Entering a new technology based B2B business – Part XII

Targeting to become the market leader in 5 years

This is the last part of the 12 point checklist that I follow to identify whether we might be able to succeed with a new product or service line. Originally I intended to call this post – Targeting to dominate the market. But then I realised that the word dominate could also have negative connotations. So I renamed it as becoming a market leader. However in the content, you will see the use of the word “dominate”. The idea is only to bring out a forceful point.

In the last post, I brought out a concept of Life Time Value of a customer. This is a concept, I first came across, while reading books by Jay Abraham. Subsequently, a lot of other US authors/marketing consultants also wrote about it.

This is a fairly simple concept. If you pick up an order from a customer, and you provide them with a good experience, then what is the amount of business, she can give you over an extended period of time, that she remains a customer. This can define at what value you can acquire a customer, such that in the long run you can make a profit which is much higher, than if you had not acquired a customer.

Related to this concept is also the concept of becoming a market leader. So you look at any business and see if you can be a dominant player in that market. When that happens , the momentum also helps you bring in business.

But to be able to dominate the market, you need to be able to identify the total market size. Then you need to see, how much business will you be able to pick up in a year, then two years etc. Now if, in 5 years, you think you can pick up a substantial part of the overall market, and at that revenue level you are making good money, then its worth getting into the market.

On the other hand, if you realise that even after 5 years – either you are not able to pick up enough business or even if you can pick up the business, you can’t make profit, then, its not a market worth entering.

Combined with the life time value of a customer, you can determine the marginal cost of acquiring a new customer, and then the velocity that you can create, because of repeat orders, referrals etc.

If on paper you can work this out, and it’s profitable, then you actually go out into the market and test your hypothesis. At the end of the day, the market determines your success or failure. But if you have taken care of as many challenges, that can occur, you increase your chances of success.

To the success of your product / service launch.

Carpe Diem!!!

Entering a new technology based B2B business – Part XI

B2B, checklist, Marketing

What are the backend opportunities available to you

If you have read some of my earlier posts, I have talked about the Life Time Value of a customer. I came across this concept , first, when I read Jay Abraham’s works. If you haven’t. heard of Jay, you should go and look him up on YouTube or Vimeo. He has an amazing number of thought provoking, marketing related videos.

Now coming to this episode, on the checklist that I have been running for the last few weeks. It doesn’t make sense to acquire a customer, if you are only going to do one transaction with them. In a B2B context, it’s extremely expensive to acquire a customer. Expensive both from time and money perspective. At the end of the day, you are running a business or product line. You are not running a charity.

So every customer has to become profitable for you. You may initially acquire the customer at cost. But you should be able to sell him more of the same product or other products or services, which can then get you profitable.

To be able to take a decision to acquire a customer, even at cost, you need to be clear, from the beginning, about the life time value – simply put, what else can the customer buy from you and how often, over a period of time that she remains a customer with you.

For example – we acquired a global television brand as a customer by just selling an item worth about $20K in the first transaction. Over the next five years that company gave us more than 0.5 million dollars of business. This would not have happened, if we had not taken the first low value order. Of-course the caveat is, that you will provide the customer with exceptional service in the first deal and in all the deals, so that they stick to you and want to keep doing business with you.

The advantage of B2B, that I have reiterated multiple times earlier also, is , that there is a lot of inertia in corporates. If they have a good supplier for something, they don’t want to waste time, trying to identify a new provider. So once you get in and provide exceptional service, B2B buyers will generally ensure that you have continuous business from them, even when they know you are not the cheapest. That is because they value reliability over cheapness.

So whenever you launch your new product/service, please also analyse and see, what will the customer need, after they have used your product/service. Can you help them realise more benefits, in areas other than the one they have initially taken from you. May be you start with some product or service from the plant, can you go to their finance and offer something else, or can you go to marketing and provide them something. Then see if the revenues from all these backend services will be worth doing the first transaction with the customer at “cost”.

In my next post I will elaborate further on this concept and how you can use this concept to dominate the market.

Till next time then.

Carpe Diem!!!

