Situation: A company has determined that market shifts off-shore have neutralized their strategy for the past two years. They need to find new markets that offer growth potential. How do you find and evaluate new markets?
Advice from the CEOs:
This is a classic competitive strategy challenge any time a company wants to expand within or beyond its core business. Michael Porter of the Harvard Business School is a top expert on competitive strategy. You can find talks that he has given on TED Talks and elsewhere on the Internet that can help guide your efforts.
Do a SWOT analysis. First, figure out your vision and analyze the strengths that you possess that will fulfill that vision. At the same time analyze your weaknesses to provide a counterpoint on what should not attempt to do. Then consider both threats and opportunities. Have these analyses in place before you expend major effort responding to or developing new opportunities. There are more opportunities out there that will end up as dead ends than there are profitable opportunities.
Don’t discount the expertise that you have developed over the years in your specialty. This is the area of your greatest profits both now and historically. It is likely to remain so in the future.
If you need additional resources to meet existing or new client demand – particularly if these involve activities that are less profitable to you – explore partnerships to access this expertise instead of trying to do everything yourself.
Situation: A company has learned that a competitor has cloned their client development approach. This approach enabled the company to gain early market share. They have since moved up-market and have enhanced their sales tactics. How should the company respond to the competitor’s tactic?
Advice from the CEOs:
Reconnect with the market contacts that got you where you are. Be sure that they are aware of your track record, the value that you provide your clients, and reinforce your current market development focus. Now that you are established, position yourself as the proven producer who consistently produces results.
Study what the competitor is doing, who their target customer is, their close rates, and what if anything they are doing to enhance their close rates. Learn from them and copy or improve on their practices where this will yield benefit.
If your sales development is based on referrals, enhance the rewards to contacts who bring you new business in your prime target markets.
Your principal concern may not be your client base, which is likely unaware of the differences in your versus your competitor’s approaches, but in the referral structure that is your primary source of new business. Focus effort and resources to shore up your relationship with your referral base.
Focus on your strengths – performance and excellence in managing client relationships.
If the competitor is focusing on down market accounts that you no longer cultivate, then expect them to succeed in this market. Become the provider of choice to up market accounts and the natural referral choice for these accounts. If the competitor stumbles, you may pick up unexpected business.
Situation: A company has been approached by an international business development specialist who wants to help them expand into Asian markets. The company would need to hire local resources to support business that was generated. Most of this would be cookie cutter as opposed to creative work. How do you work with an international business development person?
Advice from the CEOs:
Research the country markets where the specialist can help you and focus on the more developed and promising markets first.
If the specialist that has approached you has a local presence in the markets in which you are interested, lean on this person for help getting you started – office space, staff support, and so on.
One company started a subsidiary in Canada. The CEO believes that you must have a highly trusted person to own the project. Success is all about the relationship with this individual and their knowledge of both local and American culture.
Another company hired very promising business development person for a large Asian market. As the relationship progressed, they found that this individual was double dipping – working for them and their competition at the same time. Apparently this is acceptable in that culture.
Many cultures are relationship based. Local contracts are critical. Does your specialist possess these, and are they premier companies or also-rans.
Talk to individuals in your industry who have experience in the region.
Have your eyes open and recognize that this is will not be a quick process.
A CEO is concerned about a possible downturn in the company’s market. They have survived the Great Recession and want to assure that they continue to survive future downturns. How do you succeed in turbulent markets?
Advice from the CEOs:
In turbulent markets, companies do everything that they can to reduce costs. This includes just-in-time ordering – regardless of lead times which they view as the supplier’s problem, delaying orders until they have confidence that they can sell what they order and produce, being miserly with cash, and demanding lower prices – even if supplier costs are rising. Dealing with each of these requires a steady head and creative solutions.
Spend as much time as possible meeting with important vendors and clients. Maintain the dialogue. They need you as much as you need them – without your products and services, their business is compromised, too. Spend time finding and cultivating the right relationships in client companies. Most of the time, this will NOT be the purchasing departments, but higher ups within the business units who are being pressed by their superiors to generate sales and revenue.
Pushing harder does not work in turbulent markets. Too many others are doing this.
Change your message – what used to work does not work now. Adjust your message to the times and adapt your message to your customer’s needs.
