Ch3: Targeting the right markets

1. Ch3: Targeting the right markets Go To Market Strategy

2. Overview • Review of Chapters 1 & 2 • Chapter 3: targeting the right markets • 1. Common targeting pitfalls • What not to do: Enconix • 2.Six steps to successful targeting • What to do: Marriott International • 3. What we learned • 4. Critique • 5. Questions

3. (P.7) Today, it’s no longer just about what you sell; it’s also about how you sell it Go-to-market strategy: A game plan for reaching and serving the rightmarkets, through rightchannels with the right products and the rightvalue proposition Review: (Ch 1) Go-to-market Strategy Choice and alternative: increasing channel availability Total Customer Experience Purpose • Attract and retain the • most desirable customer • Increase sales with lower • cost

4. Ch5: Channels and Partners Ch3: Market Ch4: Customers Ch6: The product and The value proposition • 4 ingredients of a winning go- to market strategy

5. Review: (Ch 2) The ten commandments of going to market • Go-to-Market strategy must start with the customer • Exact information can gather from customer: product, channel, value proposition, markets • Aggressive use of low-cost channels will have a dramatic impact on profits • How you sell has to fit with what you are selling • Customer, Economics, Complexity • There is Always a tradeoff between market coverage • and control • The high- control strategy vs. The high- coverage strategy

6. Not Every go-to-market solution has an ‘e’ in it • 3 reasons why ‘e-channel’ is not work • Getting channel cooperation is more important than • preventing channel conflict • You cannot be everywhere at all times for every customer • The business model has to be sound for a go-to-market • strategy to succeed • It takes time for new channels to become productive. • Patience is necessary • 12 to 24 months to build and roll out a new go-to market strategy: • To win big a go-to-market strategy must be innovative • and different

7. Ch3: Market Chapter3: Targeting the right market Targeting the right markets • “It’s impossible to choose a successful mix of channels until you determine which markets those channels are supposed to reach.” –Pg73

8. What not to do: Enconix • Picked the wrong market: Enconix • (1998) 246 employee and over $55 million in sales • Disciplines and savvy business development focus • Niche of small-to-mid sized industrial manufactures • with $50 to 250 million in revenue Developed understanding of the needs and information technology requirement of their market : (1990s) ERP SCM CRM Developed new software and service to meet the expanding needs

9. (1998) Change the direction: Y2K focus Software developers Y2K specialist • Less impact of Y2K: the failure of Y2K focus • ERP business had changed dramatically • Customers reduce the IT spending due to Economic slow down Insignificant and biased marketing research Change the direction: PRM focus Y2K specialists PRM consultants • Consumer goods manufactures • Food distributor • Computer hardware vendors New target markets = No experience No understanding (Aug 2001) Sales: $ 28M

10. The Four Pitfalls of Market Targeting…and How to Avoid Them • Trap #1: Chasing untried and unproven “blue sky” markets…and neglecting solid, available business that’s close to home (p. 81) • Trap #2: Putting too much weight on 3rd party market research reports, which often have inaccurate, agenda-driven estimates • Trap #3: Assuming that markets can be “good” or “bad”, outside of the context of your unique offerings and your business goals • Trap #4: Ignoring crucial internal sources of information when evaluating new market opportunities

11. Market targeting trap #1 • Chasing untried and unproven “blue sky” markets…and neglecting solid, available business that’s close to home • Usually, the pursuit of entirely new market opportunities is the slowest, most expensive, least effective, and least certain way to increase revenues -Reasons Why??? 1:Customers: New customers in new markets are difficult to reach 2:Products: New products are much more difficult to sell than existing ones • Companies fall into two basic camps: 1: The “Blue Sky” approach (e.g. Enconix) From the established to the uncharted 2: The “Build on your strengths” approach Grab the low hanging fruit first, then go higher • To avoid this trap remember: Most Companies have more potential business then they could ever handle

12. Market targeting trap #2 • Putting too much weight on 3rd party market research reports, which often have inaccurate, agenda-driven estimates • Recently, many market research firms have been publishing highly inflated estimates • At the minimum, get multiple, independent sources of information when evaluating a market • Take the time to learn how these conclusions are being made • In the end, you can eliminate the risks of over-reliance on 3rd party market research by doing some of the work yourself • The bottom-line is that you should never make the decision to participate in a market based solely on the basis of 3rd party research,

13. Market targeting trap #3 • Assuming that markets can be “good” or “bad”, outside of the context of your unique offerings and your business goals • Just because a market looks promising, doesn’t mean it is a good opportunity for you • The right market depends on what you’re trying to sell, and if that new potential market fits within your business goals • Example: Steady growth vs. maximum sales growth • To avoid this trap remember, there is no such thing as a “good” or “bad” market, each should be evaluated with respect to your unique business situation • Consider the costs, risks, and the time-horizon of the market entry

14. Marketing target trap #4 • Ignoring crucial internal sources of information when evaluating new market opportunities • Within most organizations lies a wealth of information about opportunities and risks in the market place which most choose to ignore • To avoid this trap look to three sources of market insight within your company: • The sales force • People who deal with partners or distributors • People who know a lot about the competition

15. Six-steps for market targeting* • 1. Develop a universe of markets • 2. Choose market evaluation criteria • 3. Evaluate target markets against criteria • 4. Validate markets with key prospects • 5. Prioritize markets for penetration • 6. Fine-tune target markets over time

16. 1. Develop universe of markets • Generate list of potential markets • Consider which markets offer good opportunities • Which are similar to those you are already successful in? • Get input from those within the company • Add markets recommended from other sources • Narrow down removing markets which: • Have no need for you product or service • Have prohibitive entry costs • Legal or regulatory restrictions

17. 2. Choose evaluation criteria • Choose a workable number of criteria • Criteria can include: • market size • market growth rate • ability to exert brand leadership • cost of entry • cost to serve • channel availability • competitive density • strategic fit • **There is no “right” set of criteria for everyone!!!

18. 3. Evaluate targets against criteria • Evaluate using a scoring metric • May not find information for all criteria • Be ready for information gathering • This step should produce 5-10 “good” markets

19. 4. Validate markets with key prospects • Purpose: final check of your best potential markets • Recommendation: • Call 30 customers in target markets over 3-4 weeks • Measure how receptive they are • Check for any potential sales • Produces group of attractive markets ready for you

20. 5. Prioritize markets • Two schools of thought on prioritization: • 1) Choose market which scored best evaluation • Pursues ‘best’ market first, but may not produce best results • 2) Choose market which offer opportunities right now • Decision should relate to time and investment costs needed to penetrate market • Create a “plan” for market penetration

21. 6. Fine-tune markets over time • Market conditions will change over time—it is inevitable • This is not a one-time process • Should be repeated at least once per year • The world’s best companies take a dynamic view of their target markets, and so should you!!!

22. Best Practice: Marriott International • Thorough and creative in identifying new markets • Travelers are diverse and cannot be served by a one-size-fits all brand • Scientific approach to market evaluation • 13 stage evaluation process that includes competitor analysis, fit with corporate goals, and mathematical scoring to rank opportunities • Ongoing market-tuning

23. What we learned… • Know thyself • Look toward your current customer base for growth opportunities • Formulate growth strategies that build on your strengths

24. Critique • Tool for continuous market evaluation? • Permanent cross-functional team

25. Questions • How can focusing on existing customers help a company achieve growth? Opportunity to increase share of customer, information concerning new market possibilities • Name three internal sources of information available when evaluating new markets. Sales force, People who deal with partners or distributors, and People who know a lot about the competition.