Creating Market Pull

Posted on May 26, 2016September 6, 2016 by Jerry Vieira

“Market Pull results in higher marketing and sales ROI than Market Push and makes everyone’s life a lot easier. Ask B2B business owners which they would prefer, and you’re unlikely to find anyone that wouldn’t prefer to have customers lined up at the door asking to buy their products than having to coax them out of the brush to engage.”

Market Push

Market Push is exactly what it sounds like – aggressively pushing and promoting of your product to any and all that will listen. After all, customers can’t buy your products if they don’t know they exist. So, marketing must become obsessed with “getting your name out there”.

Right?

Well, not really. That obsession makes Market Push programs expensive and many times ineffective.

An all-out “get-our-name-out-there” initiative can lead a B2B marketing team to commit a lot of cash, time and energy to a scattered range of unfocused activities: a new branding program, a revamped website, new logo and newly-minted tag line, a blitzkrieg of trade shows, radio ads, an SEO initiative, a blast of pop-up on-line advertising or an aggressive social media program.

Source: Douglas Wray on Instagram, via Daring Fireball

I have seen firms spend in excess of 7 figures on Market Push programs with virtually no measurable results.

It’s a fall back, non-strategic shotgun approach. And, even if it works a bit, it typically generates a widely diverse range of customers. The consequences are that the firm doesn’t know where to focus next. They will likely be pulled in many directions by different special interests within this new, wide customer base. They cannot decide how to evolve their product offering road-map or what specific message to promote to whom. Debate can get heated. Spread too thin, they can become vulnerable to more focused competitive initiatives.

There is a much better way.

Create Market Pull

Now, contrast Market Push with the phenomenon of Market Pull.

After initially trying and failing with a Market Push program, a B2B client shifted to a focused Market Pull program and grew their customer base by three orders of magnitude in just under three years. The initial impact of the switch was seen in less than 120 days. Another customer hit two orders of magnitude in six years.

The question is this: How does one create market pull of these magnitudes? The compound answer may seem counter-intuitive, at first look.

It’s: Focus and Leverage

Market Focus: Tapping into the Natural Leverage of the Market Ecosystem

Each target market is a community. Each community has a natural architecture. We call this target market architecture the Target Market Ecosystem or TME. While all TME architectures are virtually the same in basic structure, (see below), each is unique in what’s inside the nodes.

Creating market pull is about building a reputation for delivering outstanding value to Economic Decision Makers in a specific target market ecosystem, then fanning the flames of the communication of that value proposition between peers, referral sources and through the other network nodes.

Within any TME, the ultimate goal is reaching Economic Decision Makers with your compelling value proposition.

For economically impactful purchases in the B2B world, Economic Decision Makers commonly look to knowledgeable, experienced people they trust within the market ecosystem for advice and recommendations. Filling those advisor roles are peers, technical specialists, lawyers, accountants, consultants and Board Members. We classify this group of advisors as Key Referral Sources.

Within that same TME community, there are also Opinion Leaders – those few knowledgeable folks who seem to always be at the front edge of new ideas. They might not hold a direct, open communication line to the Economic Decision Maker, nonetheless, they typically have significant indirect influence on them through their Key Referral Sources.

The most impactful Opinion Leaders are characterized by four traits.

They are Fanatic Believers in your value proposition
They are Well-Networked within the target market ecosystem
They have High Credibility with Key Referral Sources and Economic Decision Makers
They are Natural Sales People, anxious to communicate what they know and believe, to all willing to listen.

Also within this community infrastructure are a couple of non-people nodes – Venues and Vehicles. Venues are the real and virtual places where people in this ecosystem meet and dialogue: society meetings, trade shows, on-line groups, peer-groups, conferences, industry events and seminars.

Vehicles are the means through which people discover new information: webinars, blogs, podcasts, talks, videos, articles, industry journals and whitepapers.

The arrows in the ecosystem diagram, represent the directions of influence of each node.

It’s A Universal Dynamic

The social influence dynamics of a target market ecosystem are at work for everything bought by anyone. Its ubiquitous existence was clearly demonstrated in social research compiled by Professor Everett M. Rogers in his book “The Diffusion of Innovations” (Free Press, 1995). From community adoption of health practices in villages in the Andes, to the fan-out of new techniques for educating children in math in Pittsburg, to the adoption of high-tech products, the TME is the engine that drives adoption.

It’s Underlying Structure is Ubiquitous

The market ecosystem architecture for Hospitals is the same structure as that for Fire Departments – and every other industry. Yet, each individual TME is, for the most part, self-contained. Within it swirls the internal dynamics of market-specific issues, market-specific peer-to-peer communications, influencers, opinion leaders, venues, and industry journals spouting their own unique industry lexicon.

This insular characteristic means the Director of a Hospital, is not likely to hang out with, or seek the advice of, the Chief of the Boston Fire Department regarding how to select computer monitors for their delivery rooms. She will most likely, ask a peer at another hospital or a hospital IT specialist first.

Leverage: Kick-Starting Your Value Proposition Communication Multiplier (VPCM)

Your VPCM is the fuel that powers growth in a TME.

Social science research shows that “node-based”, intra-community communications is 13 times more effective than mass media in getting a value proposition message to go viral within a TME.

Having one of your happiest customers communicate the exceptional value delivered by your approach to solving their problem in a venue talk to 25 or more of her peers is an example of your Value Proposition Communication Multiplier (VPCM) in action.

The VPCM is most powerful within an ecosystem and, occasionally can even jump from one ecosystem to another. It drives market pull and sells for you when you are not in the room.

Opinion Leaders are important communication and influence nodes. One Opinion Leader can influence dozens, or even hundreds of Economic Buyers or Referral Sources in a specific TME.

Key Referral Sources are influence and communication nodes for your VPCM.

Venues and Vehicles are also VPCM communication and influence nodes.

“Strategically injecting an ecosystem-validated value proposition message at the right communication nodes is the key to creating market pull.”

What You Can Do Immediately

Here are three actions to create market pull in your corner of B2B world.

1. Focus

Select a target market where your value proposition has been validated to deliver higher economic value to customers than any other segment. Be sure the market has some economic momentum, lots of customers with a common problem your offering fixes and a well-established, easily identifiable TME.

2. Map that Market’s Ecosystem

Identify the Economic Decision Makers by title, Key Referral Sources by the same, Opinion Leaders, Venues and Vehicles.

3. Target your value proposition story at communication nodes within the TME

Build your story and marketing plan around your proven, delivered value proposition in that specific sector. Then proceed to place that message through blogs, articles, talks, referrals and presentations at the Nodes of the TME to get the natural lift that each TME offers.

Don’t get antsy. If you do it right, and your value proposition is real, then you should begin to see results in no more than 160 days. If you don’t see results something is amiss – and whatever it is, it’s not anything that could be fixed with an expensive Market Push Program.

