The following article was published in the August/September edition of the Eastern Director a magazine for members of the Institute of Directors.
Conventional wisdom says that in tough market conditions it is better to concentrate on finding new markets and customers rather than relying solely on cost cutting and redundancies. While sound advice, it is much easier to say than to do. How do you ensure that scarce resources are spent effectively to increase sales rather than wasted on ineffective programmes? The key lies in clearly understanding what customers want from your products, and who wants to buy today.
Before looking at new markets it is important to review existing ones. It is well documented that retaining existing customers is much cheaper than developing new ones. To increase sales to existing customers it is essential to keep products updated and to ensure that they meet customers changing needs. In many industries needs change slowly, and it is very easy to become complacent about the merits of the company’s products. Most companies believe that they keep their products up to date, but when was the last time your company carried out a formal review to see how well your products matched the customer requirements of today, and more importantly tomorrow?
Developing new geographic territories is another option. On the surface, the product requirements remain the same, but regulatory and cultural differences can require product changes, and it is often difficult to displace existing competition. Some issues in developing distribution channels were discussed in the last edition of this magazine (‘Agents, distributors or direct sales – some choices and pitfalls’).
Developing new markets or applications can provide much greater rewards, but is riskier. In addition to understanding the usual market information it is vital to answer clearly a couple of crucial questions before committing significant time and money. First, why will customers pay good money for the product? One company in the region identified a number of attractive new markets for its products. However, research uncovered that customer interest was unlikely to translate into sales, because they had more urgent requirements for their funds. Forced to look at other markets where product development was required to meet the customer needs, the company found high market interest, and a number of customers prepared to buy evaluation licenses for a total in seven figures, which funded the necessary product development.
It is also vital to consider the competitive landscape and how this will change over the next few years. A company developing Bluetooth applications identified an attractive opportunity in the logistics market. They had a superior product, but detailed market research revealed an industry market driver that would result in the adoption of an inferior technology, leaving the company with marginal sales. Finding this out early saved them from a very expensive mistake.
Developing new markets can have a major impact on the health of a business, either providing the platform for significant growth, or becoming an unproductive drain on resources. Answering tough questions about a new market’s viability before committing major resources is essential.
Robin Higgons of Qi3, which specialises in marketing support for technology based companies, is a branch member. email@example.com