The actual nuance of a identifying a Single Target Market

Marketing, segmentation, single target market

I keep writing a lot about the SIngle Target Market. Its a term I learned from Dean Jackson. I have known about segmenting and niching but breaking down a market by usage was something which appealed to me.

Now why is it important to drill down to a Single Target Market . Once you have been able to figure that part out, you can then work on the different media you can use to engage this person and then work on what is the message you will send through the different media.

To show a practical example. We were targeting companies for selling our services. Now you can choose partners in different ways. We first did a segmentation by OEMs. If they were selling a specific OEM’s product, then we thought we could make them a partner to sell add on services from us – but these partners could be in different states, they could be of different sizes – single person companies, large companies and everything in-between. They could be owned by men, women, public listed or private. So we decided to put the limit on minimum number of employees and maximum number of employees to segment further.

As we kept on going deeper we found even more characteristics that we had not even noticed when we did the general rule partners of OEMs.

So one rule of thumb that I have figured out , to identify a single target market , is to figure what other attribute exists that could make this data set smaller till it can’t be made any smaller. Then figure out how you can combine based on the usage and expand from there once you see success with one usage area.

Till next time then.

Carpe Diem!!!

The calorific value of a rat – in marketing

B2B, Leverage, Marketing

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.

Carpe Diem!!!

How to solve the Challenges of identifying a Single Target Market

Customer Delight, Marketing, niche, single target market

Whenever I talk to my team or other business folks, one major resistance that I get from all of them is on this issue of selecting a niche or single target market.

Everyone thinks that their product or service can solve so many different problems for so many people so why limit. It basically comes out to be about whether you want to be a small fish in a large pond or a big fish in a small pond.

And it takes so much of my energy to convince them, that all I am asking them is to prioritize the market entry into different markets. Once you enter one niche, you have to dominate it, take the learnings from that and then move ahead.

People still find it difficult. So I share with them this process, which is inspired by Dean Jackson and his concepts of the Eight Profit Activators.

Step 1 : Isolate all the geographical markets you have the bandwidth to operate in. These could be national , international etc. You can put this in the columns from from B to whatever in one row of your spreadsheet

Step 2: Isolate all the use cases for each of these geographical locations that your product or service can do. You can put this in column A of your spreadsheet.

The moment they start filling (not ticking, which is a copy and paste process) this two by two matrix with their ability to serve the market and get delighted customers, they start backing off.

They may still end up with about 5 or 6 niches , in which they think they can certainly delight customers. Then I ask them to look at which would give the highest probability of profit from the same effort. Since they also realize that time is limited for everyone, after this step most automatically identify a Single Target Market.

Hope the above helps you in identifying your niche and helps you dominate the market.

Till next time then.

Carpe Diem!!!

Finding the right market niche

Marketing, niche, single target market

Today I had an interesting discussion on choosing the right niche or the Single Target Market that I keep mentioning with one of my colleagues and she was not convinced on my logic. So I will throw this open to your comments. I will give my logic and my colleagues logic. In marketing there’s nothing right or wrong. The market decides. You try to go with as much common sense and logic.

We will discuss it by using an analogy of the Indian automotive market. The Indian passenger transport market for personal travel is primarily broken down into two wheelers and four wheelers. The two wheelers are scooters and motorcycles and then you have cars which start from 800CC engines all the way to the Bentley and Rolls Royce.

Suppose the product we have is a 1000CC engine car which is more expensive than the 800CC car (not our product) by almost 40%-100% and is more expensive than the general two wheeler by about 10 times.

So who should be the customer you should target. Someone who has an existing 800CC car and wants to upgrade in life because the car has got old or should we target the person who owns a scooter or a motorcycle and wants to upgrade in life because the family has grown and they can now afford to buy a car.

My suggestion would be to look at the person who already has a 800CC car and suggest our product as an additional car or an upgrade from the old car. My colleague’s logic was that there’s a much larger market which is driving two wheelers and if we can convince them to move to our product rather than to the 800CC car we would be able to target a much larger market even though it will be a tougher sale to crack

I would love to hear your comments below on what you think we should do out of the two options or if you can think of a third option.

Till next time then.

Carpe Diem!!!