Finding New Markets

Posted on April 15, 2013August 27, 2020 by Jerry Vieira

Where does one begin the search to find new markets?

The good news is: new high-potential market opportunities are typically discovered closer-in than you would imagine. Some await discovery hidden in the clutter of your current customer list. Others find you, not the other way around. In either case, your task is to recognize and quickly assess their viability.

The biggest barrier is not that opportunities do not exist, but rather that firms have not dedicated a resource, and put in place the discipline to continually explore, vet and test their viability. New market opportunities can quickly and positively impact the bottom line. So, the key to growth is learning a) how to consistently be on the lookout, b) how to recognize possibilities and c) how to test their reality and viability.

Places for discovery:

Here are six places that have created the biggest up-sides for our clients.

Current customer list: it’s the small customers, not the big ones
Fulfilling customers’ unrecognized needs: the iPad and the SUV are good examples
Your competitors’ current markets: they are not as homogeneous or impenetrable as you might believe
Channel-to-market: is your channel providing more or less value to your customers than your customers need?
The sales pipeline: most sales people are poor at assessing an opportunity for its real, bigger-picture potential
International: some international demographics and economics are compelling

If you think you’ve already looked in these places, you might want to check again after reading this blog post.

Your small customers:

Some of the most significant growth opportunities we have seen have come from analysis of small, unexpected customers that have, under the radar, slipped into a firm’s customer list. They are typically considered insignificant and/or outliers for two reasons: 1) the revenue amount represented was relatively low and 2) they came from outside the primary market targets of the firm. However, a quick analysis in several cases revealed that these customers were actually representative of much larger markets – markets with large numbers of customers with the same significant unmet needs that were already being satisfied by the firms’ product lines better than any other offering available.

In one case, the small “insignificant” customer was representative of 20,000 similar organizations nationwide, none-of which had as good a solution to their problem as was being delivered by the firm’s software. This new market opportunity was tested and validated within 90 days. Growth over the next two years in that market more than doubled the company’s revenue

Well-known business thought-leader, Peter Drucker, in his book “Innovation and Entrepreneurship”, named this phenomenon “the unexpected success”. “Unexpected successes” are characterized by customers buying your product from markets you had not considered, getting benefits you had not conceived because your solution was inherently better than alternatives they had to consider.

This common dynamic means that someone in your firm should always be asking your “unexpected-success” customers these four questions:

Why did you buy our solution?
How many more people like you are there, out there?
How many of those other people have a good solution now?
Where do these people hang out?

The lack of a consistent asset dedicated to this analysis, delays the discovery of breakthrough new opportunities.

Your customers’ unmet needs:

The iPad, the SUV and the microwave oven are examples of new product ideas that were formulated to meet customer needs that were “subconscious” or simmering just below the surface of a customer’s “experience” with current solutions. The key words in this sentence are “subconscious” and “experience”.

Typically, in smaller companies, not enough time is dedicated to thinking about the subconscious needs of customers and the customer use experience. Most product development roadmaps we have seen are driven by; a) urgent responses to competitive moves, b) the drive to reduce product costs, and c) evolutionary feature extensions to current offerings. None of these create new market breakthroughs.

New market breakthroughs come from insights into customer behaviors, problems and product usage.

Your competitors’ current markets:

In the 1970’s GM (50%), Ford (25%) and Chrysler (15%) collectively owned 90% or more of the United States automobile market. Now some 40 years later, imports represent a huge portion of that same market. The lesson learned is that if you do not fragment your own market, a competitor will do it for you. The caveat: In each segment of the competitor’s market you target, you must have a relatively advantaged solution.

Imports won their initial US auto market share by fragmenting the US automaker’s markets and offering a value proposition that represented a significant value proposition improvement in one specific segment – the industry’s most vulnerable – small, economic compact cars. After establishing that foothold and clinching their quality reputation in the compact segment, they then stepping-stoned through the other segments – leveraging that quality reputation.

Your new market opportunity may simply be created through a focused initiative at a segment of your competitor’s markets that is most vulnerable due to that competitor’s neglect of the segment. This is particularly effective if the competitor is much larger. You should never attack a competitor on all fronts at once. However, all competitors are vulnerable to fragmentation and differentiation aimed at dissatisfied or under-satisfied customers in some sub-segment of their business.

Your channel to market:

Most firms decide on their channel-to-market based on what benefits it provides in market coverage. The market (customers) really only care about the services the channel provides to them – not the exposure it provides to the firm. If the channel is under-satisfying the needs of the customers’ this represents an opportunity for a) increasing value delivered and compensation received, or b) increasing market share based on service.

