It is essential every company have a target market. The target market should be formal and defined. It should have rules attached to it about who gets in and who?s taken out. It is a dynamic system that keeps you focused on your goals.
How do we know what market to target?
Three primary opportunities can give you an advantage in the market:
You can be first in a market with a product. It doesn?t even have to be a new product no one else has. You must be first in that particular market to sell the product. First can also mean the prospect has never purchased the product before. First doesn?t have to mean ?first company to ever have this product.? First can mean being first to your target market or prospect. You could be the ?first company to sell me this product.?
You must offer the most competitive advantages in the market. You must truly be the best offering in the market. Who says you are best? The market says you are best. Don?t just think you are the best ? be the best.
You don?t have to be best in the world or best in the United States. You must be best in your target market.
Only means you are the only company offering what you are offering. This is a literal statement. It?s not like the Yellow Pages where everyone says, ?We are number 1?. You must be the only company selling this product offering. Being the only one with the offering can mean you win.
Once again, being the only one doesn?t have to mean being the only one in the world. It means being the only one to your target market.
Who says we are First, Best, or Only? Our market says so. When you select a market, and go to sell your product, your customer will tell you if you are First, Best, or Only. Will you be listening? That is the question.
Segment your market where you have an advantage of being First, Best, or Only.
Finding the Vein
When you segment markets, you are trying to segment a market where you can gain a competitive advantage. The simplest method I?ve seen is to be First, Best, or Only.
When you construct your product identity and corporate identity, you want to reflect this competitive advantage.
Within your segmentation, you are searching for a vein in the market where you can get a foothold. The vein in the market is group of businesses where cooperation can be built. You find common variables among the companies that you can identify and use in your revenue chain.
Often veins show up as vertical markets. I consulted with a telecom company that had a vertical market in automobile dealerships. By constructing a unique product offering we could target the vertical market by being the only telecom company with the product offering.
Over time you will find veins where First, Best and Only can be exploited.
Our Target Market Strategy:
- Structure your competitive advantage for First, Best or Only.
- Segment your target market.
- Find the vein and exploit it.
Guidelines for the Target Market
1. Don?t leave market selection to chance.
You must do the work on your market selection. Too many companies leave market selection to chance. It?s a learning game. You can?t wing it if you want to succeed. You need to be very strategical in your market selection.
I consulted with a technology company a few years ago that completely broke this rule. They have invested $12 million in their technology offering. Unfortunately, they developed a specialized product that required a very distinct target market. The company was burning through $300,000 a month. No target market. No sales. Painful!
Conversely, I consulted with a marketing company that perfectly targeted its market. It was an advertising product. We carefully selected the market and did a fax broadcast. We generated a 16% response rate. You?re lucky if you can get 2%. Why was the campaign so successful? The company knew its market. It set the rules and targeted appropriately.
You can?t guess. Do the work.
2. Set rules for adding and subtracting target companies.
I call a Target Market ?the box.? When you set rules for adding or subtracting companies from your target market you are building a box. It?s a great concept. It drives everyone in your marketing and sales departments mad!
People dislike definition. ?What do you mean I have to sell this group and not anyone I want?? You need rules to be able to better define your sales cycle. If you don?t set rules for getting in and out of the box then your Customer Profiles are meaningless. If your sales cycles are meaningless you are toast!
Sales and marketing people are a resource. Focus the resource. Give them rules. ?We market to companies that do not have IT departments.? This is an example of a rule. Sure enough, a sales person will spend hours trying to sell an IT department. Rules are guidelines but you need to set them. Whatever you define your target market as sets the rules for getting in and out of the box.
3. Train the staff to stick to the target.
Of course, it?s not fair to build a box, set the rules and not train the staff. You need to prepare training and education material for the staff about your target market. DO NOT ASSUME PEOPLE KNOW! They don?t know. You must tell them who the target market is. Don?t assume they will follow it either. Part of training is explaining the rewards that come from targeting the right market and the punishments for spending time on the wrong market.
4. Open new markets by design.
As you go about your marketing and sales process, inevitably opportunities will arise. We call this phenomenon ?positive deviation.? It is something positive that occurs that couldn?t possibly be planned for. When new opportunities do arise, you may be able to open a new market. Don?t just fly into it. Open it with a plan. Select your market variables. Build your rule set.
I worked with a software development company once. They went to market as soon as the software was functional. Their first target market? China. Was this by design? No. They were asked to attend a meeting and off they went. No plan. No funding. No market selection. Their reasoning? ?There are a billion people in China.? And your point is . . .? The company didn?t last long.
Don?t burn your market. When you set a market, and start to sell it, leads will progress through the sales cycle at a set rate for your product. If this rate is too fast you burn through your market very quickly. If this rate is too slow you don?t generate enough revenue to cover your cash flow. You need to adjust your marketing to get the right pace.