Establishing Target Market Data for business plans
In my career I have seen everything from highly focused and detailed market definition and sizing to finger in the air generic statements of the target market. If we understand correctly the driver/reason we want to define and quantify a target market, then perhaps we can strike the right balance of effort and cost versus usefulness and accuracy of target market definition. I am considering this subject matter from the position of preparing a credible business plan or business case for 1. Making a decision to proceed (perhaps also related investment decision) 2. Providing clarity and direction for market and sales development initiatives. Let us get some clarity around some terms that are used relating to markets.
Target Market: Is often the general term used to provide a high level communication to stakeholders as to where you may find customers and where you intend to do business. It may be defined descriptively in terms such as, Geography, Demographics, Technology, Buyer types and general macro-economic descriptors, and/or in terms of numbers such as Macro & Micro economic terms such as Numbers of companies of a specific Size, Revenues, Trends , Employees, Performance broken down into specific segmentation based on other variables.
Addressable Market: is that refined market definition where our advantage gives a compelling reason to the customers in that defined market to purchase our product and/or service, and we have or can acquire the capability to profitably sell to, deliver and support customers in that segment either directly or indirectly over the term of the plan or business case (suggest 2-5 years max). In its simplest terms our plan assures confidence we can reach the customers in this market and service their needs, whereas the broader definition above usually includes segments we can never access and/or may take many years to access.
Beach-head Market (Niche target market for entry):- We have to start somewhere when entering a new market, whether we are a start-up or a mature enterprise entering a new market (New Geography, New Application, New product etc.). Often referred to as “The Low Hanging Fruit”, it is that defined niche component of the addressable market where we will have the lowest risk and highest opportunity to successfully gain traction and secure our initial profitable revenues and hopefully reference customers.
So what should we focus on for our business case and plan?
Well it is recommended that we understand and validate each level of market definition above for our business as they are inter-related. However the amount of time and level of detail invested in each will differ depending on your position in the target market. As I am focusing on new market entry then the level of effort and detailed facts should be weighted heavily towards the Beach-head entry market, having confirmed there is an acceptable addressable market and that the over market dynamics remain attractive.
What do we need to know?
First we need to be clear on what the profile of our ideal customer is “Sweet Spot” (Easiest to sell and deliver to, who will quickly buy into our advantage and value proposition and deliver maximum sales and profitability at the earliest possible time) This is very important from many perspectives, most importantly market entry and market definition but also on an on-going process for Sales qualification. It helps also focus everyone on the importance of the advantage and who it is aimed at. The sweet spot profile is likely to change over time as the venture and market matures but having an initial definition of the profile will enable focus and traction. Criteria may include some or all of the following:
- Size headcount, revenues, profit, volume, etc.
- Age, maturity
- Business model
We now need to identify how many customers might meet the sweet spot criteria and group them as to specific traits. The questions we want to answer are:
- Are there sufficient numbers of these customers for the business to be both viable and achieve its vision? (The Size of Market is sufficient)
- Taking into consideration our capabilities and that there will be limited resources available , what are the sub-set groups and their profiles that are addressable? (We understand the structure of the addressable market)
- So they have the problem/opportunity and we have a compelling advantage for them in our solution but is there a “pecking order” in the groupings, this helps identify the beach-head. (We can define a validated beach-head segment)
- Can we reach them & How? (We know we can successfully sell and deliver to them)
- What are the alternative solutions currently available to the customer groups, who supplies these solutions? Types and profiles of current solution providers. This tells us there is a market because we have suppliers doing business with these customer groups. If anyone says there is no competition, there is likely no market, that competition may be internal. (We know the competition and our compelling competitive advantage)
- The dynamics of the market, static, growing, shrinking, changing, by segment (e.g. geography, vertical, industry, age, etc.)(We understand what is happening in these markets and how it creates opportunity for our solution advantage)
- List of the top 50 to 100 customer names we will target (We know where to start)
Where do we find this information?
There is work involved here , you can do it yourself or you can pay someone to do it for you, but you need to be intimately involved as you will need to learn and adjust as information and data becomes available.
Primary or Secondary Research
If you have a very niche, unique or game changer solution then you may need to carry out or commission primary research, that is go directly into the markets to potential customers and gather the data to identify and confirm a valid market exists and the dynamics of that market. For most businesses secondary research can be carried out by accessing primary research information carried out by others.
Sources of Information
l Public Data (Nace, CSO, Govt. published statistics and reports, Internet, etc..)
l Analyst Reports (Gartner, IDC, Boutique, etc.), Though these can be expensive and of limited value unless they are very focused on your target addressable and/or beach-head market.
l Investigate what your competitors are doing?
l Trade Associations (ICT & Customer related), including joining and active participation as well as sourcing their reports.
l Chambers of commerce in your target market
l Your current customers & suppliers may have operations in your target sector and can provide useful information as well as potentially making introductions.
l Your partners, even though you may be an early stage enterprise you may have already established relationships with different types of partners , these could include technology, channel, supplier partners
l Spend time in the target market , meet stakeholders, attend trade shows and conferences.
l Purchase customer/marketing lists, these lists can provide a lot of detail on named target customers (But beware there are lots of list suppliers and many do not deliver quality information and data, also they are trying to sell the same lists to everyone else including your competition)
l On-Line surveys and tele-contact programs.
Why commission research ?
- MR and research experts will be more efficient and productive
- They will have access to sources of primary research and reports
- It may be more cost effective than using your own time
- They know where to go to secure information and data
- They usually already have a knowledge base of data and information from previous research assignments.
- They have better skills, tools and processes for analysing and presenting the data and information.
Where will you find MR resources
- There are international and multinational providers of these types of services
- Local SME’s who specialise in your target sector are often very effective, especially those that are located and operate in your target sector.
- I have successfully used contractor web sites such as eLance.com, Guru.com, Freelancer.com to secure good market information and data (Beware and careful in your selection process)
CSF’s when contracting primary and secondary research
- Write a detailed ITT or MR requirements document
- Clearly state the date and information required and how you want it presented.
- State specific primary and secondary sources you may want included
- Require them to provide the credential of the sources of data and information
- If you are commissioning primary research , agree the key gates in the process, deliverables and approvals you require.
- Request a fixed price with defined deliverables
- Ask for sample reports of previous work
- Check references
- Keep it real focused to get the beach-head and/or addressable market you really need.
What should you have on completion?
- A clear definition of the addressable and/or beach-head target market
- Relevant segmentation
- The key data Headcount, organisations, sizes, revenues, Pricing, costs, profits, budgets, spend on your area, number of competitors and their profiles
- Trends and influencers
- Competitive profiles, groups, leaders, markets shares, SWOT
- Clarity on your advantage
- Validated assumptions on your revenue and cost drivers
- Validated assumptions on your lead generation and sales conversion rates planned