*****

Jerry Vieira, CMC is the President & Founder of Jerry@qmpassociates.com. Read more about Jerry on LinkedIn and follow him on Twitter at @JerryatQMP

Overcoming the Fear of Market Focus

Posted on May 26, 2016September 6, 2016 by Jerry Vieira

“Not every customer receives the same level of value from your product or service. It makes sense that those who receive the greatest value are more likely to buy it, pay more for it, be happier with it, tell others like themselves about it and return when they need more. So, if you’re launching a new product, why not start there?”

I love this photo. It precisely captures the reaction of many clients struggling with stalled sales when they first hear the suggestion that a narrower market focus might be the best way to overcome their problem.

Their faces, and sometime their mouths, say, “Are you nuts!? We don’t have enough business now, and you want us to NARROW our efforts? We should be EXPANDING, not focusing.”

The truth is, many times broadening a company’s marketing and sales efforts is not the best cure for a stalled-sales situation.

Focus is.

The “Everybody Can Use It” Fallacy: The Emotional Fuel Driving the Desire to Expand vs. Focus

Quite often when I ask clients who their product is targeted to, they reply with a vague, “Well, just about everyone can use it”. The false corollary is then, “So, we ought to make everyone aware of it and try to sell it to anyone and everyone. Right?”

No, not really.

Why?

Because not everyone receives the same level of value from your product – and it makes sense that those who receive the greatest value are more likely to buy it, pay more for it, be happier with it, tell others like them about it and return when they need more.

So, while there may be some truth in the statement “Everyone can use it”, it doesn’t mean that you will be successful selling to everyone. You will be most successful, and get the greatest lift, from those segments in which the value proposition has the highest significance.

So why not focus on those high-value-received markets first, reduce your wasted energy and money and increase your success rate?

How do you focus like that? And what’s the risk?

First, pick the best market to focus on.

That market must have the following attractiveness characteristics for it to be worthy of your focus:

economic momentum,
a common problem that you can fix with your offering,
lots of people with that or a similar problem that haven’t solved it yet,
a strong economic (or other) benefit that accrues to the customer from fixing that problem,
a lot of peer customers they can tell about it, and
a well-developed peer-to-peer communications network

For new or innovative products, it is important to have a real customer to which you have already delivered that incredible value – a verifiable case study, testimonial and reference account.

Sometimes it only takes one or two.

I was once asked to help a Product Manager that had refused to focus and whose product’s sales were so bad it was about to be shut down. She spent all of her time increasing distributors across the country – because, “everyone could use it”.

With just a little customer analysis we found just two current customers within one market, that had, unbeknownst to the manager, received enormous benefit from the product – and with just a few phone calls and visits confirmed that the market they represented had all the characteristics of attractiveness discussed above.

We refocused efforts by tailoring the story for that market, reduced spending, increased sales focus and greatly increased penetration as a result. The largest single order from that market prior to focus was $20,000. After focus, within a year, the largest single order was over a million $. In addition, the number of large customers in that segment purchasing product went from just the original 2 to over 150. Finally, the average selling prices increased by anywhere from 2 to 4X, as customers in that market requested further market-specific product features.

This is only one of a number of similar situations in our archives.

Won’t We Miss a Lot by Focusing?

Focus just means your primary effort, targeting, messaging and resource allocations are aimed and tailored to your highest-value-received segment of the market. It does not mean you ignore other customers that unexpectedly come knocking. It just means that your primary attention is elsewhere.

So, service well the customers from outside your primary focus that unexpectedly arrive at your doorstep. Just don’t get too distracted by them. But, quickly analyze why they bought. A few may well represent yet another high-value-received segment to approach after you have developed a strong and comfortably defensible foothold in the first.

You must constantly be on the lookout for what Peter Drucker has called “The Unexpected Success”. An unexpected success is a customer buying your product from some crazy, unexpected market that seems, well, weird.

No, I am not talking about Portland, rather from a market segment that you can’t imagine why in the world they bought. As weird as it may appear at first, it could be an early indicator of high value received.

Constant vigilance will assure you don’t miss something big by focusing.

*****

Jerry Vieira, CMC is a Certified Management Consultant and President & Founder of the QMP Group. QMP is a Portland-based management consulting firm specializing in market strategy, marketing & sales organizational transformations and training & coaching. Read more about Jerry on LinkedIn and follow on Twitter at @JerryatQMP

Selecting the Best Market Strategy

Posted on April 13, 2015June 21, 2018 by Jerry Vieira

Strategy (noun): “A plan of action intended to accomplish a specific goal”

The 33 Strategies:

Robert Greene wrote a great book about military strategy entitled “The 33 Strategies of War” (Viking Press). Fascinating reading. In it, Greene analyzes the 33 strategies in great detail, citing numerous historical examples over the course of history from the ancient Greeks to the 21st century.

Along with the more well know strategies like “The Divide and Conquer Strategy”, several had intriguing titles, like: “The Guerilla War-of-the-Mind Strategy”, “The Controlled Chaos Strategy”, “The Strategy of the Void”, “The Death Ground Strategy” (not my favorite) and the “Ripening for the Sickle Strategy” .

Small-to-midsize business could learn a lot from that book.

But, with 33 strategies to choose from, few executive teams are able to dedicate the time and resource necessary to gather and analyze enough field intelligence, and then grind through the decision making and selection process, to pick the precise best strategy to execute. More typically the strategic planning process is done in a short time window each year, commonly facilitated by a non-strategic expert.

The six basic strategy alternatives – 3 F’s and 3 D’s:

Barring the existence of a proven tool or affordable expert to assist small to midsize firms in the selection of the best of “The 33” strategies, we suggest 6 basic strategic alternatives that executives might find easier to understand and select from.

The Frontal Assault Strategy:

A frontal strategy is a tempting, and typically, poorly thought out alternative that is too common in business. It is, many times, the default strategy. It can be paraphrased as, “Here is our product. It’s the best. Go out and sell it.”

New companies often have that strategy, and inventors and entrepreneurs are notorious for it when they say, in one form or another, “Everyone can use this”.

Frontal assaults typically fail.

Examples of famous failed frontal assaults in business were IBM in their assault on the PC market, Coca-Cola with their New Coke debacle and Segway with their assault on the personal transportation market. As an aside, neither Coke nor IBM’s powerful brand recognition helped them avoid failure.

Notable military frontal assault failures were Pickett’s charge at the Battle of Gettysburg during the U.S. Civil War, Napoleon’s assault on Russia in 1812 and Hitler’s assault on Russia (Operation Barbarossa) in 1941. Even Napoleon’s and Hitler’s huge, powerful and highly capable armies could not overcome the fallacy of the frontal assault on Russia with its immense land mass, winter weather and dedicated and committed army.

Frontal assaults are extremely costly, and research suggests that it takes anywhere between and 3 to 5 times the resources of the enemy (competition) is required to overcome a defended position in business or war.

