Blue Mine Group

Importance of product market strategy

“Which products should we offer to which markets?”

This simple question is one of the most important and far-reaching in business. The answer to this question is your product market strategy – the set of products and services you decide to offer, and the set of markets you decide to serve.

In many ways, your product market strategy determines what it is you do as a company. Your product market strategy is probably the greatest driver of your financial performance and company value. Offering a very good solution to a large market with urgent, unmet needs is incomparably more valuable than pursuing a mature, competitive market with a mediocre solution. It sounds obvious, but it never ceases to amaze us how many companies we meet that talk about doing the former, but are actually doing the latter.   

In addition, your product market strategy drives most of the key activities in your business, including engineering, operations, marketing, sales and service. It basically dictates what most of your people do every day, how easy or difficult it is for them to succeed, and how much all of that costs you.   

For all these reasons, thinking through your product market strategy, and continuously evolving it in light of changing circumstances is a critical, central component of your overall company strategy and business model. Done correctly, your product market strategy will enable your company to maximize its potential. 

Prospecting

Prospecting is the first of two elements where the primary goal is to identify sales opportunities. This element refers to identifying new prospective customers who have a need that you can address.

The process begins with summarizing from your strategy and market analysis activities your target markets and customers. In B2B sales, this normally means defining target organizations by specific criteria such as size, industry sector and / or geography, as well as target contacts within these organizations by job function.

Once your target prospects are identified, you need to define and test a process for initiating contact to introduce your company and products, and to invite prospects to begin a relationship with your company. It is rare for a prospect to express their real needs and concerns in the initial introduction. It is better to focus initially on learning about the prospect company and contacts, providing value of interest to them, and making it easy for them to become part of your relationship development program.

A relationship development program should have two components. One is managed by your marketing communications team and comprises newsletters, webinar, seminar invitations, and other methods of touching contacts regularly. 
The second is managed by the sales team members and comprises calls, emails, visits, birthday cards, meal invitations and other personal relationship building tactics.

To record and manage your prospecting and all other sales activities, you must implement a customer relationship management (CRM) system, such as Salesforce or SalesLogix.

Talking to customers

While you can gather some information on customer needs from online research, nothing beats talking directly to prospective customers. This should be one of the earliest market development activities a new venture undertakes, and it should never end.

The fundamental requirement for winning customers is to talk to them on an ongoing basis, and to continuously refine every aspect of your market development model until you have perfected the formula for unleashing the market’s potential.

The rise of social media offers a powerful new option for companies to understand customers and their needs. Paying attention to, and participating in, the ongoing conversations online about your market and product category enables you to get the pulse of your target customers quickly. 

Customer research

Having identified your best target customer segment, you need to develop an in-depth understanding of these target customers, their needs and options.

The first step is clarifying exactly who is the customer. For consumer and small ticket business purchases, this is normally fairly easy to identify and define. For high-ticket business purchases, frequently a number of people are involved playing different roles, such as champion, recommender, decision maker, and approver. In all cases, you need to identify the typical profile and motivations of these different players, so you can tailor your marketing and sales approach accordingly.

Next, you must develop a deep understanding of the needs you address. Customer needs can be analyzed in two primary categories:

·         Core needs – these are the functional needs customers have that you address, normally driven by increasing revenue, reducing costs and / or managing risks.

·         Buying needs – these needs are to do with the customer’s ability to buy - what must happen from both a process and budget point of view to get to a purchase commitment.

Both these sets of needs must be clearly understood and addressed in order to secure a purchase order from the customer!

Market and product definition

The strategy development exercise discussed over the past few days should define in overall terms the market you want to pursue and your offering to that market. Within those guidelines, almost all new innovations need sharp focus through clear product and market definition in order to be successful.

Market definition enables you to focus on a clearly defined set of customers with an urgently felt need that is not currently being satisfied. Product definition enables you to provide an offering that meets your target customers’ needs better than all other options.  These are accomplished through a specific set of analyses, the results of which are summarized in a product market document.

