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!!!

Single Target Market and the Life Time Value

B2B, life time value, Marketing, Product Management, single target market

I came across the concept of the Life Time Value from Jay Abraham while reading his book, Getting All You Want from All You Have. It was a very intriguing book name and I couldn’t end up not buying it. Since then I have read it multiple times to find new ideas and ways of thinking.

The Single Target Market concept, I have learnt primarily from Dean Jackson. The advantage of this concept is that you can get to focus all your energies on just one segment of the market at a time and then Dominate it, before moving forward to the next Market.

Each entrepreneur, product manager, marketing manager has multiple markets, that they can focus on and it is counter intuitive to focus on only one.

The reason I keep coming back to discuss on the single target market time and again is because I use it myself and find new applications for it when analyzing different businesses.

A good way to analyse the relative economic values of each market and then choose the one which is the most lucrative. So if you knew what’s the life time value of a customer and you knew that you had the potential to pick up at least 30% of the market then you could take a call on how you could go about investing.

So let’s take a B2B example where the Life Time Value of a customer is say $100000/- at a Gross Margin of 30%. Now let’s assume that there are a total of 1000 potential customers in the segment you have chosen. The bottom 20% will never buy from you. That leaves about 800 prospects. Out of these 800 some are in pain right now, some will get into the pain stages over the next 5 years.

So your potential market yield could be $80million over 5 years or a gross margin of $24million. If you can earn $24 million what would you be willing to spend to get these customers. If on the other hand the other market segment can only do $80000 LTV per customer at a GM of 25% then the potential yield of this market is $64 million at a GM of $16 million. So how much can you now spend to get the $16 million.

So that is the combination to help you choose which is the most promising market for you to enter.

If you have any queries, please raise them in the comments section. I would love to hear them.

Till next time then.

Carpe Diem!!!

P.S: If you are interested in getting a free copy of my “7 point checklist for B2B markets”, you can ask for it, by filling in your details below.

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Coaching – for changing the growth trajectory

coaching, problem solving

While I talk about a lot of things related to marketing, I also get stumped quite often on some problems. It’s good to know, what you don’t know or where you need assistance. A lot of times our ego does not allow us to confess that we also have limitations.

I learnt this lesson in college when I was doing my engineering studies. I did not understand the subject of Engineering Drawing and I failed badly. I was about to give up, but my elder brother insisted that I undertake coaching. With the coaching I liked the subject so much and took to the subject like fish to water.

Multiple times I have seen that a coach can change the speed and trajectory of your growth by solving the challenges, much quicker than if you had to solve them yourselves. This is not to say that I have not been headstrong in trying to solve problems myself and wasted a lot of time on it.

In addition sometimes the environment that you live or work in limits your thinking patterns. Sometimes you need to break through those patterns. A coach can help you achieve that because she is seeing things from “outside-in” for the things which you are seeing “inside-out”.

That’s where from time to time, I take coaching and / or also keenly follow the blogs/podcasts/videos of people like Jay Abraham, Joe Polish and Dean Jackson. Each coach has a different style of functioning and you need to see with whose thinking you resonate. This is important because if you try to follow or take coaching from too many people, you will end up completely confused.

While all coaches may be good, you need to find the one who is “Good for You”. Here I am mean both commercially and at your brain level. I need a coach who can explain to me in simple terms what are the possibilities. So someone who may be conceptually strong in solving problems, but can’t explain to me, doesn’t work for me.

Till next time then ….. climb higher with the help of a coach.

Carpe Diem!!!

Leverage – Sales

Leverage, Sales, Time

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.

Carpe Diem!!!