Tag Archives: Segment

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the originators of available market data to get their assumptions, comparative data and any other findings that may not be published but are beneficial.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 Improve Infrastructure to Manage Cash Flow? Seven Points

Situation: A CEO wants to improve management of his company’s cash flow. While this is particularly important during times of tight cash and rapidly changing market conditions, the CEO wants to know what others focus on when monitoring cash flow in their companies. How do you improve infrastructure to manage cash flow?

Advice from the CEOs:

  • Track project mix and margin contribution both in part and in total. To accomplish this estimate relative contribution margins of different project types.
  • Adjust sales targets and commissions to emphasize projects with higher contribution.
  • Segment the company’s business model by margins, overhead, and cash flow. Set targets and drive focus on profit per “X” (selecting the proper indicators).
  • Analyze contribution per direct cost factor, for example per engineer on payroll.
  • Develop detailed cash budgets on a monthly or even weekly basis when times are uncertain. For example, inflows and outflows by major category tracking actual cash receipt or disbursement.
  • Start with broad projections, and refine the analysis over time as the company better understands the factors that drive cash flow and profitability.
  • As understanding improves, formulate value propositions for salespeople which reflect the most advantageous cash flow contributors of the business.

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How Do You Quickly Shift Your Marketing Position? Five Points

Situation: A company wants to shift their marketing position quickly and effectively toward a new focus. The new focus is the result of breakthroughs that they have developed that have opened new product and service opportunities. How do you quickly shift your marketing position?

Advice from the CEOs:

  • Hire a strategic marketing consultant to help analyze the market, identify unmet needs and unaddressed segments of the market where the company can establish a strategic advantage.
  • Pick an area where the company is known or can be known as the best. Create differentiation by specializing in this segment.
  • Add both sales and marketing positions to guide the refocus.
    • Marketing is more than just collateral. It is strategic positioning, understanding changing customer needs, and thinking creatively about how to leverage those needs and the company’s capabilities to maximum advantage to support the sales efforts.
    • A good marketing platform provides salespeople the structure within which to operate.
    • How do you find good candidates? Talk to editors and publishers of trade journals. They know marketing contacts and who is good.
  • As the company shifts the model, look for ways to reduce utilization and down-time for engineers and other staff.
    • Maximize the value of this down time.
    • Develop case studies or materials to support the sales effort.
    • Create new concepts or capabilities to add to the offering.
  • Several other CEOs noted that with the quality of the projects that the company has completed for current clients, the company already has both the capabilities and proof of delivery that many sales and marketing people would love to have. Use these as assets and leverage them.

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What Software Version Do You Launch First? Three Suggestions

Situation: The CEO of an early-stage software company has two versions of its software that they could launch. It has an alpha site set up and is configured to serve up to 10K simultaneous users. There are two beta versions that they could launch next. What software version do you launch first?

Advice from the CEOs:

  • Use the more basic version for the Beta launch.
    • Restrict the Alpha to individuals within the company until the major bugs are resolved. Once this is ready, proceed to Beta launch.
    • The right target users will be both early adopters who are effective sneezers.
    • Select a segment of the market that is the home of both enthusiasts and sneezers – for example, if it were the music market target dance music – a crowd that is easy to attract.
    • Target a service that many in the game and related early adopter worlds like. At the right time they will sneeze frequently to their friends and contacts.
    • Let the creative audience know that the Beta version is an artist-centric site, but that it will be followed soon by a consumer link that they can tell their fans about.
  • Assemble a knowledge bank of experts to guide the company as it progresses through Beta. These experts can and to help the company prep as fully as possible prior to launch.
  • Crossing the Chasm – when the company is ready for this.
    • Find an appropriate venue that attracts target users. Again, as an example, in the music world this could be American Idol. Through American Idol, the play would be to allow fans to access and download the songs that their favorite contestants sang this week, plus other songs from their favorites.
    • An approach like this quickly opens a large market for a new app.

