Five Factors Affecting Revenue Growth

June 22, 2022September 28, 2021 by Eskinder Assefa

According to research from Gartner, only 6% of chief sales officers (CSOs) report that they are extremely confident in their team’s ability to meet or exceed their revenue goals. This means that for the vast majority of sales leaders, reaching revenue growth targets is a high-priority challenge.

At the same time, the B2B purchasing process has changed entirely in the digital era. To stay competitive, companies must adapt and keep up with their dynamic customer bases. But how can companies do this, as their buyers navigate the digital world on their own terms?

To answer this question, here are five factors affecting revenue growth that will elevate your company to the next level.

Factor 1: Choose the Right Market Focus for Revenue Growth

First and foremost, choosing the right market focus for your company is the single most important factor impacting your revenue growth. It’s the keystone of your marketing and sales activities; the one crucial element that can make or break your revenue growth.

Simply put, a well-chosen and narrow market focus can result in millions of dollars in the sales pipeline. Not only that, but you will see more high-quality leads each month. Of all of the five factors, this segmentation and focus has the greatest potential to increase or decrease your revenue growth from the previous period.

So, how does this work? A narrow target market empowers you to focus on excelling in a specific area. You can develop in-depth knowledge of your target market that would be impossible to develop otherwise. Consequently, this specialized knowledge increases efficacy and boosts the number of high-quality leads generated by your marketing efforts.

Read more

Factor 2: The Sales Process Is the Buyer’s Process

Next, the old sales process is out of date. The tactics that may have worked in the past—like cold calls and mass email marketing campaigns—are quickly becoming obsolete.

To be clear, today’s buyers spend only 5% of their time with a given sales representative during the purchasing process, on average. They spend more time researching solutions online, preferring to discover for themselves whether or not a vendor is well-suited to fulfill their needs.

But in the new buyer’s landscape, you must meet buyers on their terms. This involves creating highly individualized content to demonstrate what you have to offer your target market. To capture the attention of this new brand of buyers, sellers must align their sales and marketing processes with their buyer’s expectations and preferences.

Read more

Factor 3: Tightly Align Sales and Marketing for High Growth

To facilitate revenue growth, marketing has to be directly linked to sales outcomes. It’s not enough for marketing to simply generate brand awareness anymore. Marketing strategies must result in high-quality leads that are likely to start a conversation with sales.

In fact, at least 75% of leads and 50% of sales that close should be a direct result of your marketing strategies.

To align sales and marketing, make sure that your sales goals are the motivation behind your marketing efforts. Uniting sales and marketing with a common goal will change the way you approach marketing. Read on to discover how to transform them from a cost center to a revenue generator:

Read more

Factor 4: Leverage Intelligent Sales & Marketing Data for Revenue Growth

How do you ensure that your marketing and sales departments are in alignment with the overwhelming amount of data present? Well, the answer is simple—use intelligent sales data to guide your strategies, rather than historical data and experience-based knowledge.

One goal of intelligent sales data is to keep your strategies as up-to-date as possible. You should be responding to industry changes and accommodating new buyer preferences in real-time, not years into the future. This makes intuitive sense—with historical data, you are responding to buyers’ past preferences and not their current needs. Intelligent sales data keeps your strategies cutting-edge. This will keep your company from falling behind.

As such, the targeted capabilities of intelligent data enables your sales team to more effectively speak to leads and prospects, increasing the likelihood of their conversion into buyers over time.

Read more

Factor 5: Importance of Managing Sales & Marketing Operations by Metrics

Additionally, you can’t fix what you can’t see. That’s what the final factor is all about—to successfully increase revenue growth, you must track the right metrics and use them to build effective strategies for sales and marketing.

To generate revenue growth at a faster rate than costs, companies should invest in tracking the performance of their marketing campaigns. And from Factor 3, we know that marketing is just as important—if not more important—than sales at generating leads and revenue growth.

Thus, using metrics to manage your strategies will provide you with an objective understanding of how your sales and marketing efforts are performing. The right metrics will expose where you can improve, where you’re already excelling, and everything in between. This is essential to increasing revenue growth.

Read more

Revenue Growth: Focus on Buyers

To summarize, one key element that all five factors have in common is a focus on the buyer. At every stage of the process, successful sales and marketing strategies place the buyer front and center.

This is what B2B buyers expect in the current era. They want to work with vendors who understand their industry and anticipate their needs, preferences, and habits.

As a whole, today’s buyers have higher expectations than ever before. The companies that deliver revenue growth in this environment are prepared to meet and exceed these expectations.

Further Resources:

To learn how to best leverage these five factors to reduce costs and grow your revenue, download our full white paper.

Read more about revenue growth strategy here.

Schedule your free value prop analysis here.

Factor 1: Choose the Right Market Focus for Revenue Growth

Successful marketing isn’t about reaching the broadest audience possible—it’s about reaching the right audience for your company.

Let’s say you have a limited marketing budget, which means that you have to maximize the ROI of each dollar you spend. Without a defined target market, you will waste your resources reaching market segments that aren’t the right fit for your product.

Because of this, the real challenge is to target and reach customers who are most likely to convert into sales. You don’t want to waste your money on anything else.