Amazon was launched as a channel alternative to brick and mortar book stores. It didn’t capture all book customers – but it did exploit a vulnerability and weakness of the then current book stores by offering convenience and in-home browsing. It created the on-line-bookstore market.

Your sales pipeline:

A sales person’s effort in pursuing an opportunity is typically influenced by three factors: a) the anticipated initial purchase amount, b) the magnitude of the long-term opportunity as communicated to the sales person by the customer’s purchasing department and c) the commission rate associated with the opportunity.

The first thing to recognize is that customer predictions of ultimate volume activity (part b above) are typically overstated – many times to hold up a carrot in order to exact the best pricing for whatever it is you are going to quote. More important than the volume prediction, is its logic. It should never be accepted at face value. Discovering the logic is what separates pursuit of a typical opportunity from discovery of a breakthrough market.

To test the validity and logic of a large prediction the savvy sales organization pursues a revealing question chain:

What ultimate economic, regulatory or demographic market factors will drive such high demand for your customer’s product?
Is this product introducing a whole new revolutionary value concept that no one has offered before (like the first microwave oven) or is it an evolutionary product (like current microwave oven offerings) – just bouncing along an incremental improvement curve?

Purchasing managers almost always over-predict the anticipated adoption of their new products. However, the answers to the two questions above may reveal a truly large and compelling market opportunity. For example, a firm that makes metal fabricated parts for military and aerospace customers may find in its pipeline an opportunity for a part for a medical device. That opportunity may represent a number of situations: a) someone looking for a competitive quote to replace their current supplier, b) the need for a part for an evolutionary incremental product or c) a breakthrough new product. Looking at the face value of the opportunity may not reveal the truth behind the opportunity. Only by delving deeper can the truth of new market opportunities be discerned.

International:

The demographics and economics of India and China are intriguing. The average age of the population is much lower than in the United States, their educational levels are growing, their income per capita is growing and their middle class is also growing. Indra Nooyi, the current CEO of PepsiCo, when asked where her company will be investing in the near future stated those facts – along with two population statistics that clinched the answer. India has a population of 1.1 Billion people and China a population of 1.5 Billion people. (Current stats are 1.2 Billion and 1.3 Billion people respectively). For PepsiCo the investment decision is made.

Those investments will require infrastructure and support – a “demand-halo” – from smaller companies, creating an opportunity for international expansion. Navigating the local laws, regulations, cash repatriation and other idiosyncrasies of international expansion is a bit of a challenge but it can be done. If you don’t do it, someone else will – likely some competitor.

Conclusion:

Given the incredible amounts of money spent today on branding, websites, Search Engine Optimization, sales promotions and tradeshows it is sad that a small portion of those funds do not find their way to support a “market opportunity sleuth” (MOS). Even if your firm has only 10 people in it – assigning the job of MOS to even one-half a person would be wise. That person should be responsible for scouring the areas listed above and reporting monthly on findings. After all, even if only one breakthrough opportunity is discovered in the course of a year – the investment would be worth it.

Read our related posts “Diagnosing Stalled Sales” and “Foundational Marketing – and please send us your comments.

For more information about Finding New Markets and Assessing their Viability call QMP at 503.318.2696 or eMail Jerry Vieira at jgv@qmpassociates.com

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Accelerating the Market Adoption of an Innovation

Posted on April 7, 2013November 19, 2014 by Jerry Vieira

The Product Development and Management Association Glossary of Terms defines failure rate as the percentage of a firm’s new products that make it to full market commercialization, but which fail to achieve the objectives set for them. By that measure, it is not surprising that a quick internet search on the subject of product failure rate yields studies that claim anywhere between 50% (commercial) and 90% (retail food) of new product or service offerings fail.

Failure can mean some or all of lost time, wasted money, missed opportunity, damaged credibility, tainted brand reputation, enhanced competitive vulnerability, lost jobs, truncated careers and a host of other unpleasant outcomes. So, whether the real failure rate is closer to the lower (50%) or higher (90%) end of the estimate is not as important as recognizing that discovering ways to improve it is essential.

For the past 15 years a good part of our work at QMP has centered around helping business-to-business clients turn around under-performing businesses and products. Many of them were struggling with getting new offerings off the ground or gaining traction in the marketplace. We’d like to share with you a bit about what we have learned, in hopes that it may improve your probability of success and help you avoid the myriad consequences of failure.