The Fragmentation Strategy:

Fragmentation in business is the same as segmentation. Fragmentation allows a firm to focus their energy and their value proposition in a much narrower arena, increasing significantly their ability to develop a meaningful value proposition and establish a defensible foothold. Both development and marketing expenses are reduced and the outcome of product design focus is typically a much more relevant value proposition for the market, which ultimately makes selling easier.

The Flanking Strategy:

Flanking, in military terms, is differentiation in business terms. Differentiation allows firms to create a unique brand presence in the mind of the customer.

Flanking and Fragmentation go hand in hand.

The Defend Strategy:

Just as a frontal assault requires 3 to 5 times more resource to succeed, a defend strategy requires 3 to 5 times less resource to succeed. In business, overcoming a defended position is challenging for many reasons; the defender’s customer relationships and channel are already established, their brand name is already known, their customers’ buying processes and contracts are already established and all the support and service mechanics are in place. That’s a lot of bonds for the attacking competitor to break.

On the other hand, the defend strategy is extremely vulnerable to a Fragment and Flank strategy.

The best example I can think of is the Japanese success in the US auto industry. The Big 3 (GM, Ford and Chrysler) had become complacent in their market share. Together they owned 90% of the US auto market. GM had the highest share at roughly 50%.

The Japanese fragmented out and targeted the small car market where the US automakers had a poorly defended position, and quite frankly, had little interest in defending. Small cars simply didn’t contribute enough margin to the Big 3’s bottom line.

The demographics of the times (baby boomer new-household growth) were promising, as was the economic value proposition of the small 2nd car. Fragmenting and Flanking, based on quality and economics, were all that was required. GM now has roughly 20% market share.

That foothold was the first in a series of sequential fragment and flanking moves that took the Asian automakers from economy compact cars to luxury sedans and SUVs.

The Depart Strategy:

Sometimes it’s simply better to decide not to fight. Also called the “Cut-Your-Losses” strategy, it is better labeled as the “Reallocate-Your-Resources-to-a-More-Lucrative –Market-Opportunity” strategy. That more lucrative alternative would likely be a fragment and flank opportunity.

The Depart strategy comprises overlooking the battle field and simply deciding not to engage at all. The biggest enemy to overcome in accepting the wisdom of this strategy is pride. Executives must allow reason to triumph. The depart strategy is best utilized when it becomes apparent, that the enemy is well dug in, having a strong defensible position.

The Develop Strategy:

The Develop strategy is the common follow on to the Depart strategy. If the market opportunity is judged intuitively attractive, but temporarily impenetrable, after departing the field the develop strategy suggests that you remain engaged through intelligence gathering, looking for just the right opportunity to find a poorly defended fragment of the competitor’s market to attack.

The Best Strategy:

The point of all this that the only strategy that produces consistently good results is the combined Fragment-Flank strategy aka Market Focus and Differentiation. Whether your products and markets are mature or new, Fragment and Flank, or Segmentation and Differentiation is key.

*****

For more information about formulating winning market strategies contact Jerry Vieira, CMC at Jerry@qmpassociates.com , call to 503.318.2696 or visit the QMP Website at www.TheQMPGroup.com or connect with us through our Contact Us page.

Navigating Price-Driven Markets

Posted on April 13, 2015June 21, 2018 by Jerry Vieira

Negotiations with procurement specialists in large organizations can really be brutal.

More than ever they seem to be driven by a sadistic combination of corporate edicts. These might include: sourcing overseas, reducing commodity costs by some per cent annually, reducing the number of suppliers by 20% and driving to 60-day payable policies – all while achieving the lowest piece-price possible.

These selling conditions define a prototypical “price-driven” market – though I have heard it called other things NSFW.

Sadly, some small B2B firms never actually do anything meaningful about these challenges. Year after year they eke out marginal success by squeezing their prices and margins, repeatedly trying to sell to the same hard-nosed customers, continually targeting the same markets and agreeing to be victimized by abusive procurement conditions.

There are ways to reduce the effects of these challenges. Some of the solutions are quick and some take time to develop. But, one thing is certain, if there is no action taken, there is no improvement likely.

Self-Diagnosis: A Reality Look in the Mirror

Step 1 is understanding what has brought you to this situation. If you are struggling with price-driven markets, one or more of the following statements are likely contributing:

Your product offerings and your company actually have no meaningful differentiation

You are aimed at the wrong markets and customers

You are unable to quantify the economic value you can deliver

You are doing a poor job of communicating your economically quantifiable value

You have not established true strategic partnerships with your customers

The first step to freedom, is identifying which statement, or combination, is true.

Doing something about it.

Salvation can actually be easier than you might imagine. Here are some paths to consider.

Path 1: Market Refocus

You must focus on markets where your unique product and corporate capabilities have real meaning to customers.

A client of ours had a new product that was significantly price disadvantaged in the general market. Despite this reality, the new business development team was hustling to set up distributors across the country for that general market, betting on corporate approval of a major price reduction to spur sales – when, in fact, corporate was quietly considering shutting the product line down.

Surprisingly, some handful of customers had actually bought this grossly overpriced product – a certain hint that someone was seeing value that others were not. When asked “Why they bought?” those customers explained that the product, even at that exaggerated price, solved a unique set of problems for their situation.

By quickly shifting their sales focus to this market, the business was saved without any change in selling price. In fact, customers in that market requested additional features which eventually lifted the selling price to 4X its original.

Path 2: Understand, Quantify and Communicate Your Unique Economic Value

Everyone in your organization that deals with customers must be able to understand and communicate the economic value of your products.

A client was puzzled by the slowness with which their new product, designed specifically to help customers save substantial amounts of money, was not selling better. The choke point was discovered to be the distributor sales manager who simply did not believe the economic argument. He had quietly avoided promoting that benefit to his distributors, in spite of customer testimonials validating the savings.

A rapid individual re-education was required, followed by a re-training of the distribution sales force. Product sales turned up significantly shortly afterwards.

You cannot assume that your benefits are being accurately communicated. Check the communication choke points.

Path 3: Tell the Whole Story

Your customer cannot make a decision based on anything other than price if that is all she sees. There is much more than price that is critical to the success of a supply relationship. A single-page quote sheet cannot communicate that larger story.

Here are some items to consider. Each can create additional value around the price.

Who is on the team you will dedicate to this supply relationship – their names, experience and roles? This information builds trust.

What is the detailed schedule, timeline and check points? This information builds credibility.

What approach will be used to assure success? What examples of this approach have been successful in the past? This information reduces perceived risk.

What is the quality story? This information also reduces perceived risk.

A client of ours increased their bookings by 20% in just one deal using this “whole story” approach.