Entering a new technology based B2B business – Part X

B2B, Marketing, Marketing Stamina, new launch

Is the solution dependent on a specific platform or product to be able to deploy

It has multiple times for me. We thought we had a niche market, where we were the dominant player and anyone who needed the service, had to at least check us out. But then the base product, on which our services were based, suddenly started losing market share. New upstarts started capturing the market, for that product, with their offerings and suddenly within a matter of a couple of years, we had lost a complete line of business.

So as a matter of policy, now, whatever new service we launch, we make it a point to ensure that the services can be deployed across multiple platforms without any significant disruption in our revenue.

If you look at other industries also, you will find a lot of such examples. In the telecom space, with the CDMA technology becoming obsolete, all the companies that only made CDMA phones, suddenly had to rethink their operations.

In case you were making software for the Blackberry phones, with the advent of Apple and Android phones, the demise of Blackberry phones was amazingly sudden. So if you were building software, that required the code or security, of Blackberry, to make it run, you were also suddenly out of business.

So while this post is short, if you have been reading my posts on this subject over the last 8-9 weeks, then you will realise the benefit of this item on the checklist. Ticking this item will ensure that you have sustaining power in the market.

Sometimes it so happens, that we forget this point, because we get success with the first platform on which our solution is based and because the revenue is consistently flowing, no one wants to disturb something which is going on well. And then you get hit from nowhere.

So please ensure that you have multiple platforms available to port your solution.

Till next time then.

Carpe Diem!!!

Entering a new technology based B2B business – Part IX

B2B, checklist, Marketing, Technology

Will the customer need any special additional things to be able to run your solution

If you have gone through the last 8 posts, where I have shared my checklist of launching a new technology based B2B business, then this post will be a logical next step.

Have you gone to the car dealership and seen a car which has the best features in the world and you could also afford it and you had the need and it was available in the color of your choice, with all the accessories that you wanted, but still did not buy it. If you have to buy a car which only runs on ATF (Aviation Turbine fuel), will you buy it? The car may be amazing and have the most incredible features, but if you can’t get ATF near you on a regular basis, you will not buy this car, because you won’t be able to use the car.

Similarly if you have a tremendous technical solution, for a B2B business, but the company will need specific additional inputs to get the solution to actually work out, then the solution will be a non-starter.

As I have mentioned many times earlier, if there’s even a slight amount of resistance in your solution, in a B2B environment, you will not be able to convince most customers to take your solution. Most B2B managers (whatever be the level of the manager) are risk averse. One, because of the peer pressure , where even a small mistake gets highlighted and could spoil the manager’s career and second, the inertia to move through various levels of the hierarchy to get approvals is extremely high and the questions that need to be answered, to get the approval is a major pain.

If after doing all the activity, they realise, that other than the solution, they also need to arrange for specific inputs which are either too expensive or generally unavailable, then they will just not want to take it forward.

There are some managers, who like to take risks and try new things, but even they will be averse to trying this kind of a solution which entails handling two different variables, where the outcome is not certain.

Has any of you heard of the satellite phone that was launched by Motorola, just before the GSM mobile phones were launched on a large scale. These were bulky sets which had a huge cost of the phone as well as the cost of making the call. You had to specifically carry it in a specialised case. And Motorola had to launch multiple satellites to ensures that there was coverage across the world, all the time. Without the satellites, the phone wouldn’t work (specific item).

The positive of these satellite phones was that, you could be anywhere on earth (except in water) and you could make a call to your dear ones, by connecting via the satellite. So this was a unique proposition. But the cost, the size and carrying such a bulky phone in a special case, were big resistance points and the competitive GSM technology was available at a fraction of a cost.

So until and unless you were climbing mountains or going on treks in the forest, where there was no GSM “tower”, you would not need a satellite phone. Many millions of dollars later, Motorola just got out of the business.

So you may have a great solution, which is technologically very advanced and has a unique value, but if the customer sees resistance points (at your end – like the satellite, or at their end – like the ATF fuel) they will just not move forward.

So build your solutions which can run on generally available infrastructure or commodities and then take it to the market.

Till next time then.

Carpe Diem!!!