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How Do You Monetize Your Business Model? Five Suggestions

Situation: The CEO of a start-up software company focuses on connecting potential parties to business opportunities. Early signs are that this offering has legs and potential parties have responded positively. The critical question for the CEO is how best to turn interest into revenue. How to you monetize your business model?

Advice from the CEOs:

  • The first step is to segment the audience and determine both the potential for each segment to both benefit from and fund the service that they receive.
    • Individual contributors may not have a lot of financial resources but may be interested in participating as employees or providers of expertise or services. They also may know others and can spread the word.
    • Collaborating organizations may be able to offer both funding and services to help build and sustain momentum.
    • Companies have funds to support the effort provided they see value to their bottom lines as a result.
  • Suggest a fee or contribution for services from companies who will benefit. Provide guidelines or a sliding scale of fees depending upon duration of services provided to the company. Make it clear that moneys earned will be reinvested to increase the range and depth of services offered.
  • Suggest a sliding fee scale for individual contributors based on the financial benefit that they receive.
  • For companies and collaborating organizations offer levels of membership or recognition for support based on benefit received.
  • For all segments – start with small, timed fees and increase these as the model proves its benefit to them.

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Can You Pass Higher Expenses on to Customers? Six Thoughts

Situation: A company is concerned about increased energy expense as prices rise, and the impact on the bottom line. Pricing in their market is competitive. What’s the best way to recover these costs? Can you pass higher expenses on to customers?

Advice from the CEOs:

  • Businesses regularly pass on their increased gas and transportation costs to both commercial and retail customers as these costs rise.
  • This isn’t just true for gas and transportation expenses. As other expenses rise, companies regularly increase their pricing to account for increased costs.
  • Is it necessary to send out an announcement letter about the company’s intent to do this?
    • Some companies do. Others just start adding a line with a gas surcharge to their invoices. This is happening frequently enough so that most customers just pay it without question.
  • What do you do if someone objects?
    • If a customer objects, you always have the option to credit them the charge.
    • Again, most customers are so accustomed to seeing and tolerating these costs that they don’t object.
  • Look at the company accounting system. Are costs and performance trackable by business segment? Performance numbers show both the impact and magnitude of energy cost and improve the ability to manage the business.
  • If the talent is not present to either improve the current accounting system or to shift to better software, bring in part time accounting help. A good source is Robert Half International/AccountTemps. The cost of adjusting the current system will be recovered as the company gains more control over expenses by segment.

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How Do You Finance Growth? Three Options

Situation: A mid-sized company faces challenges financing their growth. Investment of time, energy and resources precedes the reward of future revenue. It can be difficult to balance the cash needs of current operations with new growth opportunities. How do you finance growth?

Advice from the CEOs:

  • Have you analyzed growth opportunities and evaluated which could increase your cash flow? For example, if you increase manufacturing efficiency, can the savings help to finance growth?
  • If you produce parts or products for start-ups, can you structure the relationship so that if the start-up become successful and is subsequently purchased by a larger company there is a bonus payoff for the work that you’ve done?
    • Analyze – by project, not company – the jobs you’ve done that have eventually become large volume opportunities. Try segmenting your analysis based on the source of the original project: jobs for start-ups, mid-sized and large companies. This may provide insight on where to focus future efforts.
  • Another company performs clinical services for both big pharmaceutical companies and start-ups. To take advantage of the upside from working with start-ups they take payment both in cash and in stock.
    • One option is to set up a separate Investment LLC – not tied to the operating company but owned by the same people – that takes the stock position and can, at its option, provide limited venture funding to start-ups.
    • Start-ups are not yet threats to your large customers but are potential future acquisition targets. Because the stock financing is done outside of the operating company, it is more difficult to trace back to the operating company. Further, competing large companies have not tended to see these investments as threatening the way that they would view direct investment by the company in a competitor. At the time of acquisition by the larger company, the member’s ownership position in the start-up is liquidated.