Path 4: Build a true partnership

A one-salesperson-to-one-procurement specialist link does not define a strong and defensible relationship – even if they play golf once a week and belong to the same ski club. Multiple connection points must be developed: engineering to engineering, quality to quality, customer service to planning, shipping to receiving, manufacturing to manufacturing. The trust that is built up by these multiple open communications channels has real value in terms of problem solving, getting things done and creating a strong tough-to-break bond.

Path 5: Challenge the Chief

I once asked a group of 12 B2B CEOs, during a talk to take out a blank sheet of paper and write down what they perceived as their best product offering – the product that they thought customers should appreciate the most.

I then asked them to identify the value factors delivered by that product. and calculate what economic benefit that ideal customer was likely to receive from that product. Remarkably, they stumbled. None of them could do it in the 15 minutes allotted.

If the CEO can’t do it, how can they expect it of the rest of their team? That kind of understanding and expectation sets the tone for the whole organization from engineering through shipping.

Final Words:

We have offered 5 diagnostic questions and five paths out of the briarpatch of a price-driven market. It will take some serious self-examination and require some analysis and thought, but it is definitely achievable.

*****

If you’d like to learn more about dealing with price-based competition call Jerry Vieira, CMC at 503.318.2696 or email to Jerry@qmpassociates.com. The QMP Website is at www.TheQMPGroup.com and more insights can be found on the subjects of Market Strategy, Business Business Development and Sales at Jerry Vieira’s QMP Insights Blog. If you have an immediate challenge, please communicate it through our Contact Us page.

6 Targets for Applying Lean in Marketing & Sales

Posted on April 13, 2015June 21, 2018 by Jerry Vieira

Boosting Customer Received Value Through Lean

In our previous blog post, “3 Guiding Principles for the Application of Lean in Marketing & Sales”, we offered a trio of overriding Lean commandments. In this post, we point to specific Marketing & Sales targets for Lean that will simultaneously increase customer received value and marketing and sales ROI.

Target #1: Lean Applied to Market Focus

Face the facts. Your product or service offerings do not deliver the same economic, emotional, political or physical value to all market segments equally. Lean means focusing your products on market segments where the total value received by customers is its highest. If that situation exists, the Law of Economic Value is satisfied.

The Law of Economic Value states:

“All economic value accruing to your firm has as its source, the customer’s perception that they will receive more economic, emotional, political or physical value from your product or service, than it costs them economically, emotionally, politically or physically to acquire and use.” ©

Research shows that the following benefits accrue to a firm if the Law of Economic Value is fulfilled:

the ability to garner price premiums
faster market penetration
higher customer satisfaction
more market peer-to-peer customer communication of that value proposition
higher interest in your product from channel partners
higher probability of achieving market share leadership in that segment
reduced marketing and sales expense
improved sales win rate and faster time to close
reduced product design costs and a clearer product evolution path
greater returns from focused on line marketing investments

Market Focus is Lean in Action.

Target #2: Lean Applied to Product Requirements

Feature creep is the antithesis of Lean. It can be particularly nefarious in high tech firms where brilliant and creative engineers, encouraged and abetted by marketing and sales folks, attempt to stuff all the capabilities they can into a product to make sales as easy as possible.

The truth is, feature-stuffing typically causes delays in new product launches, ingrains price and profitability pressures in the product and results in a general market positioning of “everything to everyone in just one package”. Everything-to-everyone products inevitably lose market share to focused, niche offerings.

Focused Product Requirements are Lean in Action.

Target #3: Lean Applied to Marketing Communications

The wisdom of Lean and focused market communications is the toughest principle to convey to marketing and sales teams. The common fallacy is that, “more marketing expenditure is better than less”. Marketing and sales teams typically will fight tooth and nail to avoid reductions in this sacred budget arena. They believe that more marketing dollars across more expansive markets means more customers. Not so.

Research shows that communications of a new idea is best accomplished through peer-to-peer opinion leaders in a specific target market. That research revealed that peer-to-peer communication is 13 times more effectively than mass communication. Focused marketing communications programs that reach those opinion leaders, supported by value propositions achieved through market-focused product design, is the most economically productive combination that can be achieved.

Focused marketing communications is Lean in action.

Target #4: Lean Applied to Channel to Market

Your market share will eventually erode if your channel-to-market provides value only to you and not your customers. Marketers must be vigilant to assure their channel delivers meaningful and relevant value to customers and clients first.

Marketers must also recognize that the customer value the channel must deliver changes with the maturity of the industry. In a fledgling market the channel may be required to supply training, installation, configuration and integration services. In a mature market, those expensive services must be replaced by the channel’s ability to quickly deliver spare parts or service.

Evolving Channel Value Delivered is Lean in Action

Target # 5: Lean Applied to the Sales Process

An oft-cited statistic claims that 30% to 50% of the opportunities in the average sales person’s pipeline won’t close because the customer makes a decision to notbuy anything. The sales person has, in effect, wasted time and money pursuing something that was destined to never result in a sale.

We suggest a set of 5 criteria that can improve a sales person’s ability to qualify an opportunity and save time.

The intensity of the customer’s need or problem,
The degree to which the customer believes your product can meet that need,
The degree of the economic, emotional, political or physical value the customer will receive by buying the product or service,
The customer’s perception of your product’s relative competitive advantages ,
The existence of a customer champion for your solution

Good Sales Qualification Discipline is Lean in Action.

Target #6: Lean Applied to Market Intelligence Feedback

Sound strategy cannot be developed without current and accurate market intelligence. Rapid response to market intelligence feedback is critical to business success. That intelligence may comprise some or all: competitive moves, customer satisfaction, barriers the sales people keep running into, the health of the customers’ markets, usage idiosyncrasies and a host of other informational tidbits. The sales team must be at the forefront of gathering this market intelligence. The sales team is the one company asset that is in the most frequent communication with customers.

Here are some thoughts about making your market intelligence gathering Lean:

Create a market intelligence section as part of your sales person’s weekly or monthly sales report or presentations
Train your sales people how to question, listen and observe when they are in front of a customer – not just spew the benefits of your product
include providing market intelligence in the sales compensation plan and sales position descriptions
provide the ability to award spot bonuses for the most timely and important pieces of information that come your way
read the market intelligence reports; think about and acknowledge them by calling back the sales person who provided the information, thanking them and getting more information
Understand what pricing pressure means. Pricing is typically a symptom of a bigger strategic problem, centered on customer-perceived value. Make your actions value-delivery related, not pricing related.

Rapid Collection and Response to Market Intelligence is Lean in Action

Conclusion:

The application of Lean principles to marketing and sales requires no major cash investment. In fact it saves cash. A firm of any size and market can deploy Lean in marketing & sales and begin to reap the economic rewards quickly.

Lean principles assure that customers receive the best value possible – and in return, consistent with the law of economic value, your business optimizes its own economic performance.