By targeting a narrow market, you can increase your depth of understanding in a specific industry. So when you offer more individualized information that is relevant to potential customers, you stand out from the competition.

Remember, your goal is to get on the shortlist of vendors the buyer will contact. Buyers want to know that you can offer the right solutions for their specific pain points.

To do this, you’ll need to develop an in-depth understanding of your buyers. And not only do you need to understand their industry, but you also need to understand what motivates your buyers as individuals.

Also known as persona development, this process involves conducting thorough research to create a profile of the types of customers that are most likely to purchase your product.

Now, let’s solidify the concept of choosing a market focus with an illustrative case study.

Case Study: Establishing Market Presence with Digital Content Strategy

Without a specific industry target, your marketing efforts could draw the attention of companies in any number of industries. Not all of these companies will be the right fit for your product.

In this instance, the client was a digital technology services provider that built digital capabilities for its clients. They provided services to any incoming request and did not target a specific industry. Even though company executives knew they had to focus on a specific industry sector to execute its outbound strategy, which one was the right one?

Well, we helped the client analyze its track record to determine which industries were the ideal targets. Then, we conducted in-depth industry research to narrow down the top industry that was worth targeting.

With one specific industry in mind, the next steps were to create content for this industry and generate targeted demand through email campaigns and phone prospecting.

As a result of this digital content strategy, the client generated 16 high-quality leads per month, increased name recognition, and brought 4 million dollars into the sales pipeline. This success story demonstrates the value of focusing your marketing efforts on a specific industry.

The Right Market Focus: Key to Success

With a narrow target market, you can develop your understanding of your target market to a greater degree. You can devote more of your resources to specializing in this industry, to refining your knowledge of their pain points, current and future challenges, and crucially, how your company and its services can help.

And there’s a reason that finding the right market focus is Factor 1—it’s the first thing companies should nail when developing a strategy for increasing revenue.

First, it will make your company stand out. Next, market focus increases the effectiveness of the following factors—starting with the buyer’s process in Factor 2.

Resources:

5 Ways to Reach Your High Performance Marketing Goals
Case Study: Establishing Market Presence with Digital Content Strategy
Persona Development & Targeting
The Creative Content River White Paper

Factor 2: The Sales Process is the Buyer’s Process

Does this story sound familiar? A salesperson blindly calls and emails through a list of contacts, hoping that someone will respond so he can convince them to schedule a meeting. On the off chance that he is successful, he will conduct the meeting as follows: First, he will tell the prospect all about himself. Then, he’ll ask the respondent about their company. Regardless of the response, he will then launch into selling his product.

This clunky, sales-centered approach is the old sales process that prioritizes the salesperson’s preferences. There’s a reason this process is ineffective—despite its name, the sales process is not really about the salesperson. Buyers aren’t interested in working on a salesperson’s schedule—they have their own priorities to fulfill, and they appreciate salespeople who anticipate and respond to their needs and work with their schedule.

So, calling it “the sales process” is a misnomer. Your focus should be on the buyer’s needs, desires, and timeline, making it more accurate to call it the buyer’s process.

To fully understand the buyer’s perspective along their journey toward making a purchase, let’s look at the purchasing process from their point of view.

The Buyer’s Process

Today’s buyers start with research. Once they recognize the problem that needs solving, a team member begins looking for answers online. They’ll comb through blogs, articles, industry reports, and other sources, all in search of the best possible solution to the problem at hand. Your job is to stand out amongst this crowded market and make it to the shortlist of vendors they will contact.

To stand out, your content must address exactly what your buyers are looking for. This is where your in-depth knowledge of your target market comes into play (as you already know from Factor 1).

However, the reality is that buyers only spend 5% of their time with a given sales rep during the purchasing process, on average. As they spend less time with sales reps and more time researching online, your content is becoming increasingly important.

Then, buyers make the crucial decision of whether or not to include your company on the shortlist based almost entirely on your content. So, you must ensure that your content is highly valuable, relevant to their needs, and surfaces on search results pages.

Personalized Content Fitted to the Buyer

Not only is it is an opportunity to demonstrate your comprehensive knowledge of the potential buyer’s needs at every stage of their journey, it is the key to standing out in a crowded market. This approach works with the buyer’s preferred process—conducting independent research—and provides them with useful information to substantiate their purchasing decision.

Ultimately, the key to building a successful marketing and sales strategy is to focus on what the buyer wants. Your focus on a single target market will shine through your content and encourage readers to set up a meeting. Now the question becomes—how do you ensure that the right people are finding your content? Read Factor 3 to find out.

Resources:

The Creative Content River White Paper
Content That Converts White Paper
Fixing a Broken B2B Sales Model
Digital Marketing Mix Infographic

Factor 3: Tightly Align Sales and Marketing for High Growth

Marketing and sales should work hand in hand to increase growth. Ideally, marketing efforts will deliver about 50% of the leads that the sales department will convert into buyers.

Start with your revenue goal and work backward from there to determine the targets your sales and marketing efforts should strive to reach. This process will align sales and marketing in pursuit of a common goal: growing revenue.

To achieve this goal, marketing has to deliver the right kinds of leads. It’s not just about branding and spreading the word—it’s about finding highly motivated leads interested in purchasing the product you’re selling, capturing their attention, and nurturing them along the funnel toward sales.

