Product management training & consulting firm ZIGZAG Marketing recently released a whitepaper about “Creating a Market-Driven Organization From the Top Down” and employing a “market segment first” approach through portfolio management. Along with this, they have provided guidance on calculating your market-focus quotient, which is based on a “market segment first” mentality that aligns corporate goals and objectives with the market segments most conducive to achieving those goals on an ongoing basis across the entire product portfolio. The result is a single top-down agenda that products, marketing and sales align with accordingly to eliminate redundancies and simplify execution at all levels. Your market-focus quotient is a simple calculation that tells you how well your organization is executing on target market initiatives that will drive growth over the next 12-24 months
They suggest that if your organization is instead a “product first” environment where each product has its own strategy, product managers compete for R&D and marketing resources, everyone believes their view of the market is the correct one and sales does anything necessary to make quota, you may be working harder than you need to.
Follow these five steps to calculate your organization’s market focus quotient:
1. List Your Target Markets
List the market segments that will account for the bulk of your revenue over the next 24 months across the entire product portfolio. For B2B companies, these are vertical market segments in most cases – retail, telecom, healthcare, non-profit, etc., or sub-segments of those categories.
2. Evaluate Your Marketing Program Spend
Determine the percentage of your marketing program budget that has been spent year-to-date on lead generation programs specific to the market segments listed in step 1. For example, if you have a $10 program budget and you’ve spent $6.50 on collective programs for the market segments listed in step 1, your number is 65%. Do not include corporate campaigns that are not segment specific.
3. Evaluate Your Sales Pipeline
Take the most recent snapshot of your sales pipeline and calculate the percentage of prospective customers that fall into any of the market segments listed in step 1.
4. Evaluate R&D Resource Allocation
Determine the percentage of R&D resources allocated to projects with broad market value for one or more of the segments listed in step 1. Do not include one-off projects that correct quality or design flaws or projects that are specific to a single customer.
Total the numbers from steps 2-4 and divide that total by 3. The result should be a number less than 1, for example .67.
Interpreting the Result
- The closer your score is to the number 1, the better aligned your organization is to its target markets, greatly improving your odds for success in chosen markets.
- A score of at least .51 means your organization has a slightly stronger focus on target market growth initiatives than anything else – a good thing in most cases.
- The closer your score is to 0 the less market-focused the organization is, the thinner its resources are spread and the less impact each initiative will have on overall growth.
- The younger the organization, the closer its score should be to the number 1. Trying to be too many things to too many markets too soon will bury most start-ups before they get out of the blocks because the unique needs of each market can spread a young organization beyond its ability to do anything well.
- If the marketing lead generation machine is working the way it should, 80% of the sales pipeline should consist of buyers in the target markets listed in step 1, assuming that you’re marketing to buyers who are the best fit for the products/services you can deliver today or in the very near future.
- R&D initiatives typically falls into three categories; market growth, customer satisfaction and competitive. One of these categories should command a substantially larger share of the R&D budget than the other two in order to make a significant impact on your longer term objectives.