*****

For more information on the application of Lean principles to Marketing & Sales, call Jerry Vieira, CMC at 03.318.2696 or visit the QMP Group website atwww.TheQMPGroup.com

The Law of Imbalanced Value

Posted on April 13, 2015September 6, 2016 by Jerry Vieira

Those of you who frequent my blog will know I occasionally make reference to “The Law of Economic Value”. I am now calling it “The Law of Imbalanced Value”©. The reasons will become apparent.

That law states:

“All economic value accruing to your firm has as its source, the customer’s perception that they will receive greater economic, emotional, political or physical value from your product or service, than it costs them economically, emotionally, politically or physically to acquire and use.” ©

When we consider any investment of time, energy, money or emotion, we hope for a meaningful return on that investment. We look for an investment that will make us more money (economic), make us feel good (emotional), help us look good to the right people (political) and/or relieve our stress or pain (physical). If some combination of those benefits are not envisioned, we will not be motivated to invest. If the mix of those benefits is not delivered in the optimum relative proportions, we will not re-buy.

The relative levels and mix of the four customer-received value attributes (economic, emotional, political and physical) is a business’ complete value proposition.

At the receiving end, a mix of those same four value attributes must be expended by the customer to buy and use a product.

A common example of the range of complexities associated with this law of imbalanced value and the relative value attribute mix, becomes apparent by considering the process of buying a diamond engagement ring. Imagine the complexity, mix and range value attributes considered in such a purchase.

Thank goodness our B2B world is simpler.

Or is it?

The Value Quotient (and why it must always be greater than 1)

Value, by definition, equals benefits divided by cost. It is a quotient.

The Law of Imbalanced Value © defines the Value Quotient as the Sum of Perceived Value Attributes Received by the customer (benefits) divided by the Sum of Perceived Value Attributes expended by the customer (cost).

This equation needs to yield a perception or feeling on the part of the buyer of a return much greater than 1, or much greater than break even. If that perception is not triggered, the purchase will not be worthy of consideration.

This means the value quotient must be significantly imbalanced in favor of the customer. It also means that the customer must consider all contributing value attributes in their decision process. It also means that a customer-centric marketing and sales process must incorporate the defacto creation, communication and use of that quotient.

The following questions can help you assess and appropriately adjust your value attributes to deliver a perceived imbalanced value quotient to customers.

1. Have you surveyed your customers to ask what value attributes they receive from your products and your firm – and in what order of importance?

I confess to being surprised when I did that survey for my own business several years ago. That answer was flattering, but not what I expected. The result of that survey was an increase in the amount I am investing in what they told me was important vs. what I had thought was important.

You will probably, need to face some cold truths when you see the results of your survey too. Then you must exhibit the humility and courage to reallocate time, money and people to reinforce what customers perceive as valuable. It may be painful, but the reward is less wasted resources on non-customer-value producing activities (see our related post on “Applying Lean in Marketing & Sales”), higher sales and higher marketing & sales ROI.

2. Do customers in all your target markets perceive the set of value attributes delivered by your product/service in the same proportions?

Probably not.

Sub-sets of customers with similar value-attribute profiles form a de facto market segment. Whether or not they fit neatly into, or can be labeled as, a traditional vertical or demographic category is irrelevant.

This kind of market segmentation, based on a common mix of value-attributes received, permits a narrow and cost effective focus on those segments. In these segments the profile of value-received delivers the highest value quotient to customers. This approach typically results in less price competition, higher differentiation and more effective peer-to-peer communication throughout your customer community.

In other words, a common value attribute profile defines your customer community.

3. Do your marketing and sales activities (from product definition and design, through marketing and sales, to customer service) consciously integrate and align the four customer-received value attributes with your target market?

Many small to mid-sized B2B businesses still adhere to a one-dimensional, surface-level economic benefits approach to marketing and sales. As differentiation they may tack on customer service and good relationships. This approach leaves too many unprotected dimensions of value that competitors will exploit.

4. Do your recruiting and training programs communicate and inculcate in your employees and culture your unique formulation of the Law of Imbalanced Value?”

A firm’s value proposition, its unique combination of the four value attributes it delivers, must not be left to the passive process of osmosis, any more than recruiting and training a new member of a football team can be left to chance. The new player must integrate into the team’s system, practice and train hard.

A Non-Action Call to Action

I call on you to think. Not do, but think. Not multi-task. Think.

This is the first, and most common barrier to overcome in achieving the insights and benefits that can accrue from designing your business around the “Law of Imbalanced Value”. Ask your customers, group them by common value attributes and optimize their value quotient.

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For more information on the process of optimizing the value model and incorporating the Law of Imbalanced Value into your business, call Jerry Vieira, CMC at 503.318.2696 or email Jerry@qmpassociates.com. You can also elect to describe your challenges through our Contact Us page

3 Guiding Principles for Applying “Lean” in Marketing and Sales

Posted on April 12, 2015April 12, 2015 by Jerry Vieira

“Lean (as applied to marketing & sales) is the process of maximizing the value delivered to customers by eliminating any wasted activity or expense in the marketing or sales process that does not create or enhance relevant customer-perceived value.”

Depending on your market circumstances, Lean has the ability to reduce your marketing and sales expenses, while increasing sales and market share and enabling increases in selling prices and margins. Lean is not too good to be true. The benefits are real and borne out by strategic research and real life success stories.

Lean is not simply a slash and burn offensive on the sales and marketing budget. It needs to be applied strategically and in a targeted way. It requires the re-allocation of resources and assets to the most important customer-perceived values and away from non-value-delivering capabilities and activities.

So, here are three principles to use when considering the application of lean principles within your Marketing and Sales function.

First: The Law of Economic Value© is Always at Work

That law states, “All economic value accruing to your firm has as its source, the customer’s perception that they will receive more economic, emotional, political or physical value from your product or service, than it costs them economically, emotionally, politically or physically to acquire and use.”©

Amazon got its foothold because the value of the traditional brick and mortar bookstore was irrelevant to a large segment of the book buying market. Bricks and mortar, attached Starbuck’s, store clerks and reading couches simply did not deliver value to buyers in that segment. Yet they cost book stores a lot to maintain.

Second: The Lack of Lean Creates Vulnerabilities in Your Business that Competitors Will Exploit

If there is any place in your product or service offering, marketing, customer service process or sales approach that customers consciously or subconsciously perceive as not providing the highest value possible, that gap will be the place you are most vulnerable to competitive attack.

Third: When assessing the relative importance and value of deploying a specific lean initiative in a specific part of your Marketing & Sales function, use the first and second principles above to guide your decisions.

You can’t improve everything at once, so you must prioritize.

The order of priority?

First, re-balance investment and assets to enhance the most important customer-received value dimensions (economic, emotional, political or physical) in your most lucrative market segment. Shift resource from non-value delivering activities to relevant values.

Second, apply lean to reduce or eliminate potential and emerging competitive vulnerabilities.