Here is an infographic that illustrates the process of funneling prospects toward sales.

But for every highly qualified lead that is likely to convert into a sale, there are plenty of less-qualified leads who will find their way into your funnel. Maybe they’re students researching a project, or an HR manager creating a job description. Whatever the reason, they’ve come across your content, shared their contact information to download it, and are not at all interested in purchasing your product.

So as not to get stuck in the funnel, you should choose targeted keywords to filter out as many of these leads as possible, but you will probably still receive some low-quality leads. After that, it’s the marketing department’s job to sort through these leads and separate the promising ones from the rest.

To do this, automation is key. Your marketing department is busy with strategic high-level tasks, and separating leads manually is time-consuming. If you automate the process, you receive more of the job titles you want while minimizing the number of low-quality leads.

That’s why the ultimate goal is to streamline the lead generation process to deliver the highest quality leads possible to your sales team. To accomplish this, both departments must be on the same page in terms of their goals, progress, and how these indicators will be measured.

Resources:

Fixing a Broken B2B Sales Model
High Growth Lead Generation Cheat Sheet
3 Prospecting Strategies and Why They’re Effective
Four Funnels Infographic
High Growth Lead Generation Playbook

Factor 4: Leverage Intelligent Sales & Marketing Data for Revenue Growth

Since we have established how important marketing is, how can we quantify our findings? Traditionally, sales planning relied on account segmentation, driven by historical knowledge of the market rather than up-to-date facts. But things have changed.

But in a post-COVID-19 world, historical data may not be relevant at all. More importantly, the COVID-19 pandemic will undoubtedly have long-lasting effects on consumers and companies alike. Using outdated data to develop your sales strategy will leave you struggling to keep up with buyers’ needs in real-time.

Looking towards the future, experts predict that smarter, more responsible, and scalable AI will be key to growing revenue from sales in today’s world. Access to constantly updating information about your target markets and their industry trends will be essential to developing effective sales strategies.

As we discussed in Factor 3, sales and marketing should work hand in hand to deliver sales growth. Intelligent data is the way to ensure that this process is working as it should be.

And where exactly does this data come from? Automated sales and marketing tools will provide you with the information you need to develop an effective and dynamic strategy for increasing growth. Automated tools simplify the process of collecting useful sales data, which makes it easier to put this information into action.

Using Intelligent Sales Data: Good Things Take Time

In response to a drop in sales, the sales department might be too eager to make adjustments without taking the time to review performance and properly diagnose the issue affecting sales. A sales diagnosis is key to determine what went wrong and how to fix it.

After conducting a sales diagnosis, the data you gather from practices like these should form the basis of your sales and marketing strategy. Rushing into a quick fix without uncovering and addressing the root of the problem will lead to more issues down the line.

Taking the time to implement intelligent sales data tools, interpret that data, and apply it accurately to your situation is essential to developing the strongest possible sales strategy. This is similar to the process of managing by metrics, the subject of the fifth and final factor affecting revenue growth.

Resources:

Fixing a Broken B2B Sales Model
SOMAmetrics Sales Strategy
The Importance of Performing Regular Sales Diagnoses
Sales Diagnosis: A Sales Game-Changer

Factor 5: Importance of Managing Sales & Marketing Operations by Metrics

To effectively foster growth, you must know exactly what is and isn’t working and why. This is what managing by metrics is all about—to develop growth-minded strategies for sales and marketing, you must track the right metrics in real-time.

Below, you’ll find some examples of critical metrics to track:

Closing ratios
Sales cycles
Average deal sizes
Average discount given
Quota attainment rate
MQL to SQL ratio
SQL to closed deal ratio
Sales budget per sales dollars
Marketing budget per sales dollars

As seen above, metrics provide you with crucial information that you can use to substantiate your strategic business decisions. They give you an objective and evidence-based measuring stick to use to foster your company’s growth.

Let’s take a look at a case study that demonstrates the power of metrics in action.

Case Study: 246% Sales Pipeline Growth in 90 Days

This client was a software vendor targeting the financial services industry. Their goal was to increase the number of clients served and bring in more new business from completely new customers—a crucial challenge for any company.

So, how did we go about strategizing for this level of growth the current period?

Measuring the right metrics was key to developing and implementing a sales plan that could double sales from new customers in 12 months. To achieve this goal, all salespeople had a set number of activities to complete each week, including calls, emails, and demos.

Furthermore, the proof is in the results. After 90 days, the company saw a 620% increase in outbound sales calls and achieved 246% growth in the sales pipeline. The result was a 67% increase in the number of deals closed each month.

And this level of growth wouldn’t have been possible without regular and accurate measurements of strategic sales metrics. As this case study demonstrates, setting attainable, evidence-based goals for growth is a key step toward building your high-growth lead generation strategy.

Managing by metrics can expose areas of weakness in your sales and marketing strategies. This provides useful data detailing what you can improve on. That’s why metrics are crucial to any sales and marketing strategy today.