The Empirical Science Basis of the Adoption of Innovation:

In 1962, Everett M. Rogers wrote a breakthrough work entitled, “The Diffusion of Innovation” (republished in its fourth edition in 1995 by The Free Press). In it he compiled a number of studies documenting adoption successes and failures of all types of innovations over the past 100 years — from sociological to scientific. He included varied research findings, such as the struggles of the Chilean health department with getting Andes mountain villagers to adopt the habit of boiling water for health reasons, Iowa farmers adopting hybrid seed corn and Pittsburg school system principals adopting new math.

While the lessons learned from reading such a remarkable book are many, two items stand out above all others; 1) the adoption or diffusion of an innovation is not a linear phenomenon (meaning it does not gain its energy and momentum just one isolated customer at a time across a wide range of groups), and 2) adoption is significantly accelerated by the dynamics of the intramarket communication network (how buyers in a market or group meet, discuss and communicate ideas).

In fact, one of the most amazing conclusions coming from the research is that communication through the intramarket network is roughly 13 times more effective than mass communication in the adoption of an innovation. This interesting research conclusion predates the emergence of social media, blogging and Tweeting which, by now, are well recognized as an effective internet-powered intramarket communication vehicles.

Mass Communication and Struggles with Adoption

One of the most common problems we find with innovations struggling to gain a foothold in the marketplace is the parent firm’s unwillingness to focus. Rather than taking a chance on a focused launch initiative, they believe it’s better to try a broad one and see what sticks. In addition, the management team and product people are typically so convinced of the universal applicability of the innovation, that it leads the firm to believe that “getting our name out there” quickly, to masses of potential buyers, will be all that is required for success. This is rarely the case.

In pursuing such a course of action, it is not uncommon for a firm to find they have spent valuable economic resources on grand branding schemes and exposure initiatives with a minimal real impact on market penetration. Applying for a second round of dilutive funding to finance a second run at that same holy grail is an option—and some select it – with the same results.

Fragmenting the market to gain a profitable foothold

Buyers, particularly commercial and business-to-business buyers, invest in an innovation because they believe the economic value they will receive from that innovation will exceed the amount they have to pay for it. The market success of an innovation requires that the market which you’ve targeted has a significant enough proportion of customers with a big enough common problem to create a compelling argument for an investment to solve it. The key is, not all market segments have the same problem to the same degree. Focusing your launch on a particular sub-segment of the market where the economic value proposition of the innovation is compelling, creates a much higher probability of success than a broad approach.

If it’s that simple, why don’t more businesses focus?

There are many reasons: First, investors prefer firms that are moving after big markets with big payoffs. The bigger the market envisioned, the bigger the potential payout. Secondly, the inventors have a sincere belief that “everyone” can eventually use their innovation—and eventually they may be correct. Third, innovators and marketers alike get caught in the excitement, glitz and hype of launching a major market initiative launch. It can be a very heady experience. And, fourth, they simply have too much marketing money in the budget and don’t know how to manage it well.

Trying to stand in front of the innovation-launch train as a voice of reason, as it barrels down the track of a well-funded general market launch is fruitless. It’s best to wait till the train burns out its fuel and then catch up to it further down the track when it has stalled.

Not withstanding the previous explanations, there is a more fundamental reason why people don’t focus for success, they simply don’t know how to select the best markets to focus on.

Criteria for Target Market Attractiveness:

Over the years of working the challenge of assessing and selecting the target market segment that will yield the highest probability of success for an innovation, we have developed a series of criteria that seem to work effectively.

Market Momentum: Different market segments have different economic, demographic and regulatory factors which affect its basic momentum. When selecting a market, we want our investments to be lifted and propelled downstream as much as possible by inherent momentum factors in our favor.

Compelling Need: This factor refers to the extent the problem the innovation is designed to resolve is compelling from an economic, safety or regulatory standpoint. Take the Segway for example, the innovative two-wheeled, gyroscopically-balanced personal transport scooter. It’s general market launch, after much early hype, has been less than hoped for by investors and its inventors alike. It is, however, finding its way to higher success rates in mobile security markets, on campuses, malls, large commercial complexes, inner city tourism, and in a slightly modified version, golf courses.

Match: The extent to which the innovation matches and completely resolves the compelling need it was designed to fix. A perfect match will increase customer satisfaction and improve the ability of potential customers to rapidly make the innovation-to-problem-fix mental link.

In the early days of flat panel monitors, when they were expensive compared to bulky CRTs, one of our clients attempted to penetrate the general desktop market with this own version of a flat panel monitor. At a $1,000 selling price, compared to a $249 monitor price, the effort failed. However, when the effort was refocused on hospital rooms (a much smaller segment of the market but with a more compelling set of needs), the monitor was wildly successful. In hospital rooms, space is constrained, electromagnetic interference from CRTs cannot be tolerated around sensitive medical monitoring equipment and sparks from high static CRTs can’t be permitted in oxygen rich environments. The client’s initial adoption failure was turned to success simply by redirecting the market focus—and there were no changes required to either the average selling price or inherent product features. In fact, the selling price increased as, over time, hospitals requested additional features to increase the basic capabilities of an already good solution.