Third: Apply Lean continually. Lean requires continual vigilance.

Why?

Because the lack of Lean deployment is directly indicative of your competitive vulnerability and the graveyards are full of failed companies and products that ignored or completely misunderstood how to apply resources in proportion to what the customers really considered most important.

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For more discussion on lean in Marketing & Sales, read our sister post entitled “Six Targets for Lean in Your Marketing & Sales Function”

To discuss Lean concepts with Jerry, call 503.318.2696 or email to Jerry @qmpassociates.com. Visit the QMP website at www.theqmpgroup.com

Escaping the Non-Innovative Product Development Box

Posted on April 12, 2015June 14, 2018 by Jerry Vieira

The Four Boxes of Product Evolution:

The figure below illustrates the basic four boxes of product development evolution. Along the horizontal axis we have Explicit and Implicit customer needs and wants. Along the vertical axis we have Conscious and Subconscious customer needs and wants. The intersection of these dimensions creates 4 boxes, or quadrants, each defining the level of basic and/or differential value your new product might provide to customers.

The Product Evolution Matrix:

To use the map, simply bulletize the product characteristics you are planning to develop, recording them in each appropriate quadrant. The further up and to the right your newly developed product capabilities fall, the more value they should provide to customers, the higher prices they should be able to command and the higher the innovative brand value they should create.

Think of what box Steve Jobs was working in at Apple – and what he was able to accomplish with Apple’s products and brand.

What to Expect in Each Box:

The Reactive Box:

Engineers and marketers using “Voice of the Customer” techniques to build the product development road map, can simply ask customers what they would like to see in their next generation product. This may be one step better than simply going off into the engineering “lab” and, in a vacuum, conjuring the product changes that the customers “should” like. But, this approach puts the firm squarely in the Reactive Box of our Product Evolution Matrix. A firm working in the lower left hand corner of the map, the Explicit-Conscious sector, is simply reacting to customers’ explicitly-stated needs and missing the opportunity to create unique value.

This is not necessarily a bad thing, unless of course, you stop there and do not venture outside of this box. If your competitors are working in the boxes further to right and up on the map – you lose. Working in the Reactive quadrant, provides little in the way of competitive, defensible advantage – because all competitors can do it.

Many developers elect to start in this box because it’s the easiest and path of least risk. If the redesigned product ultimately fails miserably, the product manager can always say, “Well, we gave them what they asked for. You can’t blame me for wanting to give customers what they explicitly requested.”

However, in order to achieve high customer-value product functionality, strong competitive differentiation and defensibility (all things that permit price premiums), a product manager must travel through, and out of the Reactive Box – upwards and to the right.

The Pro-Active Box:

Thinking in the Pro-Active Box requires a deeper understanding of customers. It requires considering their psychological, emotional and physiological motivations in buying, using and experiencing your product. For example: Consumers would not likely have asked for a microwave oven in the early 1960’s if a cooking stove manufacturer was asking questions in the Reactive Box. They didn’t know what a microwave oven was. Respondents, more likely would have said: “I’d like a clock that does not fail after a few months.” or, “I’d like a self-cleaning oven” or, I’d like a selection of colors other than simply white.”

It would have been unlikely customers would have said “I need a stove that cooks faster because I am pressured by time.” Only by understanding the subconscious, psychological and physiological needs of the primary chef in the house would a faster cook time have been recognized as a critical value needing to be delivered.

In the Pro-Active Box we think about emotions and subconscious physiological factors – not just functions.

The Insight Box:

In the Insight Box a product manager asks the question, “I know what the customer said they want, but what do they really mean?”

Take, for example, a customer observation that a first aid kit is difficult to open. What do they really mean? Does it mean, they have fat thumbs or does it really mean that, the life-saving components in the first aid kit need to very easy to access… fast! Is it a minor inconvenience or a life-saving need.

In the Insight Box we search to understand implicit needs

The Innovation Box:

When a product manager is working in the Innovation Box, he is bringing to bear all of the dimension of need: Conscious, Subconscious, Explicit and Implicit. The Innovation Box produces products that break with tradition, fulfilling needs people didn’t even know they had and providing features they never imagined they would love. The Innovation Box challenges product designers. The Innovation Box creates products that create iconic brands.

Steve Jobs lived in the Innovation Box. Thomas Edison lived in the Innovation Box.

Framing the Innovative Product within an Innovative “Experience”:

But, your job is not complete, even if you have worked our way into the Innovation Box.

Once a product manager has exercised their power of inquiry and thought in these 4 boxes or quadrants, they must then envision all of these boxes working within a greater bubble of the total customer experience. This means that prior emphasis on product features and capabilities must now yield priority to the customer’s total experience. The product must be integrally woven into the total environment your customer will experience in buying, setting up, using, servicing and communicating with your business throughout the life of the product.

This last exercise brings into play almost everything from order entry to repair and replacement parts. The key here is envisioning the perfect experience and creating and aligning all the key parts of the business model, and your organization, around that vision.

Experiential needs then fall into the same four quadrants for consideration. By blending an Innovation Box developed product with an Innovation Box developed experience, you create an true innovation.

Conclusions:

Never be satisfied with just developing product enhancements out of the Reactive Box. Reactive Box product enhancements rarely achieve price premiums, defensible competitive market positions or market share gains.

Even a thoroughly mapped out product enhancement plan that incorporates input from all the quadrants can fail on a bad holistic customer experience. The whole customer experience needs to be exercised according to the same 4-quadrant tool.

All aspects of the business must be aligned to deliver both innovative products and innovative experiences.

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For more information about The QMP Group and it’s methodology for developing market and product strategy, call Jerry Vieira, CMC at 503.318.2696 or email to Jerry@qmpassociates.com.

5 Steps to Assuring the Success of Your Branding Program

Posted on August 21, 2014June 21, 2018 by Jerry Vieira

A Good Brand: Cause or Effect?

Perhaps it’s a result of living in the Northwest for the last 20 years that I am periodically afflicted by the “salmon complex” – the uncontrollable impulse to swim against the current, despite obstacles. And so it is, I find myself in such a stream with regard to the growing pandemonium toward B2B branding programs. It’s not that I don’t believe that “Brand” has value, in fact, just the opposite. Brand has enormous value. It’s just that brand power is the effect, not the cause of B2B market success – and the strategic research proves it.

I have had the opportunity to observe a wide range of branding initiatives at B2B companies. At opposite ends of the spectrum, two come to mind. The first was a simple logo redesign for a small private company. The other, a million-dollar comprehensive branding initiative for a mid-market public firm. Neither initiative seemed to have any visible impact on the firm’s earnings.

After those initiatives had been in place a while, I asked the executives of each company whether they thought their branding program was a success. The answer, in each case, was an unequivocal “No”.