Resources:

Case Study: 246% Sales Pipeline Growth in 90 Days
SOMAmetrics Sales Metrics & KPIs
High Growth Lead Generation Playbook

Final Thoughts

Through these five factors, we’ve provided a comprehensive overview of the key practices that impact revenue growth in today’s world. This knowledge will form the basis of a sales and marketing strategy that delivers revenue growth now and into the future.

Schedule a call with us today.

Grow Sales Pipeline and Drive Revenue Growth

Increase Revenue Growth with Your Lead Gen Engine

The 3 Steps to Growing Revenue Through Marketing

Choose the Right Market Focus for Revenue Growth

The Growth Marketer’s Cheat Sheet: How to Drive Sales Growth

September 13, 2021September 7, 2021 by Eskinder Assefa

As potential customers increasingly rely on online research to substantiate purchasing decisions, your content is becoming more crucial to sales growth than ever before—which is why you must efficiently create a high volume of high-quality B2B marketing content to reach your future buyers.

Content Types: Demand Gen vs. Lead Gen

First, let’s establish the types of content you need to fuel your marketing efforts.

Demand Gen Content

Demand generation (demand gen) content is the kind of digital marketing that increases overall brand awareness. This type of content should drive traffic to websites where prospects can learn more about a given brand. With this in mind, demand gen content should be easily accessible and shareable, which means it should not be gated. Your goal is to distribute your content as widely as possible to get more people interested in your brand.

The following are the content types necessary to drive successful demand gen campaigns:

Blogs
Infographics
Checklists
Videos
Newsletters

All of these types of content offer relevant information in an engaging and accessible way. They should be entertaining and enlightening at the same time, which requires in-depth research presented with a conversational tone. The most effective demand gen content strikes a careful balance—it is packed with information while still being entertaining to read.

Additionally, content like blogs, infographics, and videos should be shareable, often linking to other content on your website to keep viewers engaged. Remember, the goal at this stage of the process is to generate interest by demonstrating your value to potential customers. Your demand gen content must spark and maintain the viewer’s interest.

Lead Gen Content

After generating interest with your demand gen content, it’s time to turn that interest into action. This is where your lead gen content comes into play. This type of content is used to capture contact information for outbound nurturing, which means it is typically gated. This means that viewers must see the content as valuable enough that they are willing to share their contact information to access it.

However, many potential customers are protective of their personal information. They must be convinced that this piece of content will provide them with a comprehensive understanding of a valuable topic.

Below, we have provided a list of the most important types of lead gen content that you must continually generate to be considered on the shortlist of your potential buyers:

White papers
Maturity models
Webinars
Solution guides

Generally, these types of content are longer and more detailed than demand gen content, requiring more in-depth research than their attention-grabbing counterparts. At the same time, these articles must be engaging and interesting to read. Additionally, remember that these types of content should be informative—and not just a product pitch.

To summarize, demand gen content is designed to provide small chunks of teaser information in an easily digestible format to catch users’ attention. On the other hand, lead gen content builds on that positioning to bring your product closer to the front of mind—as something to really consider in the short term.

Together, both content types should position your company as a thought leader in your entire ecosystem. This process lays the groundwork for sales growth through your content.

Sales Growth Through Marketing Content

Content is a Product

Now that we’ve established the main types of content fueling your B2B marketing campaign, how can we streamline the content creation process to increase sales growth?

The key is to consistently create fresh content that sparks and maintains potential buyers’ interest. However, maintaining a content cadence that keeps up with the demand of your customers and facilitates sales growth can be both challenging and expensive.

Thankfully, by reframing your perspective on content production, you can increase the speed with which you create and publish content—effectively increasing sales growth in the long run.

Think of it this way: content is essentially a product. Here’s why:

It can be designed, made, and distributed for mass consumption.
When completed, it has a significantly greater value than the sum of its parts.
Although it has a limited shelf-life, it can be stored and distributed on-demand.
It has a learning curve—those who do it more will learn how to produce it at a lower cost.
It has an economy of scale—the more you make of it, the less the unit cost.

Knowing this, you can start streamlining content production in the same way that products are manufactured in a factory.

Factories excel at making large quantities of a product at a high level of speed, accuracy, and quality at the lowest price possible. At the same time, factories can make many different products to order using strategies that allow them to make many things out of a small set of fundamental units that can be recombined to make many “products.”

By applying this framework to content production, you can accelerate your demand and lead gen content cadence, drawing in more potential customers in the process.

The Creative Content River

As an example of this idea in action, consider SOMAmetrics’ Creative Content River. The Creative Content River leverages modern manufacturing principles to produce high-quality content at a higher speed and lower cost that is difficult or impossible to match using internal content creation teams.

Through three key phases—designing, making, and delivering—the Creative Content River maximizes content output in a cost-effective fashion, which increases sales growth from marketing in the long term.

Download this white paper for more information about the Creative Content River and how you can drive sales growth through your content.

The Importance of High-Quality Leads

September 15, 2021August 2, 2021 by Eskinder Assefa

High-quality leads are crucial to increasing sales growth, which means successful marketers must know how to attract this type of lead through their lead generation strategies and decision-enabling content.

Why is lead generation so important? In today’s digital-first environment, B2B buyers prefer spending more time researching products online and less time speaking with salespeople, which means that they rely more heavily on content to make purchasing decisions. And this isn’t changing anytime soon—only 20% of B2B buyers say they hope to return to in-person sales in the future.