Socket Count: A socket is a potential place where the innovation can be installed. For example, a first estimate of the potential sockets for the microwave oven at its inception would have been the number of households without one. Today, the number of sockets available for new microwave oven innovations is going to be limited to those sockets that either don’t have a microwave already installed (very few) or those for which the innovation solves a compelling need or significant shortcoming with their existing solution.We want to find a market to target our innovation at that not only has a compelling need and positive momentum factors , but also a lot of unfilled or under-satisfied sockets.

Value Quotient: Closely related to the magnitude of the compelling need is the balance of the value quotient from the customer’s perspective. This relates to the value of the benefit to the customer of solving their problem with your innovation, divided by the cost of acquiring, installing, learning and using it. There may be a significant compelling need, but if the cost of the innovation needed to repair the compelling need is prohibitive, adoption will be slow. A rule of thumb is that within three years of purchase the innovation should pay back at least 5 to 1 in bottom line cash flow for the customer. A further note on this point: Value received is not completely economic. Value comprises the complete suite of benefits encompassed in the Economic, Emotional, Political and Physical realms of what your product/service delivers.

RPQL Position Availability: RPQL stands for Relative Perceived Quality Leadership. Forty plus years of research in the Strategic Planning Institute PIMS data base (Profit Impact of Market Strategy) indicates that the single most important factor affecting a business unit’s success is the market’s perception of the relative perceived quality of its goods and services compared to its competitors. One important point to remember—perceived quality is related to the segment of the market. Not all segments perceive quality in the same way. Charging after a market that already has an RPQL leader is equivalent of a military frontal assault on an entrenched position. Not a wise decision.

IntraMarket Network: As mentioned earlier, innovations diffuse more rapidly if there is a strong intra-market network through which the value proposition of the innovation can be communicated—person-to-person, customer-to-customer. The intra-market network comprises two parts a) its venues (events, forums) and vehicles (journals, publications, websites) and b) its intra-market opinion leaders.

Opinion leaders are the real geometric multipliers of the value proposition message. For opinion leaders to be most effective they need to have four important characteristics. First, they need to be rabid believers in the innovation and its value proposition. Secondly, they need to be well-networked. Third, they need to be highly credible in the network of interest and finally, they need to be natural sales people—anxious and completely un-shy about communicating new ideas to friends and colleagues alike.

The next five target market attractiveness assessment criteria are important as well, but if the market isn’t attractive after an analysis of the first seven the second five are not worth working through.

Profitability: Selling the innovation must be inherently profitable. If you feel you have to reduce price to gain traction, it may simply be that you have a questionable value proposition or your perception of the customer’s compelling need is misunderstood. It certainly should bring into question your thoughts about the economic equation factor. Sometimes simply changing the target market can change the profitability by allowing pricing in proportion to unique benefit—as in the flat panel terminal example stated earlier.

Competitive Turmoil: The higher the competitive turmoil the more expensive it will be to create a successful presence. The exercise of focusing down to a smaller, less competitive market segment, will provide a higher probability of surviving any inevitable market shakeout.

Brand Leverage: It’s easier to gain market attention for your innovation if your brand speaks innovation. Apple will easily get media and intra-market opinion leader attention for a new consumer, music or creative computing idea. Volvo will get attention for an innovative auto safety related product—like a car seat or anti-roll stabilizer for an SUV. Neither will get brand traction if they introduce a pillow or dinner ware.

Accessibility: Sometimes markets may be attractive but relatively inaccessible because of sales channel limitations, aggressive competition for limited shelf-space, import/export restrictions, licensing requirements or other considerations.

Perceived Value of Differentiators: This last factor comes into play when the competitive turmoil factor is less than optimum. It assesses the degree to which your differentiated position for the innovation, compared with your competitors’ approaches, has meaning and economic value in the target segment under assessment.

Conclusions:

What we have learned in years of helping our clients with the market introduction of their innovations is this: Focusing on those markets that exhibit the best composite results on the listed assessment factors results in:

More rapid adoption
Higher average selling prices
Higher profitability
Higher degree of customer satisfaction
Lower market launch expenses
More defensible positions
Higher probability of surviving shakeout
Learning how to do it consistently in the future
Less ownership dilution

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For more information about how to accelerate the market adoption of your innovative product, contact QMP at qmp1@qmpassociates.com or 503-318-2696

The Basics of Foundational Marketing

Posted on April 2, 2013August 25, 2014 by Jerry Vieira

“You can’t build a durable building on a weak foundation.”