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How Do You Build in a Declining Market? Five Solutions

Situation: Revenue for a product and craft business has been slipping. At the same time, their competition has been disappearing. It is clear to the CEO that demand is and will continue to be present because of the market that the company serves. The question is how to maintain the profitability to survive long-term. How do you build in a declining market?

Advice from the CEOs:

  • The keys to recovery in a business like this will be in two areas: improving sales and increasing margins.
  • To increase sales the choices are more aggressive marketing and selling to existing customers or creating new markets like previous generations did when they started the business. Consider services that you could bundle with your products to augment the ways that customers use them. It will be the responsibility of your sales and marketing teams to demonstrate these product/service bundles to increase sales both to new and existing customers. This will help to solve the revenue slippage.
  • The other side is ongoing efforts to reduce cost which will, in turn, improve your margins. Costs can be reduced in creative ways that are not obvious. These include improvements in purchasing, reduction of waste, recycling of component materials, and inventory controls. It will be the responsibility of your production, purchasing and inventory management teams to develop these solutions. Assure that these teams are recognized and rewarded for their solutions.
  • Look at the segments of your product offering. Are they declining at the same rate or are there differences? This will help you to focus your efforts, as a company, to grow market share even if the overall market is declining.
  • Other suggestions for increasing sales:
    • Take advantage of the craft trends. Do this with NEW talent – not tired talent.
    • Consider partnerships and collaborations.
    • Set up contests and craft classes.
    • Look at how other industries promote to the craft industry and follow their lead.
    • Consider kitted craft products.

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How Do You Optimize Your Business Model? Six Points

Situation:  A company is in the process of shifting their business model to better address customer needs. They have three different models under consideration. Management is split between these models, but must arrive at a consensus. How do you optimize your business model?

Advice from the CEOs:

  • Right now, you are considering three different potential models:
    • Tools – your old model
    • Data – produced by your old model
    • Service – your new model
    • These are different models with different prospects.
  • The money makers in marketing focus on data, not tools. Data is information, and this is what is valuable to clients. If you want to focus on the data component of your offering.
  • Currently, you are scraping data from social media and matching this to your client’s database on a real-time basis. There’s a model and value here because you are enhancing your client’s current database by making it more useful and actionable to them.
  • You have tools to enable and add value to existing client databases by allowing them to better segment their database. Again, there is value here.
  • Your core IP is the ability to correlate diverse data sources. Have you protected this IP? If not, this needs to be a top priority.
  • How much information that you scrape from social media sources can you share without violating privacy? This is something to think about because people are becoming increasingly sensitive about companies collecting their private information.

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Is It Time to Hire a Marketing Manager? Five Considerations

Situation: A small company has always used guerilla marketing as its marketing modus operandi – trade shows, etc. Their VP Sales recently left. They feel a need for a marketing plan and hired a company to assist them in understanding how they are perceived by their customers.  Should they continue to outsource, or is it preferable to bring marketing expertise in-house? Is it time to hire a marketing manager?

Advice from the CEOs:

  • How well do you understand your customer profiles? It is important to characterize, segment and understand your customers before you can understand your marketing.
    • What is the company size of your typical customer? Small companies don’t spend a lot on big trade shows, other than perhaps sending a couple of people as attendees. Event marketing may be a more effective way to reach small customers.
    • The company that you hired should be answering these questions for you.
  • Marketing is about creating an environment in which people are aware of you and find you versus your having to go out and find them. Social media have fundamentally changed the marketing challenge, emphasizing pull versus push marketing – commercials, ads, billboards, etc.
  • An important role of marketing is perception management so that when a lead or need arises, your company is a natural answer.
  • Whether or not you hire a person, you need a marketing plan. Once you have a plan, you need a marketing budget.
  • The company is now at 35+ employees. Fischer’s growth curve research indicates that at this size you need a professional in the marketing position – someone with experience who knows the ropes. This person could be inside or outside.

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