Not too long ago I gave a talk on market strategy to MBA students at a prestigious local university. At the end of the talk, one of the students approached me and expressed amazement and disbelief. How could I possibly give a detailed talk on market strategy without mentioning the importance of branding? He was agitated and animated, his arms waving about as he skittered around in front of me, like a drop of water on a hot skillet. It was as if I had missed stating the importance of water to agriculture.

So, why all the hysteria and stampede around branding?

Even though branding programs often fail to move the needle – their popularity remains ubiquitous. There are a number of reasons for this:

It feels good: A new brand. A refreshed tag line. A fantastic logo. A clean, well-constructed website. Looking at these products of a branding program makes you feel good. Customers can quickly see the highly visible outcomes. Executives smile at the wondrous accomplishment, reinforced by the adulation of their peers telling them how snappy it all looks.

The majority of the creative energy needed can be subcontracted to, and accomplished by, outside folks – minimally increasing anyone’s internal workload

Marketing and sales teams are hounding their management to spend money on branding

Branding gives the marketing team something concrete to focus their energy on – something on which to build a whole marketing communications program

Websites need to be constantly refreshed anyway – and a rebranding typically does that in a big way

There’s little downside risk, except for the money spent

Everybody’s doing it, and

Everybody’s selling it

Now, please don’t get me wrong. I sincerely appreciate the value of a good brand image in attracting customers – but a brand (the image, interpretation and meaning of your name, tag line and logo) is an effect not a cause, of success. What impact would the Apple logo have if Steve Jobs hadn’t first amazed the world with a steady stream of mind-blowing, innovative products?

What your company and its products and services mean to their target markets, i.e. the customer experience surrounding your value proposition, must have already been delivered and validated in the marketplace before a brand can be meaningfully established.

Strategic Marketing Research and RPQL

The voluminous PIMS* database and research from the Strategic Planning Institute, conclude that the customer’s perception of a product’s quality relative to its competitors, is the prime driver of financial success. This is called RPQL – Relative Perceived Quality Leadership. The research concludes that financial success is the outcome of achieving RPQL – and brand power is also a result of RPQL – not the other way around.

Quality means more than just “it won’t break”. It means that the product or service experience meets customer expectations – consistently delivering on its promises. And, delivering a relative perceived quality leadership experience takes consistent organizational rigor and discipline. No matter the logo! The customer must experience RPQL first hand, and then the synaptic connection can be made to the brand name and logo.

Achieving the Branding Impact You Intend: 5 Steps

Develop, deliver and confirm a meaningful value proposition experience first:

The Law of Value Exchange states, “The source of all economic value in your company originates from a customer’s willingness to exchange their cash for what, in their perception, delivers greater economic, physical, emotional or political value in return.”

Assure that your value proposition targets a market with substantial momentum and potential:

The world’s best boat, sporting the flashiest logo and most clever tag line goes nowhere in a river that is devoid of water. And remember, a brand has different meanings to different markets. Focus your investment and energy developing a meaningful RPQL experience in a meaningful growth market.

Don’t muddle corporate and product branding:

Smaller companies with petite marketing budgets often try to create one brand for the whole firm. But they may be serving multiple market segments with different products delivering different value propositions. In such a situation, it might better to focus branding budgets on specific products, vis-à-vis branding the whole firm. For example, the GM (General Motors) brand has been badly damaged recently by a torrent of recalls, however one brand RPQL experience (Corvette) remains solid.

Understand what your firm means to your best customers:

I asked new and returning clients why they buy from QMP. I was surprised; it really wasn’t what I thought. When I repeatedly heard the same reply, I immediately changed the corporate logo to reflect that perceived value and experience. Here is the QMP logo.

Yup. Our clients told us they engage with QMP because they gain invaluable insight because we challenge them to think.

Align your brand:

Alignment does not mean just marketing materials, fonts and messaging. It means your whole damned company. From employee recruiting, to training, to product design, values, culture and customer service. All components must be aligned to reinforce the customer RPQL experience – which is your brand. When you invest in that kind of brand discipline, your brand promise will be delivered.

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*PIMS stands for the Profit Impact of Market Strategy, a data base initiated by GE in the 1960’s to study the connection between strategy and profit. It is now maintained by the Strategic Planning Institute. It has tracked more than 500 key metrics of thousands of companies since the 60’s.

For more information on branding success contact Jerry Vieira at The QMP Group 503.318.2696 or Jerry@qmpassociates.com

Diagnosing Stalled Sales

Posted on March 13, 2014June 21, 2018 by Jerry Vieira

Just Ignoring or Pushing Through the Pain is Not the Answer

As an entrepreneurial CEO or owner of a small or start-up company, you probably don’t have the economic safety net to tolerate long term losses or less than adequate speed and growth in the adoption of your new products. You also may not feel you have the time or cash to stop everything, pull the team together, and completely re-visit your base assumptions and offering design. This is where panic sets in. What do you do?

Typically, if you ask your marketing, sales and engineering team what should be done, they will come to you with a laundry list of quick fixes: requests for price reductions, funding approval for new marketing initiatives or even more complex and higher performance product features which, they claim, are certain to turn around the problem. As CEO how do you know what to bet on? How do you know if you’re throwing good investment dollars after bad? How do you avoid having to seek out more funding and perhaps dilute ownership?

A number of years ago, I was asked to assess the viability of a new product that was struggling to gain traction in the marketplace. The CEO of this high-tech, pre-IPO firm wanted to know whether the product line could be saved. Sales were almost non-existent – profits negative. There was no breakthrough in sight.

The product manager of this line was convinced that if the psychological price barrier of $1,000 could be broken, customers would flock. The current selling price was $1,100. In the meantime, while price reductions were being considered (not seriously), the product manager was spending his time and budget setting up new distributors around the country, building promotional materials, stocking shelves with minimum quantities, training sales reps on how to demo the product and, in general, “flogging” (his word, not mine) and constantly “badgering” (my word) the distributors to produce more sales.

Two weeks of field investigation revealed a strategic opportunity to re-focus the market strategy. Twenty four months after that refocus:

– the selling price had increased from a $1,100 to more than $4,000. (Yes, it went up, not down!)

– the largest single customer order went from $20,000 to more than a $1,000,000

– the number of customers (hospitals) grew from 2 to more than 150

– the product-line, and the people, were saved

– the story added to the attractiveness of the IPO

And all this was accomplished while spending less in marketing, not more.

How was this accomplished?

This turnaround was made possible by discovering what, up to that time, was an ignored sector of the current customer base, where the product’s value proposition was significantly greater than for other customers. The business was then refocused on that smaller, yet more lucrative, group of customers. Focus allowed a reduced marketing budget. The result was greatly accelerated adoption, revenue growth and profitability.