We’d like to share an insight that has helped executives and business owners sort through all the hype and claims over the last several years about an ever growing list of “gotta-do” new marketing and sales techniques.

If you’re a General Manager, business owner or C-level executive, your marketing team probably approaches you annually with a laundry list of funding requests to support their critical marketing and sales programs for the coming year. Those requests may include any or all of; a website upgrade, a branding program, a social media expansion program, a blog, a publicity and PR program or maybe even a new six-figure trade show booth – not to mention the additional staff to help manage it all. How do you decide what to approve? How do you sort through all the hype and enthusiasm about each program and decide what will truly give you the best return for your investment?

The graphic below illustrates an alternative approach to selecting marketing initiatives.

Most people think of marketing as one or more of the items listed on the right side of the graphic — in the grey, typical-marketing circle. Stop a moment and consider the list. Is this what you think of when you think of marketing? If yes, join the majority club. If not, join the other group. It has fewer members – but they are the ones who have found the secret to getting greater return on their marketing buck.

Before those of you in the smaller, enlightened group get smug, remember “typical marketing” programs aren’t completely useless. Let’s be realistic. These days, unless you operate a lemonade stand that will only be open for two weeks in August, everyone needs a website. So let’s agree that, to some degree, typical-marketing expenditures are necessary – and in fact, required, once the foundational marketing base is laid.

But, back to the point – the hidden secret about marketing and what the people in the smaller group know that others may not is this; Rarely will any typical marketing initiatives produce truly breakthrough results — and they can tie up a lot of money! What really sets up top and bottom-line breakthroughs is Foundational Marketing. Foundational Marketing is the stuff in the oval on the left. Foundational Marketing is inexpensive and the primary, required ingredient in every major success.

For any typical marketing expenditure to be productive, Foundational Marketing must be done well. In our experience, foundational marketing tools and techniques have produced remarkable results. For example:

A software firm earned 1,000 new clients in just a little more than two years
A fledgling medical product landed 150 hospital placements in its first two years, with some orders exceeding $1M. Prior to using Foundational Marketing techniques, this product was in only two hospitals, with the largest single order only $20,000.
An electronics firm achieved a 50%+ growth rate for six years straight
A components firm increased their win rate by 15% while investing 33% less quoting time
A wholesale distributor generated a 47% increase in regional sales in 1½ years

None of these breakthroughs required a significant investment in typical marketing.

To contrast the effectiveness of the two types of marketing even further, in one of those cases above, after the success had been achieved using Foundational Marketing techniques a new management team invested in a mid six-figure re-branding typical-marketing program that didn’t move the needle a bit – losing the discipline of Foundational Marketing along the way.

Why don’t more firms adhere to Foundational Marketing disciplines?

They don’t know what they are: B-school educators are fantastic at teaching principles and concepts, but in general, weak at delivering a practical approach to moving those principles and concepts into practice. I speak from experience as, at different times, both an MBA student and MBA-level university instructor. Concepts and principles education does not equate to skills, tools and process disciplines. Most B-school graduates do not come out newly-minted with a honed skill set and tool kit.

They haven’t developed a standard tool kit: You are more likely to find a dozen carpenters that use the same field-proven tools and processes for their trade, than a dozen top B-school graduates that use the same tool kit and process for strategy development. Coming to the job site, most marketing practitioners have to create their own tools and processes, convince the executive team to learn, trust and use them and support the execution discipline to see the resultant strategies through to success. Not to place all the blame on the practitioner, many firms simply haven’t developed a Foundational Marketing process and tool kit.

It’s tougher to do: Typical marketing programs are an easy way out – particularly if everyone in the industry is “doing something”. They can be delegated and the deliverables are easy to see: a new web site, a new logo, a bigger show booth.

They don’t have the discipline to do the Foundational work first: Unless the top-dog insists that Foundational Marketing receives first priority and is the right way to do marketing, it won’t get done. Foundational Marketing is a “think-before-doing” approach.

They think it takes too much time: Building a good foundation doesn’t take long if you have the right tools. We have witnessed strategic decisions made in a few days with execution and success in as little as 90 days.

They don’t believe in it because they’ve never seen it work: Using and trusting Foundational Marketing principles does take some faith and practice, but the track record is proven.