Plus, buyers want to make purchasing decisions based on up-to-date information. One survey reports that 47% of executives recommend that B2B vendors use more data and research to support their decision-enabling content.

For any company to make a lasting impression on prospects in this environment, high-quality decision-enabling content is essential to capturing leads and nurturing them toward making a purchase. Next, we’ll discuss how to create decision-enabling content to accomplish these goals.

Creating Decision-Enabling Content

Decision-enabling content takes two forms: demand generation and lead generation. These two content types work together to form the basis of your digital marketing campaigns. Generally speaking, demand gen sparks a user’s interest, and lead gen makes that interest more concrete.

Both types of content require in-depth research presented in an engaging style, but each type is designed to appeal to buyers at different phases of their purchasing journey. Below, we’ll discuss the differences between each type of content, and why they’re both important to increasing your company’s sales growth rate.

Demand Gen Content

Demand generation content is the first impression your brand will make on new prospects. Its main function is to increase brand awareness, spark interest, and drive users toward sites where they can find out more.

With these goals in mind, demand gen content is designed to grab readers’ attention as they research a topic related to your company and its products or services. So, demand gen content must be useful, fresh, and tailored to the needs of your target market at that moment.

Here are some examples of content that falls into this category:

Blogs
Infographics
Checklists
Videos
Newsletters

With these relatively short forms of content, marketers can introduce a useful idea to the reader quickly and engagingly, thus proving their company’s value and piquing the reader’s interest in a short time. The goal is to engage readers enough that they are interested in reading your lead gen content, which brings us to our next section.

Lead Gen Content

After your demand gen efforts have generated interest among potential customers, your lead generation content steps in to seal the deal.

The goal of lead gen content is to capture leads’ contact information for outbound nurturing. This means that lead gen content must be seen as highly valuable, to the point that users are willing to share their contact information to access it.

This is no small feat—many users are protective of their personal information and wary of irrelevant marketing messages clogging their inboxes. With this in mind, it is crucial that lead gen content not only appears useful, but that it delivers on its promise of providing fresh, interesting, and useful information as well.

Here are some examples of lead gen content:

White papers
Maturity models
Webinars
Solution guides

These types of content are more in-depth than your demand gen content, providing more well-researched and curated decision-enabling information to establish your value to your target market.

Together, these two types of decision-enabling content will draw in more users and generate more high-quality leads to pass along to your sales team. By creating content that is uniquely useful to your target market, you can demonstrate your value to them and encourage them to consider working with you sooner rather than later.

Next Steps

In this blog, we’ve explained why lead generation is key to increasing sales growth, why high-quality leads are crucial to that process, and how to generate high-quality leads through decision-enabling content. We clarified the difference between demand gen and lead gen content and explained why each of these types of content is essential to any marketing campaign.

With this foundation of knowledge, you can increase the number of high-quality leads you generate, which will increase your company’s sales growth rates as well.

Any questions or comments? Click here to schedule a call.

To read more about the impact of high-quality leads on sales growth rates, download this white paper.

Proof that the Future of B2B Sales Has Changed

March 2, 2020March 27, 2018 by Eskinder Assefa

When it comes to B2B sales, 73% of all B2B companies say that winning new customers is their top priority.

Yet, 50% of B2B Sales Leaders don’t believe they can meet their targets.

Here is the research data that explains why.

Business-to-Business (B2B) buying has always worked the same way. When a new initiative or need arises, staffers are directed to conduct research and report back with a short list of recommended solutions and providers.

In the past, the short list predictably consisted of well recognized sellers. It paid to attend conferences, shake hands, and pass out plenty of business cards.

However, the old selling model is not working as well today. In fact, B2B sellers report a 57% increase in cost of sales since 2011.

The way B2B buyers make purchasing decisions has dramatically changed in the last five years (download the list of additional findings here):

90% of all product and vendor searches happen online (with 50% of them on mobile devices while at work)—without ever speaking with a sales representative.
71% of B2B researchers start a generic search for a solution to their problem with little regard for brands.
As a result, 57% of the buying journey is completed by the time B2B buyers begin contacting sales reps.
It’s no wonder that 90% of B2B buyers reportedly NEVER respond to cold calls. They believe it’s just a waste of their time.

The seller that ends up on the short list today has compelling information that buyers need on an online, preferably mobile platform and knows how to drive its prospects to that information with highly targeted marketing and business development campaigns.

This is the only proven way to continue to win new customers in a highly competitive digital era. Here is a case study that demonstrates this model.

We are here to bolster your sales and facilitate growth. Please contact us to set up a quick call to find out how we can help you consistently win new business.

Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Contact Us

Tips on How to Enter New Markets

October 18, 2021November 30, 2017 by Eskinder Assefa

Why Companies Need to Enter New Markets

Companies enter new markets in hopes of increasing revenues. Most often, this happens when they find it difficult to meet revenue targets in their current market(s).

However, experience tells us that successfully entering new markets is a far more difficult task to achieve than it may seem.

Companies tend to severely underestimate the time and cost required to generate adequate sales in new markets. In fact, many have bailed out of new markets after sinking significant money without seeing the returns they expected.

