Crane Valve Group emphasizes marketing thrust

BY MORRIS R. BESCHLOSS

PVF and economic analyst

In the history of the valve industry, Crane is one of the most familiar brand associated with the flow control sector’s evolution. Having celebrated its 150th anniversary in 2005, Crane’s valve division continues to be a significant segment of the multi-billion-dollar, New York Stock Exchange-listed, publicly-held corporation.

Unlike some of the venerable industrial valve factors that have disappeared from the top rung of valve industry leadership, Crane has made significant acquisitions in this decade alone. Such well-known names as Xomox, Saunders and Hattersley, as well as Jenkins, Stockham and Pacific Valve, now fly under the Crane banner.

Under the leadership of Max Mitchell, head man of the Crane Fluid Handling Group, the number of Crane offerings has now been reduced from eight to four distinct business entities.

After exhaustive industry surveys, which included a long sit-down with this writer, Mitchell came to the conclusion that these four key marketing approaches would unveil the broad product diversity of Crane. Last year, Crane proceeded with the realignment, and now is more focused to serve its hundreds of distributors and such end-use and specification influences as industrials, original equipment manufacturers, architects, engineers, mechanical contractors and major turnkey constructors.

Although the Crane Valve Group achieved record revenues in the 2007 banner year, Max Mitchell believes that the new market-oriented units will pro-actively address the pvf industry much more effectively than the previous organization, which was more manufacturing/production oriented. One of the four key units that now comprise Crane Valve’s marketing dynamic is “Energy Flow Solutions,” arguably the most growth-oriented of the four marketing prongs.

It is our pleasure and privilege to have this exclusive interview with Terry Ross, president of Crane Energy Flow Solutions, focusing on the strategy and maximizing of Crane Valve’s penetration of this crucial end-use market.

Beschloss: Please give our readers a quick overview of your organization and the new approach to the pvf markets.

Ross: Crane Energy continues evolving today, realigning resources, reaching out to our customers and sales channel partners, and learning to win in the global energy markets. We are investing heavily in marketing and engineering to improve our ability to help customers solve problems. We have engineering activity ramping up in almost every product line. We are also working hard to reduce lead-times and improve on-time delivery, using the Crane Business System lean operations toolkit to get better everyday. It is critical that we focus our resources on the facets of the business that our customers tell us are important to them, and we believe the new model is working.

Beschloss: We know that customers around the world are well aware of the formidable legacy of the Crane name. How do you plan to leverage that to gain recognition in some of the other well-known brands?

Ross: When we do our homework and listen to what customers tell us, we hear that they view quality products as the heart of a company’s offering. Brands are a way to connect with that experience of quality. The benefit of being able to put a brand name such as Crane on our products is hard to overstate, because so many customers relate to our history of innovation, service, experience, and dependability. But, I could tell you the same story many times over with our other brands such as Pacific, Stockham, Flowseal, Duo-Chek, Center Line, and Jenkins. Our challenge at Crane Energy is to live up to our heritage and add new value to these venerable brands.

Beschloss: Will advertising and publicity be utilized as a key instrument in delivering the Crane message? Do you plan to use vertical magazine approaches as well as an aggressive approach to the pvf distribution sector?

Ross: We are always looking for the best way to deliver our message to targeted customers. I can assure you that we intend to increase our visibility in the pvf marketplace, getting our message out through press releases, advertising, trade shows, industry meetings, conferences, literature, and other promotional venues.

The process of selling still centers on a lot of personal interaction with the manufacturer. Websites are a way to create direct interaction, but even if customers choose to gather information from the website, they still seem to want to interact on a personal basis when making their purchasing decisions. So we will continue to have a focus on getting the best people in front of the decision makers, and driving new prospects through a clear and consistent message that promises a quality and satisfying experience with Crane and our entire brand portfolio.

Beschloss: Do you plan to reorganize your field sales rep force, or do you plan to appoint separate agencies for specific brand names?

Ross: The units combined to form Crane Energy brought channels to market that are mostly complementary and non-competing. This is allowing us to focus on developing the capabilities of our direct team members and manufactures representatives instead of worrying about channel conflict or reorganizing.

I would say, more than brand alignment, we look at vertical markets where we can broaden our offering to that market by having a focused selling team. So, we use a combination of strategies all geared towards maximizing our impact with specific customers. As I mentioned before, we operate under the premise that our business remains a personal business, where people purchase from people and we don’t want to get in the way of that with unnecessary restrictions.

Beschloss: In your sales intensification effort, do you plan to put more professional regional sales managers in the field?

Ross: We strongly believe in the working manager model to avoid wasteful overhead. Our customers are like us when we go to purchase any number of items -- we want the person who can make the deal across the table from us. So our regional managers are experienced professional sales managers who manage their region with a mixture of direct reports and manufacturer’s representatives, but are actively, personally involved. We push as much decision-making capabilities down to them as possible and make them accountable for achieving the sales and margin targets.

Training is the best way to add value to the equation. Getting more of our knowledge spread out among the people who can use it is another source of value in the relationship between manufacturer and user. We have seen a trend towards less apprentice training programs at end-users coupled with the fact that manufacturers are de-emphasizing training classes and seminars. This has led to distributors and industry councils filling that gap in training. The asa Education Foundation programs, the pvf Roundtable meetings and asa Industrial Piping Division panel discussions are good examples of the fact that the knowledge void exists, and must be filled by someone. We feel that a professional, experienced and well-trained regional sales manager will help us stay on the “right side of the inquiry.”