People want choice, and to do business with those whom they can trust to deliver.
Develop good case studies and testimonials – stories that your customer can share with others in their company.
Adjust your sales approach – look at SPIN Selling (Status, Pain, Implication, Needs-Payoff).
Don’t cut sales and marketing – focus it on the sectors that have cash and who are using the current market to grow. These people will continue to buy.
Look at what worked for you in the last five years – this situation is similar.
Look at your communications through the eChannels – if your competition is there, you should be too. For example, explore LinkedIn.
Special thanks to Jennifer Vessels of NextStep for her contribution to this discussion.
Situation: A company was challenged by a client to design a product to demonstrate the capabilities of the client’s processor. The result was a wonderful success, and has received very positive press. The client does not care about the product, only about their processor. How does the company test the appeal and potential marketability of the new product?
Advice from the CEOs:
Go to a local arcade, for example one operated by Golfland USA or a multiplex theater. Show them your product and ask whether you can test it for appeal with their customers. This will enable you to measure coin-drop numbers and generate demand and market appeal data. With these data you can assess the value of either selling or licensing the product. The objective is to see whether the product generates sustainable demand, or whether it is just a short-lived curiosity.
The big issue with a product like this is very simple – is it addictive?
If your initial tests show that the product generates sustained interest and revenue it is similar to a console game. There are a number of avenues to pursue, including:
Early exclusives use agreements with casino or theater chains – it will have value if it helps them to drive traffic to their venues.
Novelty markets – corporate events, etc.
Evaluate a lease model for target venues.
Consider selling the product to air table companies as a demo unit.
Situation: A company’s customer base is experiencing market softness and uncertainty. Customers are tightening budgets and delaying purchase decisions. How do you boost sales in an uncertain environment?
Advice from the CEOs:
Offer incentives to prompt customers to buy now instead of waiting. Two potential options:
A limited time discount – Sign by <date> and save X%.
Pre-announce a price increase. Follow this with a promotion – buy now, before the price increase.
If you are selling a service, package your service options in smaller chunks while pricing them so as not to erode your margins.
Consider 30 day trials for $X, or discounted pricing for large or committed long term purchase contracts.
Examine your sales process. Are your sales people speaking to the right people? Try to move the sales process up a level if this gets you to the decision maker.
If some of your sales people are significantly outperforming others, give them incentives to share their sales techniques with other members of the sales team.
If the issue is sales productivity, leverage someone else’s sales team through a partnership. The partner incurs the sales cost while you focus on implementation.
Look for opportunities where a partner can sell your product on top of theirs to boost value of the overall offering and increase their own top line.
Situation: A company’s sales process is currently ad hoc with a 20% close rate and an unpredictable pipeline. The CEO wants to develop an organized sales effort. How do you mature from an ad hoc to an organized sales effort?
Advice from the CEOs:
Use the same discipline that you use to develop and bring new products to market to develop and engineer an organized sales effort. Start with a clean slate. Develop a full business plan and process to support your sales. Set projections and milestones, assign responsibility and accountability, and hold regular meetings to monitor progress and adjust your tactics.
Utilize the company’s knowledge of the market and your customer base to better understand your sales efforts to date. For example:
Look at your sales history, and look at the cases where you have closed business. Are there commonalities or patterns among clients with whom you have won new business?
Similarly, look for patterns in situations where you did not close new business.
Look for a sweet spot which characterizes business deals that you’ve won. If you find that in past efforts there is a segment where your close rate is higher – perhaps among clients of a particular size or in a particular industry – hire a sales executive who has a history of success in this segment of the market. This will improve your close rate and provide a base from which you can expand your sales efforts in a planned and orderly way.
Determine your most important market differentiation – what makes you special – and validate this with current and past customers. Make sure that your differentiation is as important to clients as it is to you. If it isn’t find out why clients chose you rather and your competition.
Is your sales process reactive or proactive? Until you truly understand your market, it is reactive. Once you understand where your sales efforts are most effective, improve your knowledge of this segment of the market and focus both your sales and marketing efforts here to boost your results.
Situation: A company has a successful product, but the market is changing. Previous customers were savvy, but the market is shifting to more naïve customers who don’t understand how to use the product. How so you respond when the market for your product changes?