Does this mean that entering new markets is a bad idea? No.

It simply means that companies should know what they are getting into before spending money. They should have a much firmer grasp on the level of investment in money, time, and effort required. In addition, they should have more realistic expectations of how much revenue they can expect and by when.

Below is an outline of what we believe is the minimal preparatory work necessary for successfully entering new markets.

Definition: Let’s start by defining a new market as one in which you have little or no presence today.

The Basic Elements on How to Enter New Markets

We can think of 9 basic elements to consider before entering a new market.

1. Compelling Need

Identify a compelling need that your product can solve in that market. This is the most crucial and most difficult step for many companies, which could explain why their new market entry efforts don’t produce the desired results.

Definition: A compelling need is a problem that customers cannot live with any longer than they absolutely have to.

If you have identified a compelling need, customers with such a need will jump at the chance to try out and purchase your solution. If the need is not compelling enough, they may still try it but will think too long and hard about spending the money, if at all.

Lack of compelling need makes market entries a very prolonged and expensive exercise in futility. If you cannot identify a compelling need, it is better to wait until you find one before entering a new market.

2. Target Segment

Very few products solve compelling needs across a wide range of customers. Such “Killer Apps” are few and far between.

In the vast majority of cases, we can at best define a compelling need for a specific group of customers who have the same or highly similar operational context and pain.

According to Geoffrey Moore, the noted high tech marketing guru, a market segment consists of a specific business role (someone charged with achieving specific business results) in a specific industry and probably in a specific geographical setting.

For example, “Chief Medical Officers in hospitals with 200-500 beds in California” is a well-defined market segment. “Healthcare CXO’s” is not.

The more precise the segmentation, the easier the rest of the market entry work will be.

The best market segment to select is one that is adjacent to the segment you are currently serving, and for which you have identified a compelling need that you can address.

3. Access to Decision Makers

The next challenge is determining how to access the above target group. Are they members of any organization? Do they regularly attend certain conferences? Do they subscribe to certain trade journals? Do they open emails or take calls from unknown sources? Are they active on any social media network?

In short, what are the best ways to reach them, and how cost effective are those?

While the cost of your marketing and sales is expected to be quite high initially , you want to ensure its reduction to acceptable levels (no more than 30% of sales) once you achieve a certain degree of name recognition and presence in that market—which should happen after 12-18 months of consistent marketing and sales efforts.

4. Competition

All sales are replacement sales, since you are trying to replace an established product with something new— your product.

No matter how compelling a need you may have identified, you must assume that your target customers are currently solving their problem in some way, to some extent.

Competition always exists. That is a given.

What we must clearly know before moving forward are:

How currently underserved/poorly served this new market is.
If there are any entrenched competitors that are complacent today but will wake up and fight back if challenged
How capable and willing they are to fight back to keep their customers

The more you know about whose business you are trying to replace with yours, the more successful your strategy shall be.

5. Complete Product

One common fallacy is to assume that the same product will work across different segments.

For example, an accounting package that was originally created for manufacturing companies will not, out of the box, work adequately for hotels. Yet, product makers routinely think that they can simply make some cosmetic changes (such as a new name) and expect the same sales results in a different market. A mechanic may think a car is a car, but a Mercedes owner never thinks her car is the same thing as a Kia.

If you don’t know the customer’s context—what drives their business, what their top challenges are, where and how they make money, how they are regulated, who they compete against, and so on— then you don’t know enough to make a product that addresses their needs.

A product must completely address the compelling need for which it is made. It must work turnkey.

If you expect your customers to buy your product as is and then figure out how to make your product fit their existing systems/processes and business model, you may do a lot of demos but will close very little business.

The only reasonable way to build a turnkey product is to limit the scope of what that product is expected to do— go narrow but deep. This can only be accomplished through the pursuit of a very specific market segment rather than a broad one.

6. Pricing

Products must be priced to sell, which means that neither the amount nor the pricing model should create a sales hurdle.

The amount itself must work—it must be easy to show financial metrics such as a reasonable Return on Investment (ROI) and Payback Period. If the price is too high, these numbers will be too weak and you will find it hard to close deals.

It is also critical that the pricing model (how customers pay) works as well. Many companies continue to use the same pricing model when they enter new markets without first researching how the target customer expects to pay for a similar product or service.

For instance, if customers are used to paying at the end of the month, they will be outraged if you expect them to pay up front for 12 months. If the payer in the new market is typically someone other than the end user in a similar context, end users will be upset if you expect them to pay for the product.

Remember the early days of cable? Cable network providers were tasked with convincing TV viewers to pay for what they were already getting for free, since advertisers were paying the TV stations.

Cable companies had to provide considerably more channels with fewer/no commercial interruptions, as well as a much better quality of reception, to convince viewers to pay $10 a month. Today, many TV viewers routinely fork out $200 or more per month for cable subscriptions.

7. Communication

Communication consists of more than just the message. It is also the mode of delivery (online, mobile, print, broadcast, face-to-face, etc.), the timing (when, how frequently), the freshness, relevance, and usefulness of the message that makes it work.

Companies often replicate their communication from their current market to be used for the new market with little or no change. This will not work. Even worse, it actually turns off the new market since the vendor clearly doesn’t know anything about them.