Beschloss: Although your division is obviously geared to the power generation, oil and gas upstream-downstream, biofuels, embryonic coal liquefaction, natural gas, etc. markets, are you maintaining up-to-date research through field contact as well as evaluation of trends in the various end-use industries?

Ross: I am very proud of the quality and experience of our sales team and their ability to communicate what they learn in the field back to the broader organization. However, the pace of technology and investment has quickened, and, as I mentioned earlier, we have determined that building up our strategic marketing capability will pay dividends in terms of laying a strong foundation for profitable sales growth. We all have our favorite indicators or publications like The Wholesaler that we depend on to digest the volumes of information and give us a “feel” for what is happening. But, in today’s environment, we are more dependent than ever on using data to make our decisions. As you correctly point out, this means gathering field data in a well-structured process, filtering it through our strategic marketing team, and then putting it into action through new products, business development, and application-based selling.

Beschloss: My contacts tell me that you are a hands-on executive that immerses himself into the industry sector to which he has been entrusted. Do you expect to continue this active “field” contact despite the complexity of your assignment?

Ross: One of the main goals in forming Crane Energy was for us to become more connected with our customers and better understand how we can create value for them. There is no better way to do this than to spend time at the branch counter, with the specifying engineer, and on the jobsite. In the Crane Business System, we call it “going to gemba” or “going to where the work gets done.” Personally, I’ve been disappointed with myself for spending too much time on internal challenges over the last several months, so I am getting back into the field. My staff and operations leaders are also spending more time talking with customers and supporting our sales team. Getting a reality check from customers and others in the marketplace can pay enormous dividends when aligning our efforts with the needs of the global community of valve users.

Beschloss: Although the valve industry, as well as most others, has become impersonal, are you planning to make yourself available to major industry groups such as the pvf Roundtable as a speaker to tell the up-to-date Crane story on a personalized basis?

Ross: It is important to our team at Crane that we participate in the pvf industry’s efforts to address issues of common concern. I’ve enjoyed attending pvf Roundtable and Valve Manufacturer’s Association meetings, and Crane is proud to sponsor several industry events. I look forward to continuing my attendance and participation.

Beschloss: One of the major problems associated with such diversity of responsibilities is to make sure that product service is optimum. Do you foresee this as a problem in the future?

Ross: I strongly agree with you; too often manufacturers come to rely on channel partners to provide high service levels but forget that their channel partners are also their customers. But, I see the diversity of our business as a benefit, not an obstacle, to improving customer metrics. At Crane Energy, we are determined to make our product service a competitive advantage. We are moving the Operational Excellence tools developed and implemented at Crane beyond the shop floor focusing them on how information and material moves along the chain - from the customer to inside sales, order management, plant departments, multiple plants, multiple suppliers and back. The scale and global reach of the new Crane Energy is improving communication and giving us new resources to solve problems. The power of the Crane Business System gives us the tools and training to succeed. This combination is already producing real improvement in customer metrics, and we are only beginning on this journey.

Beschloss: The pvf sector is enjoying one of the biggest booms in its history. Do you feel that this momentum will continue well into 2009?

Ross: I am not an economist, but from what our customers tell us the energy markets such as Power Generation and Fuel Refining should see continued growth, although more modest than the sharp increases of the last two years. Capital construction of new infrastructure, especially in developing countries, doesn’t appear to be slowing down in the near term. The shortage of skilled labor and inflation risk are constraints, but we continue to see bright prospects across oil, gas and power. Our commercial construction customers remain upbeat about 2008, but we are concerned that the general North American economy slowdown will eventually have an impact.

The globalization of the valve business over the past decade or so is having an interesting effect on selling prices. As much of the benefit of sourcing from low cost countries has already been realized in our industry, macro economic factors such as inflation pressure in Asia, currency fluctuations, shortages in the raw material markets, and high transportation costs are creating cost pressures not seen for a few years. It is difficult to predict how this will ultimately play out in the pvf market.

Beschloss: Are you making a special effort to concentrate on the greater Houston market, the heartland of “energy solutions?”

Ross: About five years ago, Crane moved the precedent’s group headquarters from California to Houston. We had two facilities here at the time and one of them did not report into our structure. In that time, our headquarters staff has more than doubled and our sales organization has grown significantly, especially in the Gulf Coast region. We build more of our product line here today than we ever have. The proximity to the “Energy Corridor” in Houston is very beneficial, but is worth noting that Houston is not the only place where Energy markets are dominant. The Middle East, China and Russia are all significantly expanding their role in the global energy picture. We have opened new offices in these important regions. As we increase our presence in these areas, we expect to position ourselves to take advantage of the double-digit growth on their horizons.

On a personal note, being in Houston has been a great help in getting to know key people in the industry. Being able to participate in pvf Roundtable events, attend industry conferences, and get together with industry leaders all within a few minutes of home has been terrific.

Beschloss: My sources tell me that pvf industry employment is operating at max level. Are you experiencing any difficulties in filling key spots?

Ross: The job market in Houston is very tight and is affecting the regional economy, not just pvf. In many cases, we’ve had to identify top talent elsewhere and relocate them to Houston. Beyond Houston, the declining pool of experienced people is certainly not limited to the pvf industry. We are fortunate indeed that because of the outstanding valve companies that came together in Crane, we do have a depth of experienced valve professionals who can help train and mentor those new to the industry; this allows us to recruit from other industries when necessary. But we’ve also had a lot of success recruiting within the industry. Crane is an exciting company, investing in valve business, moving aggressively, and delivering superior shareholder value -- we have a great story to tell.

Morris R. Beschloss, a 51-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst for The Wholesaler.