Peter Drucker in his book, “Innovation and Entrepreneurship” calls this, leveraging “the unexpected success”. It’s accomplished by digging through the customer lists, examining the motivations of a customer that bought (that you didn’t expect to buy), and discovering that the value proposition they received was well beyond both what you imagined and/or what other customers receive. If you then discover that there are a lot more customers out there like that one, with the same problem to solve, you have a great place to begin your refocus efforts.

There are basically two phases to these kinds of turnarounds. The first is a high level diagnostic exercise and the second is a process for assessing and selecting a lucrative alternative target market.

Phase I: The Diagnostic Exercise:

In this phase we encourage a simple hierarchy of 5 diagnostic questions to start.

Question 1: Does The Target Market Have Momentum?

A dead man in a canoe will make forward progress if the stream is flowing fast – and a strong current makes up for a lot of inefficiencies in rowing, and can even compensate for inexperienced rowers rowing backward. Momentum covers a lot of sins. Inherent market momentum arises from fundamentals in the marketplace – demographics, economics or regulations.

Question 2: Is the Economic Value Proposition Valid?

In B2B, both new and mature products must provide meaningful and calculable economic value from the perspective of the customer. Customers buy for their reasons, not yours – and even though you may be convinced that your product’s value proposition is universally meaningful, it does not mean your customers see it the same way. And not all customers in all markets receive that value to the same degree. So it’s important to get your team to honestly validate the economic value proposition through visits to target market customers in specific and different market segments.

Question 3: Is the Competitive Position strong?

The fundamental value proposition may be provided equally by any number of competitive offerings or alternatives in the market place. Unless target market customers can easily see your competitive advantage and recognize it as meaningful to them – you will not be able to break through the competitive noise.

Question 4: How effective is the channel in Communicating both the Value Proposition and Competitive Differentiation to the target market?

If you want a quick way to assess this, simply ask any of the team (marketing, sales, or engineering or channel partners) to calculate the economic value proposition (benefit) of the product or service offering to a typical target customer. Ask them to do it on the spot… back of the envelope. I am continually amazed how major product development and marketing initiatives are embarked upon without the slightest consideration to this critical success factor.

It is the natural instinct of marketing teams to spend a lot of money at this level and they typically believe that a magic combination of branding, promotion, websites, trade shows, collateral, promotions et al will somehow turn around a troubled product line. If there is any indication of a fundamental problem in the three primary diagnostic levels that come before this one – spending on level four will be fruitless.

We’ll take the canoe-and-stream metaphor one step further. A dead man in a canoe floating down a stream with strong momentum will actually make more progress than a live man in another canoe rowing backwards. So not only do you need a solid market to support a valid economic value proposition, and a competitive advantage to communicate, you have to have people trained in how to communicate it… and do it well.

Question 5: Can You Consistently Deliver the Value Proposition?

Production and quality problems may be the cause of stalled success, but we rarely find that we have to go this low in the diagnostic hierarchy before we find the real cause of a market adoption problem.

Phase II: Evaluating and Selecting a More Lucrative Target Market

In each of the major turnarounds we have experienced in the last 10 years, the real key was not so much the lack of a meaningful economic value proposition, but rather a lack of focus on the segments of the market that would receive the highest economic, emotional or physical value from using the product.

All economic value transfer to your company starts with a customer believing that there is sufficient reason (economic, emotional or physical) to write a check to buy your offering. Different market segments will perceive and receive different levels of benefit from the same product. Markets with the highest value received will yield the highest selling prices.

The 12 basic evaluation criteria for assessing and selecting the most lucrative markets to focus on:

1. Market Momentum: By this we mean the degree to which the market has fundamental demographic, economic or regulatory factors driving its primary demand. Here’s a caution: many firms and marketing teams get seduced by this factor alone – mesmerized by the lure of big numbers. Even large companies fall prey to this lure. But remember, the largest markets always attract the largest and highest number of competitors. Most of the time, it’s a better strategy to focus on a secondary market. It usually less competitive, less risky, less painful and penetration is quicker.

2. A Common Compelling and Significant Problem: It’s common that if one customer in a market segment has a problem, many others, to varying degrees, will be facing the same problem. If the economic benefit of solving that problem is significant, it’s likely that the willingness to pay a premium for solving it will be present.

3. Economic Benefit to the Customer: Calculate the economic benefit for a typical customer in each market segment. The likelihood is that you’ll get the highest selling prices in those segments where the economic benefit-received by the customer is the highest.

4. Financial Wherewithal of the Customer: Do potential customers in this market have the flexibility to buy and capture funding should the economic value proposition be significant? For example, the University market segment is typically characterized by hand-to-mouth funding availability and long research approval cycles.

5. Profitability of the Transaction: This factor assesses whether transactions in this market segment can be inherently profitable. Factors affecting profitability might be geographic, customization required and willingness to pay for economic value received.

6. Match of Company Assets and Capabilities: The annals of failure are replete with stories about companies who were seduced into attempting to penetrate large emerging markets for which their basic capabilities, assets, culture and structure were mismatched.

7. Accessibility: To what extent are the market, the channel and the key decisions makers readily accessible to your channel and sales process? You can’t communicate a value proposition to someone you can’t get to.

8. Lots of Unfilled or Under-Satisfied Sockets: A socket is a potential customer with the problem and the possibility of receiving economic benefit form solving it. Customers may have one or multiple “sockets”. In assessing market attractiveness we want lots of sockets – most of them still unfilled – or filled with a less-than-satisfactory solution.

9. A Well-Established, Vibrant Intra-Market Network: Studies of the diffusion of innovation reveal that the communication through the intra-market network is 13 times more significant in the adoption of an innovation than mass media.

10. Level of Competitive Turmoil: This factor gets rated opposite to the others. If there is a lot of competitive turmoil, rate this low. If not much, rate it high.

11. Experience and Reputation Match: If the market you are assessing already knows who you are, and your value proposition is consistent with whom you are, your brand name and your differentiators – then you can give this segment a high rating. This is the factor that many marketing people believe that “Branding Programs” can fix. But even the best branding program can’t make up for a poor economic value proposition or poor market momentum – and branding programs are typically very expensive

12: The Availability of a Relative Perceived Quality Leadership (RPQL) Position:Research from the Strategic Planning Institute, concludes that the single most significant factor affecting a business unit’s performance is the quality of its offerings relative to its competitors. The degree to which an RPQL-position available, unclaimed, or vulnerable (if someone already owns it), is a key factor in the selection of a segment on which to refocus.

Conclusions and Recommendations:

If you happen to find yourself in a situation of a stalled product line or business – our experience tells us that the last thing you need to do is spend more on marketing. In general, a business refocus is a much quicker and less expensive road to success.

A quick assessment of the customers that have already bought usually reveals those for whom the value proposition is significantly higher. Assessing the attractiveness of the market segment that they represent can reveal your opportunity to break out to success.

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Learn more about strategically improving low sales performance here, call us at 503.318.2696, email to qmp1@qmpassociates.com or connect through our Contact Us page