Under the Hood of Foundational Marketing:

Practicing Foundational Marketing is really not difficult if you have the right tools. Good and sound foundational marketing tools are based on empirical marketing science. Even non-marketing people can learn and succeed using them. In a way, a good Foundational Marketing tool is like a cell phone. You don’t need to be an electrical engineer with an understanding of electromagnetic field and communications theory to use a cell phone. All of that has been done for you and integrated into the cell phone. Good Foundational Marketing tools have already integrated sound empirical marketing science into them.

Success with Foundational Marketing does require – and this is the difficult part – transforming the way your organization thinks and the way your team executes marketing and sales. It really comes down to a battle of the mind – more than a battle of the wallet. When your organization understands Foundational Marketing – and begins to use its tools and techniques, both the probability of success and the return on investment of your marketing programs skyrocket.

A complete Foundational Marketing approach has four components:

· Market Strategy: A proven and steadfast way to decide what market segments to focus on and what differentiated position to carve out for your firm and each of its products.

· Business Development Initiatives: These are about how you will approach the segment(s) of the market you have decided to target. While components of tactical (typical marketing) are included, emphasis here is on specific customers to target, specific messages to communicate, the customer’s buying process, channel-to-market decisions and leveraging the intra-market customer-to-customer communication network in the target markets of choice.

· Sales Disciplines: There are two parts of the sales disciplines component of Foundational Marketing. Both require training and consistency. First, an effective, consistent sales process is a must – one which qualifies, discovers needs, proposes good solutions, and wins/sustains long-term clients. The second part is a differentiated sales story that is meaningful to customers – one which assures that your unique benefits story is told consistently through all channels to all target customers. It’s a story that emphasizes the economic, emotional and physical benefits in the right priority, for the right customers, in the right market. Sounds obvious, but many clients actually fail in these two fundamental requirements.

· A Performance Driven Culture: Think of the components of Foundational Marketing as the gears of an engine, the culture of a firm is the oil in the oil pan. (See the figure below). To consistently achieve your goals, the organization’s culture must encourage teams to communicate, execute, adjust, think, make decisions and lead in an honest way. A culture of performance excellence is defined by: accountability, clarity of expectations, measurements and metrics, ownership, open and honest communication, fact-oriented, sense of urgency, rewards and consequences, frequent checkpoints and the ability to quickly and constructively confront barriers and problems. With a culture of performance excellence lubricating Foundational Marketing, the engine hums. Without the oil of a culture of performance excellence, the gears seize.

Can Foundational Marketing fail?

Foundational Marketing programs do fail – for one of three reasons: First, if an organization does not have the discipline to execute and follow through, any program will fail. Foundational Marketing programs are no exception. Secondly, it is possible that some firms are too far gone to be saved by a Foundational Marketing program. However, in 20 years of consulting, we have witnessed only one firm in the second category. They required a complete change of their business model to survive. They did survive, but at a much lower revenue level.

Finally, we have witnessed firms that have relapsed. Relapse is characterized by success with Foundational Marketing, followed by a reversion back to sole dependence on those items in the typical marketing list. Relapse is very costly in money, time and lost opportunity. A relapse typically occurs when a new, uniformed marketing and sales or C-level executive enters the picture.

A Final Word:

A good example of the need for foundational discipline is in the weight loss arena. The basis of all weight loss programs is discipline: discipline to eat better, discipline to exercise more and discipline to adhere to a healthy lifestyle. The latest exercise machine does not obviate the need for discipline.

So it is with Foundational Marketing. Good tools and processes are needed – but organizational discipline fuels the best results. Foundational Marketing, supported by a culture of performance excellence has proven again and again to lower marketing and sales costs, increase market share, achieve more rapid adoption of new products and increase significantly the firm’s return on investment.

To learn more about Foundational Marketing call the QMP Group at 503.318.2696, email us at qmp1@qmpassociates.com or connect with us through our Contact Us page where you can detail your challenges.

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Revitalizing Stalled Sales

Posted on January 26, 2012June 13, 2013 by Jerry Vieira

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“

Don’t Give Up on the Top Line (no matter how tough things get)

Posted on August 8, 2011August 25, 2014 by Jerry Vieira

The Most Common Reaction to Economic Turmoil: Expense Reduction

There’s a line in the Willie Nelson tune “Nothing I can do about it now” that goes like this:

I’ve survived every situation
Knowin’ when to freeze and when to run.

Two years into the current economic downturn, there is plenty of evidence that companies are trying to do both. Firms continue to take aggressive steps in reaction to reduced demand. Cisco just announced layoffs of 6,500 employees. Other big name firms such as Merck, Lockheed and Boston Scientific also announced staff reductions. Borders finally threw in the towel, closing its last 400+ stores. It once had 1,200 outlets, employing more than 35,000. And most recently, HSBC indicated it will let go between 25,000 and 30,000 employees.

