It is critical for organizations to identify the most attractive market during difficult times. Should companies target investments at the bottom of the pyramid? On the other hand, can companies capture more value by focusing on the rapidly expanding middle market? To build a solid foundation for any business, an organization must first identify its typical customer and tailor their marketing plan accordingly. Given the current state of the economy, having a well-defined target market is more important than ever.
The targeting process identifies the most valuable and “attractive” customers. A well- executed targeting strategy enables the sales force to dedicate the bulk of their efforts to highly profitable customers and limit coverage of unprofitable or marginally profitable accounts, as even small improvements in targeting can generate substantial sales growth.
Market attractiveness is important both when selecting a single market to enter and also when building a business portfolio which considers multiple markets. In a portfolio, a combination of different type of attractiveness may be used, for example a balance of short-term and long-term profitability.
Besides measuring attractiveness when considering entering a market, it is also important to review the same when you are already in a market. In case the market attractiveness has decreased substantially, it may be a valid choice to exit the market. This can happen, in the event that demand is declining or in cases of increased competitive activity that renders profitability very difficult.
Managing the Fact Base
One of the key benefits of developing a credible customer profile database is that it serves as a “fact base” for decision making. Without this fact base, management has little ability to influence targeting choices. A credible profile database gives managers a powerful tool to drive sales effort toward the most potentially profitable customers. The challenge is two-fold:
- • Identify high-value non-targets and add them to the target list
- • Identify and drop low-value targets from the target list
Among all the factors that determine sales success in the market, none is more critical than choosing and calling on the right customers. Organizations that effectively execute their targeting and profiling processes gain a competitive advantage that cannot be quickly or easily matched by competitors.
Organizations that effectively execute their targeting and profiling processes gain a competitive advantage that cannot be quickly or easily matched by competitors.
The journey of commercial excellence starts with the identification of the right market that the organization will serve at the right time.
Like in any relationship, the attraction must be high on both sides in order to create the spark , the attractiveness model or the Account policy matrix is a form of portfolio analysis used for classifying product lines or strategic business units within a large company which was developed to assess areas of the business in terms of:
- • The attractiveness of the industry/ market concerned
- • The strength of the business/ ability to serve
Determining what factors make a market attractive and what are product and/or service strengths can be difficult to pin down. A healthy dose of intuition is also helpful when determining where to place your products and services in the framework.
Factors That Affect Market Attractiveness
Although any assessment of market attractiveness is necessarily subjective, knowledge and best judgment should be used. The following key factors may also help determine attractiveness:
- • Market size
- • Market growth
- • Pricing trends
- • Intensity of the competition
- • Overall risk in the industry
- • Opportunity to differentiate products and services
The more attractive the item, the higher up it is placed on the vertical axis of the framework. The less attractive it is, the lower it is plotted.
Options for each cell:
- Protect- maintain
- Try harder-challenge the leader
- Be picky-keep an eye on opportunities
- Harvest-reduce cost to maximise profits
- Manage carefully
- Grow wisely-invest in attractive areas
- Regroup-preserve cash flow-defend strengths
- Keep investment to the minimum-protect the position and refocus
- Divest-Get out
A credible customer profile database gives management several options for creating the target list. Sales organizations need to consider implementing two or three profiling cycles before re-targeting customers. Multiple profile cycles help identify past errors and build confidence in the accuracy and credibility of the profile database. Sales and marketing need to establish a collaborative process to create final target lists, and after a careful look at business strength and market attractiveness, they can put together their own framework and arrange every primary product or service somewhere in the three areas; Invest-Harvest-and Divest.