Finding New Customers in New Markets
By Charlie Alter
article courtesy of
allbusiness.com
Finding new customers in new markets is a major element of any profitable business growth strategy. However, many companies struggle with how to do this successfully and as a result they keep mining the same markets and the same customers, even if neither are profitable anymore.
How to Find New Markets
The first step in finding new markets is to identify the most
profitable markets that you currently serve, because these existing
markets can lead your business to identify profitable new markets
to explore.
Start by forming a small internal team consisting of the people
who are responsible for the following jobs: direct sales,
marketing, finance, production and engineering. Challenge this team
to complete a table like the example below by analyzing all
customers for the last three years that collectively generate 80%
of your company's total sales. Use estimates for Margin, Hassle and
Potential factors rather than laboriously analyzing each account.
You want to do this analysis as quickly as possible and be
reasonably accurate.
The Next Step
Now that your team has analyzed each of your largest
customers over the last three years, they can begin to explore
which ones are really your Most Valuable Customers (MVCs) and which
market segments appear to have the greatest potential for sales
growth in the future by doing the following:
1. Trim the list down to those customers that ranked #1 in Margin and #1 or #2 in Hassle.
2. Next, identify which of these customers are expected to have
good potential for growth in the
future (++ or +).
3. This short list of customers represents your most profitable current and future markets.
4. The critical next step is to look for "Adjacent Markets",
that are similar to the best ones you
current serve. To do this, look at the
NAICS list, which you can find at
http://www.naics.com/search.htm, and search for
markets near or "adjacent" to your current
markets that may have potential to
explore.
Examples of New Markets to Explore
Using the table below as an example, the markets you might
explore could be the following. You should do your own in a similar
manner.
Identifying the Best Customers
The best strategy to find new customers is to identify the
characteristics of your current MVCs and then use that to guide
your efforts to segment the prospective customers in the new
markets you've identified.
Start by meeting with your team again. Review the analysis they
did on your current customers that yielded the data on your most
profitable current markets. Make a list of those customers that
your team rated #1 on both Margin and Hassle. These are likely to
be your MVCs. Work with the team to describe the characteristics of
each of these MVCs and then find those that appear to describe most
of your MVCs. These characteristics are likely to be some of the
following:
Size: total sales and number of
employees
Single vs. multiple plants (identify
how many)
Ownership Structure: family-owned,
privately held, part of a larger company, publicly traded, etc.
Attitude
Core values
Low volume to niche markets vs. high
volume to many markets
NAICS or SIC codes
Geographical location
Finding the Best Customers in New Markets
The next step in this process is to pick the target market
segments you want to explore. Using the example above, you might
choose 333131 Mining Machinery Manufacturing and 333120
Construction Machinery. The steps your team should follow next are:
Purchase a Dunn and Bradstreet
Marketplace listing of the companies in each of these NAICS
codes or find something similar at your
local library or MEP Center
Segment this list, either by the
geographic locations you feel you can best serve or by where the
most companies are located
Purchase the full company information
listings on each location
Segment this list by your MVC
characteristics
Voilà, you now have the beginnings of a prospecting list for the new market segments you have identified.