However, the message is only one component of communication that needs to be customized. The whole communication strategy must be redefined around the new target market.

In some cases, customs dictate what is acceptable and what is not. It is not a good idea to send a message that sends the wrong message (no pun intended). Crossed fingers may mean, “hoping for good luck” in the US, but it could mean something totally different in another culture. Do your market research.

It is not just customs that we need to worry about—we could inadvertently violate laws. For example, some countries allow calls only between certain hours of the day, while others have no restrictions. Still others have very specific laws as to how emails are sent, and so on.

Whether violating customs or laws, both can get companies into real trouble.

8. Sales

Selling can also be different among different markets. Some markets conduct business only after they have met face-to-face, wined and dined, and shaken hands. Others are comfortable closing large amounts of business over emails and phone calls. Customs and traditions are a big deal when it comes to sales.

Salespeople need to have “situational fluency” in the new market. They need to speak the language, know the right words and terms to use, and adequately understand their customers’ business and how they make money (which means understanding their customers’ customers) in order to truly engage their prospects.

Furthermore, size matters. Even in the same vertical space, the size of the customer can make a huge difference. For example, very large banks may behave differently from small community banks. If you are currently selling to very large banks, you may find it difficult to conduct sales with community banks, and vice versa.

This may require that you hire different sales reps who have the right background in the new market you wish to enter. It could also mean that you need to manage and compensate them differently.

9. Positioning

We think of positioning as a shortcut to sales, as it refers to how you make it easy for customers to buy your products by creating a brand they recognize and trust. That is a deceptively loaded statement.

By definition, you have no position in the new market since few customers, if any, know you exist. Only visionaries buy from someone they don’t know who promises to give them something they want badly. The problem in selling to visionaries is that they have their own ideas of what they want from you and are constantly requesting custom jobs. If that is what you want, fine. Otherwise, if you want to sell products, you must focus on the mainstream market.

That is where positioning is really critical.

Remember, all sales are replacements of something already in place.

Pragmatic buyers need to see documented evidence that your product will do what you claim it will do for their business before they rip out what they have and replace with yours. They want to see case studies, benchmark studies and the like. Even more so, they want to see what other companies that they regard highly are using your product. That’s the catch-22.
Conservative buyers are even worse. They want to know that you have been in business for a long time (think a decade or more), have a large installed base, and that you have some highly recognizable names as customers— before they even think of buying from you. Then they want deep discounts.

Winning Strategic Accounts early in the new market is the key to winning in the new market segment.

Critical Success Factors for Entering New Markets

As we see it, there are three critical success factors (CSFs) to success in a new market segment:

Select a segment that is as adjacent to your current market as possible so you can leverage name recognition and validation.
Win at least 3-5 Strategic Accounts as early as possible. These are the linchpins in that new market. As they go, so will the rest of the market.
Invest adequately in product development, support, marketing and sales for two years minimum. New market entries typically fail because they are starved of the resources they need— or worse, senior management pulls the plug on the whole project too early because of unrealistic expectations that will likely not be met.

Conclusion

In conclusion, while new market entries are a viable way to grow a company, they should only be undertaken after significant internal discussion has resulted in a strong consensus and commitment on the nine elements discussed above, and after adequate preparations on each element have been made.

Companies are especially advised to seriously consider the three CSFs and to refrain from entering new markets until they are fully committed to ensuring that the CSFs will be met.

SOMAmetrics provides the consulting and implementation services necessary to assist clients in successfully entering and developing new markets.

Please contact us for an initial discussion.

B2B Market Segmentation for High Growth

June 15, 2021March 18, 2017 by Eskinder Assefa

What is Market Segmentation

Market segmentation, along with positioning, is one of the two strategic components necessary for effective sales and marketing.

Without market segmentation, there is no marketing strategy. The pursuit of any objective without strategy will likely turn into failure. Even when success looks prevalent, it very likely came about at too high of a cost to achieve truly promising results.

That is, after all, the purpose of strategy – to discover the optimal way with which to consistently achieve an objective.

Therefore, consistently and predictably achieving revenue goals requires a well-thought out strategy; and market segmentation is a crucial foundation element of any revenue strategy.

In this article, we will further explore why market segmentation is critical and suggest a practical approach to properly segmenting a B2B market.

Why Market Segmentation Is Critical

Market segmentation, at its core, focuses a company’s sales and marketing efforts. Simply put, it is a statement of decision to pursue a singular important objective and forego other less fundamental pursuits.

Once a company identifies “XYZ” as its optimal market segment, that company commits to marketing and selling to that specific market, and only that market.

That being said, if a customer from a market other than XYZ comes to the company and indicates that they want to buy its products and services, the company will, of course, sell them what they desire.

There exists a very big cost difference between processing an inbound lead and generating a lead through an active outbound marketing and sales campaign. A company should always process an inbound lead, provided that the prospect is willing to bear the full cost. We are saying that a company should carefully select which market it wants to sell, and then commit to optimizing everything in its power towards that chosen market.

The purpose of market segmentation, therefore, is to enable the optimization of all resources around a chosen customer profile so that it can maximize value for the customer and profits for the company, simultaneously.

