How hard can it be for a new entrant to carve out a one percent share of a very large market? The answer, of course, is that it is virtually impossible. If history teaches us anything, it is that organizations that nail their niche with a simple, clear and narrowly defined market focus and then progressively expand into adjacencies do far better than their unfocused competitors.
Having a clearly defined target market or markets is the critical foundation for all other sales and marketing activities. But it’s impossible to accurately nail your niche if you restrict your thinking to the traditional narrow demographic dimensions of size, sector and location. All demographics can ever do is to describe a population. They do nothing to define how a market actually behaves.
Not useless, but inadequate
Let’s be clear: I’m not suggesting that demographics are useless, simply that they are inadequate. They are inadequate because even if you know that an organisation employs 450 people, fits into a certain SIC Code and is based in Reading UK, you know very little about how the organization is likely to behave.
Demographics tell you nothing about the dynamics of an organization. They have no useful comment to make about whether the organisation makes decisions quickly or slowly, whether they are an early adopter or a laggard, whether they are growing or shrinking, or whether they are aiming for global domination or a quiet life.
Demographics tell you nothing about the structure of an organisation. They offer no insights into whether they are centralized or decentralized, where the power lies within the organisation, how decisions get made, what systems they have in place or what chances you have of displacing an incumbent vendor.
Demographics tell you nothing about the current situation of an organization. They are not able to highlight what changes have recently taken place within the organization, what initiatives they have taken, what priorities they have established for the year, or what the Chairman has chosen to focus on in the annual report.
In short, demographics tell you very little about the factors that drive any given organization or the things that are holding them back. And yet all these elements have a profound impact on their appetite for change and on your chances of doing business with them, now or in the future.
Easy, but lazy
Demographics are easy, but they are also lazy – and there is no possible reason (and no credible excuse) for declaring your market segmentation process finished when you have defined the basic variables of size, sector and location. If you are to truly nail your niche, you can’t stop there: you need to work on identifying one or a small number of genuinely coherent target markets.
Coherent target markets don’t just look similar from the outside – they behave in usefully coherent similar ways. They are concerned by similar things. They behave in similar ways. They reference each other when deciding what they need to do. And if you succeed with one of their members, you’ve got a good chance of succeeding with a number of them.
The attraction of similarity
Understanding patterns of buying behavior is critical to working out whether you have identified a coherent target market. The most effective way of identifying your most promising target markets is to seek out a set of similar stakeholders, working in similar organizations, facing a similar set of issues, that have similar buying processes, and who could be persuaded that your solution represents the best of all available options.
This is, of course, a significantly harder job than buying a list of contacts in companies of a certain size, sector and location. It requires research. It requires insight. It requires a genuine sense of curiosity. It requires sustained commitment. And it requires the understanding that the task is never going to be completed, because the landscape will inevitably continue to evolve.
A wasteful exercise
But the alternative – of not properly nailing your niche – is even less palatable. Without a company-wide consensus about the distinguishing characteristics of your key target markets, a significant percentage of your development, marketing and sales resources will inevitably be wasted pursuing “opportunities” that are never going to turn into significant revenue streams.
It won’t stop you winning business. But it will probably stop you from winning as much business as you could have, as efficiently as you could have. And sooner or later, that shortfall will probably catch up with you.
By the way: if you haven’t already done so, I’d like to invite you to take our 10-point online B2B Sales and Marketing healthcheck. I think you’ll find the results interesting!