine the number of lost items as well as replacement costs of the many washcloths that “disappeared” from the busy Southwest Veterans Center’s inventory!
This customer was so pleased with our service that they renewed their multi-year contract last year for services worth in excess of $500,000 per year to PCI. This customer has been our best reference for this new product and we anticipate expanding the program to three other Department of Military and Veteran’s Affairs homes this year.
In 2004, PCI saw an opportunity to balance our product mix from mostly manufacturing-based industries to a 50/50 split between manufacturing and services Industries in a Request for Bid let by the Pennsylvania Department of Corrections (PA-DOC) for commissary fulfillment. While that bid was not successful, we worked hard to refine our business plan and in 2007, PA-DOC challenged PCI to provide commissary distribution on a system-wide basis.
We have managed to expand the business from a single warehouse to two warehouses in the first two years of operation … with our third warehouse set to come on-line in the first quarter of this year. We are servicing all 27 institutions by using a second shift at our current distribution centers and when the third warehouse attains full implementation, we will have put all three of these operations into the black within the first three years of this new service industry.
We have been able to avoid overtime wages, as well as managed costs by implementing an aggressive recycling program for scrap cardboard and plastic. Other cost saving measures include the implementation of competitive bids for retail products PCI cannot manufacture in-house and fuel cost reductions realized by making efficient deliveries from a more localized warehouse for our northernmost institutions.
The new distribution center will also utilize space at a correctional institution that formerly housed an unprofitable operation that PCI was forced to close. Inmate employment at this distribution center will top 75 inmates at full production.
The Nature Inn at Bald Eagle State Park
Just when you think the whole world is looking for a cheaper mousetrap, PCI has been using strong customer relationships and a commitment to expecting excellence from ourselves to expand our wood furniture line for the PA Department of Conservation and Natural Resources (DCNR) for a very special concept … a Bed and Breakfast inside a state park called The Nature Inn!
PCI has sold a lot of picnic tables to DCNR over the years, but this project required more higher-end products. Our initial meeting with this customer clearly showed us that they were not looking for low-end furnishings for this 16-room inn set in the scenic Pennsylvania Wilds of central Pennsylvania.
The Nature Inn was designed to feature a high efficiency geothermal heating and cooling system; solar collectors to heat water for showers and laundry; rain barrels and cisterns to collect and harvest rainwater for flushing toilets; high efficiency lighting and custom designed furniture made from quarter-sawn Pennsylvania white oak from certified sustainable forests.
PCI met their challenge to produce high quality lobby, dining room and guest room furniture using recycled fabrics for the seating cushions, custom-blended stains and delivering the entire order in time for DCNR’s grand opening on Labor Day Weekend of 2010 just thirteen months from the date of the agencies’ final revision to our drawings! There are four more inns being planned by DCNR for construction into 2014 and PCI is now the furniture supplier of choice for everyone.
This job allowed our furniture factory to show a profit in a declining furniture market and the project was the impetus for a secondary DCNR concept, the Elk Country Visitor Center, a premier elk watching and conservation education facility in the Pennsylvania Wilds which is home to the largest elk herd in the Northeast. The Center required custom educational kiosks and seating and on the strength of the quality work we produced for The Nature Inn, PCI was tapped to design and deliver every piece.
This classic design has now been adapted for an office furniture package including desks, credenzas, conference tables and office seating. The market for these items is not large, but we are establishing a reputation for quality in this segment of the market by providing custom hardwood furniture, on time and to the highest quality standards.
PCI has taken to heart these basic marketing principles: knowing our customer, altering our product mix to add value to both low and high-end markets and being dedicated to offering the right product at the right price. Going back to basics has allowed us to continue to find ways to “Teach Inmates to Work in Pennsylvania.” Our mission continues and we welcome the challenge to grow our business in any economic climate.