Small to mid-sized company layoffs typically don’t make a lot of news. But a quick informal survey at the other end of the corporate spectrum, showed that smaller firms, particularly those without an international earnings contribution to their performance, have experienced a down-turn in revenues of anywhere from 25% to 40% from their peaks in 2007 and 2008. They’ve aggressively cut expenses and conducted layoffs as well.

Of course, there are exceptions. Companies with specialized innovations targeted at niche market problems are doing much better than firms depending only on their traditional products and markets. But by-and-large, corporate “economic adjustment” initiatives focus on operational expense reductions.

Instability in Europe continues, the DOW is down more than 1,500 points since July 1, unemployment and underemployment in the U.S. remain high, Asian demand for US exports will decline as a reflection of reduced US demand for their imports, and the US Congress is mired in finger-pointing politics vis-à-vis problem solving. Under these economic conditions, can you blame anyone for immediately reaching in the first aid kit for the expense reduction tourniquet?

Taking a Second Look at Revenue Upside Options:

Stemming the bleeding is crucial under these economic conditions. However, in the frenzy to cut expenses, the potential for revenue upsides gets short shrift. Why? Expense reductions can be swift and easily seen in reduced cash outlays. Revenue upside strategies, on the other hand, even in good times, carry with them risk. Financial executives and conservative CEOs will opt, almost every time, for the less risky, faster impact, sure thing. Revenue-upside options fall to the side of the road.

Nonetheless, there are a handful of strategies for realizing revenue upside in a down economy. Due diligence and responsible managerial behavior should compel managers in serious economic times like these to, at least consider the revenue-upside options that follow. An impulsive, headlong rush into any one of them would simply be unwise. Rather, we suggest a serious vetting exercise, followed by execution of the best.

Upside Potential #1: Market Focus

Focus is typically rejected, out of hand in tough times. When the business is hurting why would anyone in their right mind “narrow” their focus? Shouldn’t we be casting the net further?

Not necessarily.

Spending time to reconsider the market segmentation of your customer base and the unique conditions extant in each of those segments helps you identify areas that might benefit from additional focus and re-deployed resources.

Not all the market segments served by your business are affected equally by the economic winds. Not all market segments have adopted your products and services to the same degree. Not all market segments are afflicted with the same competitive infestation. And most importantly, not all segments of the market receive the same economic value from your product offering.

For example: Let’s say that, in general, customers in a particular market segment garner a 10X economic benefit from your product in a relatively short time frame. That is, the economic return on what they buy from you is 10 times more than they paid. In other segments, the return may be less. It is more likely that focusing additional effort in the market for which your product yields the highest return to the customer would have a higher probability of success than expenditures in other areas where that return is less.

In contrast, broad-brush marketing initiatives intended to expand a firm’s reach are less efficient because they: a) dilute resources, b) dilute the economic return differentiation of your brand, c) begin to encompass more competition in each new segment and d) don’t adequately leverage your greatest successes. Focus is likely to be more effective and profitable.

Upside Potential #2: Pricing

This alternative has two options: 1) holding prices and 2) increasing prices

Holding Prices: The competitive nature of tough economic times inevitably presents opportunities for price cutting, particularly as a means to close hotly-contested deals. The reasons for this are many. First, weak, undifferentiated competitors are starting price wars. Secondly it’s the easiest option for the sales person and requires the least amount of sales effort. Third, it typically doesn’t make much of an impact on sales commissions, unless the commission is tied directly to the profit margin of a deal. Fourth, sales people are not trained or disciplined enough to sell on value. Fifth, in tough times customers (particularly purchasing managers) know they can request price concessions and “work” one vendor against another. Finally, owners and managers frequently don’t have enough good first-hand information or a well-enough established relationship with the key customer decision-makers to mitigate price discussions.

The truth is, allowing price cutting, even in tough economic times, is really an admission of several foundational weaknesses. The product is may not be providing a differentiated economic value to the customer (wrong target customer). Management may be out of touch with customer decision makers. The strategic market segment focus is one that has too much competition. Or managers don’t understand how to direct their sales team on how to avoid price-based competition.

In a mini-workshop, I asked CEOs of small to mid-sized B2B firms to imagine their best product being purchased and used by their best customer. I then asked them to pencil out what they thought the 3 year economic impact would be on their customer – that impact being the amount of profit their product would drop to the customer’s bottom line. For example, if their product was of very high quality, what would the economic impact be to the customer for purchasing the high quality product vs. a lower quality product from one of their competitors?

