A lion is fully capable of killing a rat and eating it. But it doesn’t waste its time in hunting a rat. This is because the calorific value of the rat is so little that it will spend more energy in hunting for the the rat. So it focusses on killing deer and antelopes.
I got into a deep discussion with my team on this topic today. I have quite an energetic team which does not accept my arguments on face value. They have to be satisfied with data to prove my point. So today’s post gets inspired by them.
You need to choose the markets in which you operate. If the payoff is not enough calories (large enough market which can give us sustained business) or there’s no strategic benefit to target a market, its better to avoid that market.
I would go one step further and want to identify first the most profitable market in what I want to sell. Lets take an example in the B2B space only.
Suppose I have only 2000 customers in my territory who are big and profitable who outsource a managed services contract for their IT infrastructure. Also suppose I know that there will be a turnover of 5% every year whereby these companies will choose a new vendor, which means 100 customers will identify a new vendor. Each customer can get me a sustained profit of say $100000/- per annum , so even if I am able to pick up 20 of these 100 customers (20% of the customers who will decide) I am able to make about $2m in profits per year from these.
Now on the other hand there are also another small 100000 customers who outsource some project implementation in IT. Also suppose I know that at least 10% of these will outsource – which means a 1000 customers will buy some project implementation. So you have a larger number of prospects to whom you can possibly give proposals. Most people would like to address this because there is a higher absolute number and therefore the chance of success seems higher.
So let’s go one step further and assume that here also we will have a success rate of 20% so out of 1000 possible customers you can get 200. This number is 10 times higher than the 20 customers you were looking for the managed services example. Now lets understand the amount of profit that we can generate is $1000. So after executing these 200 orders you will be making $200000/- or ten times less than if you were focussed high value customers.
The amount of effort in executing 200 deals will be much higher than in executing 20 deals and the customer satisfaction issues will also be much lower.
Its the same logic that the lion uses for arbitration and targets the deer rather than the rat for its meal.
Always look at leveraging the highest and best use for your effort wherever – in marketing or otherwise – the lion teaches us the same lesson.
Till next time then.
Since childhood we are taught this phrase. As a matter of fact I also use it frequently to tell my folks to keep them focussed on not wasting time. But within this phrase is a fundamental flaw of a linear relationship. If you will spend so much time …….you will get so much money.
But there is a very large leverage that is available to us which can multiply the value of time and make its value with money non-linear. The fractal nature of 80:20 can make, some “time” worth more in money than others.
This typically happens with mentors, coaches and customers who are willing to help you. To some ,like coaches, you can pay to learn something, to others you first give and then get.
I distinctly remember that when I was in my first year engineering in university, I was just not able to pick up a subject called Engineering Drawing. Maybe the professor’s wavelength and mine didn’t match and I flunked badly. Then my brother identified another professor and I took coaching from him and he taught me so well that not only did I excel in engineering drawing, for years after and till now I can explain the the structure of a mechanical system so clearly.
The amount of time that I spent in coaching was much less than the time I spent in taking the classes in college. But the impact was far more dramatic.
In our company, while we have a team which does scouting for accounts, our fastest and more profitable business happens because of referrals that we get because of our relationships. This is true for any company. If you manage relationships well, you can get massive dividends. The time spent on managing the relationships can give you returns far far higher than what you would spend in scouting for business linearly.
But to build relationships, you need to always be willing to give first, to help people first rather than go wit an entitlement attitude. Not all people you help will reciprocate, but those who do will more than compensate for the others. So go out and build relationships.
Till next time then.
For a sales person, the biggest consumable she has is time. If it’s gone or wasted on worthless prospects or prospects who are only out there to take “gyan” or knowledge then your income reduces by that much.
For most people who work for someone else, they sell their time for money. With sales people the advantage is that they can get incentives which can really multiply their earnings. So there is a lot of leverage on their time. And the more leverage that they can build, the more they can get rich.
So one is clearly identifying the accounts you want to work with. Sometimes the company would decide this and you have little options. Sometimes the company that you work for may also limit the products/services that you are allowed to sell. That makes life a little more challenging.
In that case the other big leverage that you can get is by using referrals. If you can create happy customers and they can refer other customers to you, then you can get an amazing amount of leverage on your time. Happy customers are always the best source of new business because then there are less hurdles to cross even with the company you are referred to.
Most sales people however feel scared to ask for referrals because they think the customer is doing them a favour. I also used to feel the same way and used to ask it in a very apologetic manner. However, has a friend asked you for help identifying a good “Chinese” restaurant. You have felt happy to recommend a restaurant, if you have had a good experience. This thought was brought out to me by Dean Jackson and Jay Abraham and since then I keep thinking about various ways to be in front of my customer when they are having a conversation where I can be of help. Think from this angle.
Everyone has a time constrain, but for sales folks it has direct impact on their earning capability so choose your customers well and figure out ways that you will create happy customers and then create ways to get a steady state of referrals.
Till next time then.
I write quite often about leverage, using the 80/20 principle or its other fractal dimensions 64/4 etc. I am regularly trying to figure out more points of leverage so that I can become more effective and see how it plays out even in my practice of marketing.
I consume a lot of content through podcasts and I subscribe to a considerable number of them. Today while seeing my pattern of consumption of content from these podcasts, I realized that I predominantly end up with only 3-4 of them and within those also the primary ones are the Ilovemarketing.com podcast with Dean Jackson and Joe Polish and the Morecheeselesswhiskers.com podcast with Dean Jackson.
This is the true fractal nature of 80/20 where just these two podcasts are utilized by me for a major portion of my listening even though I subscribe to 15 or 16 of them.
If I look at at my consumption of digital entertainment platforms – Netflix, Amazon Prime, Disney etc. I have a subscription for maybe 10-12 of these platforms but I end up primarily on just Netflix or Prime.
Again concentration on consuming through a few platforms for a majority of the portion of my time.
The internet has created a level playing field in a lot of areas and the “long tail” impact exists where even small players get a chance to play.
On the other hand from a marketer’s perspective for you to be able to dominate a market therefore you have to be able to choose a very fine niche so that, for that category you can become the top player so that by default people have to use you.
There’s massive leverage in choosing a very small niche and then moving into other adjacent categories. As a product manager if you operate in the digital consumption category, you should be leveraging on this instead of trying to be everything to everyone.
Till next time then