What you are seeing is a typical market evolution. (See Clayton Christensen’s book Crossing the Chasm.)
When a new product is introduced, early adopters are typically savvy users who quickly grasp the utility of the product. They don’t mind some inconvenience provided the product is useful.
As the market matures and starts to attract mainstream customers, new users will not be as sophisticated and expect the product to be easy to use.
If you don’t adapt to these new customers your product will languish as new competitors enter the market with user-friendly adaptations.
The path is clear. Figure out how to make your product easy to use. If you use a GUI (graphic user interface) make the GUI intuitive. Allow customers to get what they need with as few choices or clicks as possible.
These changes may alienate more sophisticated customers, but they usually only represent a small segment of your potential market.
Add a customer-friendly service component. This builds a service income base around the product. You have different options.
Align the customer with appropriate level of resource – you may not require high level resources to assist the customer, particularly if the product is one where the service consultant only needs to be one page ahead of the user.
Outsource the service component to a partner or use independent contractors.
Consider a remote monitor system:
A dashboard interface with easy to read visuals or messages that tell the customer when service is needed. This will enable them to perform simple maintenance using your tools, or alert them when they need to contact you for service.
An example is Norton’s evolving system of products that enables an unsophisticated home computer user to either use Norton tools to perform routine maintenance, or directs them to the Norton web site for assistance or more sophisticated solutions.
Situation: A company wants to expand its markets and customer base. Currently their business is dominated by a single customer. What best practices have you developed for identifying new customers and markets?
The key to getting new customers is to devote dedicated time to this task.
If your company is populated by engineer or software specialists, consider hiring a sales professional – a commission based hunter sales person who has experience landing big accounts in markets similar to yours. You may pay this person a good percentage of sales for brining in this business, but gaining the additional business can be worth it.
Much depends upon your relationship with your large customer. When a single client has rights over or ownership of the technology of the company but is not pursuing broader markets that the company is interested in, is it feasible to negotiate rights to pursue this business?
The larger client will pursue their own interests, not those of the smaller vendor. Perhaps a win-win deal can be worked out, but it may be difficult – particularly if the larger client is concerned that use of the technology in other markets could affect its interests in their primary markets.
Be very careful in this situation. The easiest tactic for the larger company to defend itself from a perceived threat is to sue and simply bury the smaller vendor through legal expenses. While the smaller company may be legally within its rights, deep pockets can beat shallow pockets through attrition.
In the case that the larger client simply continues to buy all capacity of the smaller company, an alternative is to raise rates, or perhaps to just say no.
Consider recreating the opportunity – create your own adjunct proprietary product with your own software or design talent and expand your horizons with this product.
Be aware, the large client can still sue if there is any appearance that your proprietary product impinges on their product rights. As in the case above, the larger company has the resources to bury the smaller company in legal expenses regardless of who is legally correct.
Situation: A company has just learned that a new, much larger competitor is moving into their market. They are concerned that this may severely impact their growth and even their existence. How do you respond to new competition in your market niche from a much larger new entrant, particularly if the new player comes in with a low pricing strategy to buy market share?
Advice from the CEOs:
Take a lesson from those who survive a move by Walmart into their territory:
Boutiques and high service specialty stores survive Walmart – especially those that focus on personal service. Walmart does not provide the level of service that you find in one of these stores and doesn’t know their customers as individuals. Boutiques may lose some price conscious customers, but these are not the customers that provide good margin to them.
Use your personal knowledge of the marketplace and your long term relationships to your advantage – including your reputation with existing customers when going after new customers.
You may remain more profitable than the larger company, especially on a per transaction basis, based on your knowledge of the territory or business niche. Walmart can’t tell you the best product to perform a home repair.
Focus on your strengths in the market, and don’t assume that all large companies are Walmarts. Walmart has a unique set of talents and a tightly controlled process. This may not translate to other markets – especially services which are very personal.
Research the reputation and business practices of the new entrant in their other territories. What are they known for, and what are their weaknesses? You may be able to learn this by networking with their current competitors and customers.
If you are a multi-generation family business, consider promoting your “old world skill” and established reputation and expertise.