As the economy continues to bounce along, (some say showing signs of a small movement off its bottom while others disagree), business owners and managers are getting impatient to find ways to boost revenue. Not only are we seeing evidence of this within our own client base, but also our “Insights” blog post on “Diagnosing Stalled Sales”, published in June of 2011, has re-surfaced recently as the top-read posting on the all time QMP blog popularity-list. The second most popular blog on that list is “The Marketing and Sales Audit”. Business leaders are looking for revenue answers. Standing idly by and waiting for the economic recovery is no longer a reasonable option.
As I re-read that “Diagnosing Stalled Sales” post, I realized that it was too diagnostic and not prescriptive enough. After all, what good is a diagnosis without a treatment? Apologies to those readers who came away from that post less than satisfied. This post makes up for that shortcoming.
Deciding What to Do
The first thing to recognize is that all revenue increases must come from one or more of the following four sources: 1) introducing new products, 2) stealing market share from competitors (new account wins in your current markets), 3) the natural momentum of your current markets or 4) penetrating new markets.
New Products:
If you have a new product-development initiative in the works, good for you. But pursuing this option for increased revenue typically takes time and money. Both are in short supply these days for small to mid-size businesses, exacerbated as our clients currently relate, by the challenge of tightened banking requirements.
New product development initiatives typically fall into one of three categories: a) improving what you already offer, b) meeting some new customer requirement or c) launching a breakthrough.
Meaningful overnight revenue upsides are rare from new products as it takes time to develop, tool, test and introduce a new product. It then takes time for the market to become aware of it, understand it, change their old ways of doing things (and who they may be buying from) and begin to adopt your new product. There are ways of accelerating this adoption rate, but only if the product is a breakthrough – something that fundamentally turns the market on its ear. Even in that case, time is the challenge. Twenty-five years into its existence, I still meet educated people who don’t own a personal computer, and it took 50 years for the automobile to be completely adopted by consumers.
Don’t get me wrong, new products are strategically important for a firm. I strongly encourage new product development, particularly if the product fills some need the customer didn’t even know they had – a real breakthrough. Breakthrough products typically bring sustainable growth, give customers a meaningful reason to change and provide higher margins. (More on this subject in a future blog post on the subject of Innovation).
So, keep developing; keep considering new ideas; just don’t expect the heavens to open and revenue to come raining down quickly.
Stealing Market Share from Competitors:
One of the fundamental principles of military strategy is, “The hardest ground to capture is the ground that is occupied. It typically takes anywhere from 3 to 6 times superior resources to take over a position from an occupier. Interestingly, most of the initiatives that small to mid-size companies attempt (unwisely) to increase sales fall into this, the most challenging category.
These days, there are a number of popular marketing initiatives that are all the rage – search engine optimization, the use of AdWords, re-branding, social media and database marketing – to name a few. These are not inherently bad or good. However, the key to achieving significant growth with any of them is to assure their use in a focused way combined with growth options #1 (Introducing New Products) or #4 (Penetrating New Markets). Using them in a focused way assures maximum return for minimum investment.
Some of you may decide that this option, stealing share from competitors, is the only one available to you and that you don’t have time and money for new product development or to try to penetrate a completely new market. If you do, the road will be difficult and certainly take more resources and time than you anticipated. If you can’t be dissuaded, here are some tips to make it easier:
a) Try to fragment your competitor’s market: Find and target sub-sets of customers that have a common dissatisfaction with the competitors’ offerings. The Japanese didn’t attack the US auto market all at once on all fronts. They focused first on the most vulnerable and receptive set of customers with a quality small car offering. After establishing this foothold they expanded based on their proven quality reputation.
b) Tailor a market-specific benefits story to the customers in the specific target market fragment you wish to penetrate. You may even wish to set up a separate website for that specific market. At minimum you will need a focused sales presentation.
c) Focus your sales team on that segment and train them to tell that market-specific story. Make a concentrated effort for 90 days with frequent feedback from the sales team to see if the story is gaining traction. The test of traction is a growing sales pipeline.
d) Never lead the penetration effort with pricing reductions. You’ll hurt yourself.
The Natural Momentum of Your Markets:
This is the primary problem most small-to-midsized businesses are dealing with. It is true that all boats rise and fall with the tide. That doesn’t mean that some boats don’t move around the bay faster than others, whatever the tide situation. There are always segments of a market that trend opposite, or move faster than, the overall economy. If the economic momentum of your primary target market has slowed, and doesn’t look like it will return quickly, then it’s time to consider growth option #4 – penetrating new markets.
Penetrating New Markets
The requirements for a successful penetration of a new market are: a) a good set of target market attractiveness assessment criteria, b) a high degree of focus in your attack on the market and c) rapid feedback and re-targeting process to use as required. You need not make a big, costly production of launching an initiative at a new target market. Assessing attractiveness, focusing and gathering intelligence about receptivity (basically validating the market’s attractiveness) is not a big deal.
For each of the following questions, start with the phrase, “To what degree..” and score on a scale of 1 to 10.
… does this market exhibit sustainable economic, demographic or regulatory momentum?
… do customers in this market have a compelling problem that can be solved by our product?
… does our product offer a clear competitive advantage in solving that problem for the customer?
… does solving that problem reap a meaningful reward for the customer – economically, emotionally or physically
… is there a competitive leadership position available in the market?
… can we easily reach customers in this market?
… is there strong intra-market communication between peers in this market?
… can we sell into this market profitably?
These criteria will provide a starting point for a relative attractiveness assessment. You may wish to use more, or different, criteria.
Doing it:
It is common in slow economic times for sales teams to increase their activity in trying to sell to a wider range of prospects, try to penetrate large accounts that competitors own, campaign for price concessions to win new business and chase opportunities that are a marginal match for the firm’s capabilities. As driven by the survival instinct as these activities may be and as resourceful as they may appear on the surface, they are typically non-productive. In fact, they can be hugely counter-productive. The results of such efforts are typically depressed profitability, unsustainable success and trapping the firm into businesses and/or products it cannot maintain. Such activities can also dilute customer support resources, jerk around product development and operations resources, damage the firm’s quality reputation, start price-wars and cause a distraction of the business from what it does best. It can take many years to recover from the negative consequences of impulsive sales actions taken in the fever and panic of an economic crisis.
I state the case in a dire scenario because the real key to success is focus and feedback. Focus means staying focused on the target market you decided upon using the criteria above. Feedback means monitoring progress, receptivity and success frequently and adjusting quickly.
The discipline of a limited number (one or two) highly focused initiatives targeted at specific new markets, followed by rapid sales feedback, has consistently produced good results. When followed-through with discipline the results have been significant. Our subject firms have won new clients, avoided price competition, found new ways to provide additional value to customers, increased selling prices, reduced the hysteria associated with trying to respond to every quote that comes within 100 yards of the door, achieved double-digit increases in win rates and made rapid strategic adjustments that saved them from economic disasters.
The approach we suggest requires the adoption of three basic process disciplines: 1) rapid market assessment, 2) rapid and focused launch initiatives and 3) disciplined and frequent field sales feedback. While these disciplines may be different than what your organization has used in the past, they are easy to learn, cost-effective to deploy and yield a higher probability of success – in both challenging and healthy economic times.
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We invite you to read our related blog posts “Diagnosing Stalled Sales” and “Finding New Markets“