Tag Archives: Exclusive

How Do You Quantify Niche Market Potential? Five Suggestions

Situation: A CEO’s company focuses on a specialized niche market. One of his challenges is that there is little public or chamber of commerce information available on the size and characteristics of their market. How do you quantify niche market potential?

Advice from the CEOs:

  • Define the product / service very specifically. To narrow and refine estimates of market size look for the low hanging fruit.
    • What are the high growth segments of the target market?
    • What are the high growth industries of the target market?
  • To determine whether the market opportunity is $100M or $500M:
    • Define the company’s market more clearly – particularly the initial beachhead market where there is the potential to gain the most traction.
    • Recognize that there may be two markets: a high end market – relatively low gross sales dollars but high margins, and a low end mass market – relatively high gross sales but low margins.
  • Contact the originators of available market data to get their assumptions, comparative data and any other findings that may not be published but are beneficial.
  • Work closely with customers to build category / industry revenue estimates.
    • Segment the most active customers and increase the company’s share of their purchases.
    • Develop web site transaction capabilities to offer the company’s line as an adjunct to customers’ web sales.
    • Establish a Customer Council or Round Table to better understand the market dynamics and to differentiate the company within the market.
  • Sell the product and services’ features and benefits to the C-level, not just to engineers.
    • Sell to the CEO / CFO focusing on increasing shareholder wealth.
    • Determine a return rate for conversion to the company’s technology.
    • Reach out to professional segments that will naturally see value in the company’s process.
    • Seek an exclusive relationship with an industry leader to quickly launch new products.

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How Do You Reset Pricing When The Game Changes? Five Parameters

Situation: The Company sells customized products and pricing has been per product/per customer. A large client has proposed to purchase product rights across a number of products and uses. The technology is early in its expected 5-year life span. How should the Company set pricing to this customer?

Advice from the CEOs:

  • Start with a series of questions:
    • What is the value of your technology to the customer?
    • How much competition do you face?
    • What other solutions are available to the customer?
  • Based on this framework, ask contacts within the customer company open-ended questions that will reveal what is important to them including:
    • Licensing objectives,
    • Planned use of the technology, and
    • Any protections that they seek.
    • You need to understand these before you can make decisions on pricing.
  • There are several pricing scenarios:
    • Set up a scale with a declining pricing driven by volume.
    • A large lump sum payment now, non-transferable if the customer is acquired by another company.
    • A large annual fee to cover a preset number of uses and volumes, with small increments for additional purchases.
    • The final arrangement will depend on the priorities of the customer.
  • Find out what the customer is willing to pay, but you set the terms.
  • Ask what guarantees they desire to protect their position. This includes:
    • The customer’s key risk factors.
    • Whether they want exclusive or usage rights. Exclusive is worth more.

Key Words: Pricing, Custom, Technology, Life-span, Value, Competition, Licensing, Objectives, Protection, Scenario, Scale, Lump-sum, Annual Fee, Guarantee, Exclusive, Usage  [like]