Why Companies Don’t Segment their Market

Clearly, experienced executives understand this segmentation concept, so why do they hesitate to pick a specific market segment and commit to it?

The hesitation seems to come from the fear that perhaps they would lose business and profits from other areas of the market if they didn’t elect to go after those as well.

However, what ends up occurring is the opposite:

Either a company must sell a watered-down version of their product to a broad market, losing out to focused competitors who maximize value for the customer, or
A company has to spend a massive sum of money optimizing its products for a broad category of customers, thereby losing out on maximizing profits.

Either option is a losing proposition – hence the need for strong market segmentation.

Sometimes, executives simply cannot choose among a number of segments that all appear equally attractive. In such a case, it doesn’t really matter much which market segment the company chooses to focus on. What matters is that the executive selects one, and only one, segment and commits to it maniacally.

Segmentation Technique

Assuming we have made the case for market segmentation and why it is critical for high growth, we will now turn our attention to the question of how to segment. There are many books on this subject, and segmentation is one of the oldest topics in marketing, especially in consumer marketing.

However, for B2B market space, the techniques are somewhat different. Below, we offer a simplified version.

The steps are to first segment the market and then segment that space by account. We discuss this in some detail below.

Step 1: B2B Market Segmentation

B2B market segmentation typically consists of three elements: Role, industry, and geography—in that specific order. The chart shows that as a company starts looking at potential customers that are further away from its “sweet spot”, they will look less and less similar, making it significantly more expensive to maximize value for these outlying potential customers.

1. Role

In B2B, products are sold to solve the problem of a specific business manager (typically called a business driver). This person may or may not also be the decision maker in their respective company.

An example of a Role of a business driver might be “Head of HR,” “Head of Sales,” or “Head of Compliance”. Note that in some companies, this could be a C-level role, in others a VP role, and still others, a director level role. Therefore, it makes more sense to simply refer to it as a “Head of something” for segmentation purposes. Once an actual list is purchased, specific titles may be requested.

Role is the single most important criterion for segmentation, as all features and capabilities of a product/service are targeted towards making that the Role’s headaches go away and their burdens lifted.

2. Industry

While Role might be sufficient, adding industry to segmentation will make it significantly more focused, enabling both the maximization of value for the customer and increasing profits for the company. The reason is that while the heads of HR of the Hospitality industry have many things in common with the heads of HR of the Financial industry, the degree to which the two are regulated are different, thereby requiring more controls in products for more regulated industries.

For example, if we have products that target heads of Compliance, the degree to which an industry is regulated becomes a significant issue in determining how complete a product is for that market.

Some industries are also more concentrated than others. For example, the Pharmaceutical and Oil industries are typically more concentrated than the Financial Services industries.

Concentrated industries tend to be more uniform in size and type, while more fragmented industries have significant variations in size from the smallest to the largest. Therefore, in fragmented industries, there are more niches than in more concentrated ones.

3. Geographic Location

The geographic location of a company is important because the further out the customer is from the provider, the higher the cost. The most obvious cost is that of travel. But there are additional costs that come as a result of distance including differences in time zones, idioms and languages, local customers and laws, and more.

If it is important to meet face to face in order to build rapport, then selling becomes expensive when the customer is further out than the provider. Either the provider has to spend traveling expenses, or has to open and maintain an office local to the customer.

The issue of geography is typically not a problem in concentrated industries since they also tend to be geographically concentrated. However, in fragmented industries, a provider will either have to pick a geopgraphic location, or find an optimal way to sell products and services on a national or international scale.

Closing Words

The first step in market segmentation is to decide whom to sell to, which is a factor of the targeted role (function), what specific industry, and where is the geographic location of potential customers.

In the end, we want to arrive at a statement for our company such as “Hospitality Industry Heads of HR in the DC Metro Area” – this focuses product development, support, marketing, and sales.

Part 2: B2B Account Segmentation

Once we have chosen the specific market segment we want to go after, the next step is to segment all accounts in that market to focus our resources such that our most expensive resources are allocated to the most profitable accounts.

A simple and practical approach is to segment accounts into three categories: Tier 1, Tier 2, and Tier 3. The chart below shows how we would allocate resources to each tier.

Tier	Description	Resources
Tier 1	These are the crème de la crème accounts and they typically represent between 5 to 10% of all accounts, but probably would represent 50% or more of all sales potential in that segment. Winning these accounts enable the provider to say, “Our clients include Hyatt, Sheraton, and Holiday Inn”, names that most of your prospects would immediately recognize.	Sales Executive Led Your top sales reps aided by highly experienced Business Development Reps (BDRs) to help them get in.
Tier 2	These are less well known, perhaps local or regional players that nevertheless are significant sized customers. They consist of 20-25% of your target segment in number, but probably make up 35 to 40% of the sales potential in that market segment. Winning them brings both sales and profits, but not necessarily name-dropping benefits.	BDR Led Prospect with experienced Business Development Reps (BDRs) and assign to your sales reps.
Tier 3	These are the rest of the market. They typically represent 65 to 75% of the market in number but probably would not exceed more than 10-15% of the sales potential in the market.	Marketing Led Use Marketing to prospect and process only inbound leads.