In this 15-minute exercise, not one CEO was able to arrive at an answer. If the CEO can’t describe it, how can they expect their sales people to? If the sales people can’t explain it, how can price-based competition be avoided?

Raising Prices: A number of years ago we were working with a client whose new product adoption was stalled, gaining virtually no traction in the marketplace no matter their continuing effort to increase distribution agreements. It was priced 3X higher than the most popular competitive approach. Of course, the sales people thought their job was futile and continually pleaded for significant price reductions.

A brief assessment showed that a certain portion of the tiny installed base went to a segment of the market whose needs were unique. Only this product could meet those needs, for a myriad of reasons. (Interestingly, initially the market had found my client, not the other way around.)

Rather than reduce prices we suggested the business refocus their efforts to this one segment, highlighting to potential customers the unique fit and match of the product to their unique needs. After focus and redeployment of time, money and energy (no increases), adoption took off, with no accompanying price reduction.

Now some people would call this just another version of Revenue-Upside, Option #1 – Market Focus. That’s largely true. However, the rest of the story is that while focused and penetrating this particular segment, customers began to request additional features and functions – which in turn led to increased selling prices. In the end, the average price point rose to 4X its original. (Remember, the original was 3X the competitive approach).

At no time was there a need for a price reduction and the business turned completely around, growing much faster than anyone had anticipated. By focusing on market segments where the economic value and unique characteristics of your products are understood, the opportunity exists for improved performance products at increased prices.

Upside Potential #3: Fragmenting Offerings

Sometimes fragmenting your offering into more affordable pieces makes it more digestible for clients. Increased revenue accrues when decisions that otherwise would have been delayed can be made with smaller financial commitment by the customer. This provides your firm at least a small amount of revenue vs. none. It also sets the groundwork for follow-on purchases.

When fragmenting your offering, selling prices of the fragmented pieces need to be set so that the sum of all the pieces of the fragmented offering sum up to more than what would be charged were the product/service sold all at once. Is this “sum-of-the-parts pricing” gouging? No. The costs of doing business associated with the planning, coordination, administrative management and handling of multiple orders justifies the increased pricing – and you can be honest with customers about that price penalty. They understand that it costs more to do business that way and might even be encouraged to buy larger chunks to avoid paying that premium.

Depending on the type of product or service, fragments or phases might be identified as any on the following list: planning, design, testing, tooling, manufacturing, test, integration, set-up, training, service and/or recycling. The bottom line is that fragmenting your offerings should make it easier for customers to buy something rather than not buying a more costly nothing.

Upside Potential #4: Adding Services to Product Lines

Have you noticed that, these days, nearly every durable-good purchase comes with an offer to buy a replacement or service contract? Last week I bought a 16GB PC thumb-drive for $27.99. The checkout clerk asked if I wanted to buy the replacement warranty. I declined, but certain types of renewable service warranties can be very profitable add-ons.

Upside Potential #5: Acquisition or Licensing

Opportunity to acquire businesses and intellectual property during major economic downturns increase as companies struggle and values are depressed. However, as with any acquisition at any time, there is reason to be cautious.

Buying a competitor’s business to capture their customer base (barring SEC denial) is not necessarily a coup, even at a bargain price. Your competitor’s customers may be receiving a technologically obsolete, poor quality or functionally inferior solution. In such a circumstance, you would be wiser to boost investment in your own product development effort vis-à-vis buying your competitor.

Opportunities for acquiring intellectual property may arise more frequently in tough economic times as well, as challenged companies look to find sources of cash. Turning IP (purchased or licensed) into products and then into cash, however, doesn’t typically happen quickly. A better way to ensure a speedy IP-to-cash transition is to acquire IP that can be integrated quickly into your current product offerings, increasing their functionality, their value to the customer and their selling price.

Just Don’t Do Something, Sit There! Think!

In most businesses the ratio of execution-driven people to strategic-thinking people is low. Of the two roads to survival in a downturn, expense reduction and top-line, the expense reduction road is best travelled by the tactically driven, the top-line by the strategy-minded.

The strategy-minded are often those at the top of the organizational pyramid. So, it’s only self-discipline and personal values that will compel people at the top to consider revenue upside.

George C Scott in the movie Patton said this to his troops.

“I don’t ever want to hear we’re holding anything. We are advancing all the time.”

Be brave. Seriously consider the revenue-upside options in the face of adversity.

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Learn more about the QMP Marketing and Sales Engine and how it can revitalize both top and bottom-line growth