Note that ideally a new venture should complete at least a reasonable level of market and product definition before beginning to design and build the product. The results of the analyses should define and guide product development. While this seems obvious, in practice many product innovations are developed based on the product developer’s personal experience and preferences, and in advance of systematic market and product definition. In these situations, product and market definition should be completed as soon as possible, preferably in parallel with product development.

Innovation strategy development (part 3)

We continue with our series on innovation strategy development. In addition to the strategy team workshops, selected analyses may be required to gather data and provide fact-based input to the discussions. These might include customer interviews, competitive analysis, channel analysis, and product definition.

The result of this strategy activity is a clear market development plan for the business that ensures consistency across all sales and marketing activities. It is best to summarize the strategy in a short document comprising something like the following sections:

·         target markets

·         target customers and contacts

·         key needs addressed

·         competitive options faced

·         solution offered

·         value proposition and points of differentiation

·         key sales and marketing initiatives

·         metrics and financial plan

Once an initial strategy framework is developed, you should review and update it with the team every three to six months.

Innovation strategy development (part 2)

Continuing the innovation strategy development process. Once you select your strategy team, it should schedule and hold a series of workshops to define and problem solve the key market development issues facing the company. Over a period of several weeks, the team should work through the following types of issues

• 1: define overall market development goals. What are we trying to accomplish? What specifically will represent success?

• 2: identify and prioritize target markets.  What are the range of markets we could go after? What are the key demand and competitive characteristics of each market? How do our capabilities match each market? Which is best in terms of market opportunity and our strengths?

• 3: define offering guidelines. In broad terms, what are the key needs of our target market? What are their options? What are the key benefits we need to offer to meet their needs better than other options? How do we need to be priced? What risks do we need to overcome?

• 4:  define channels to market. What are the range of ways we could reach our target market? What direct and indirect sales channel options are there? What communications options are there? Which of these make best sense in terms of fit with our target market, our offering, and our resources?

• 5: agree market development roadmap. While there needs to be significant flexibility in charting the course over time, having and updating a roadmap will help the management team become aligned and work together to commonly understood and supported goals.

The goal of these sessions is to define the broad guidelines for the venture. This provides a clear framework within which the team can operate, and makes clear what the company is doing, and equally importantly, what the company is not doing.

Innovation strategy development (part 1)

While most ventures pay lip service to the importance of a good strategy, strategy development is often not well understood or practiced. Too many ventures develop strategy on the fly, or allow the thoughts of the founder or largest investor to dominate.

The best approach is to form a team of key stakeholders (founders, managers, investors) and work together through a relatively structured process to address your primary market, product and channel options. All stakeholders will be best served by applying the “wisdom of the team” to the strategy development process.

It is also best to have an outsider act as facilitator, to enable all primary stakeholders to focus on the content of the discussion, not the process.

Market challenges facing new ventures (part 4)

This is the last in a short series of posts on the challenges facing new ventures.

Challenge 4.      Established industry structures work to prevent the entry of new innovators. Most industries have evolved over many years, and have a clearly defined structure of established vendors at each stage of the supply chain, investors in the current industry structure, and an established communications structure of media, events, and trade organizations. The internet and other technologies have begun changing this, but in most cases new entrants to a market still encounter a large, established set of vested interests that are initially suspicious of, and likely to fight against, a new intruder.

The result of these market challenges is typically experienced by the venture most fundamentally as a lack of customers. Cumulatively these challenges often cause great stress for the venture’s founders, investors, employees and other stakeholders, including:

·         uncertainty of which markets to pursue

·         lack of clarity as to the right product features for the market

·         an inability to agree on or even express “who we are” and “what we do”

·         lack of visibility and awareness in the market

·         lack of a pipeline of sales opportunities.

Recognizing, and thinking through, these market challenges is the first critical step on the path to addressing them effectively.

Market challenges facing new ventures (part 3)

Challenge 3. Customers don’t know about the innovation and its benefits.

Even if the venture has a clearly identified customer, and a clearly superior offering, it needs to overcome significant problems in reaching and educating customers about its solutions. Everyone is extremely busy and has little time available to even consider their own needs, never mind look for a solution. In addition, everyone is constantly inundated with marketing messages (estimates are in excess of 2,000 per day) and communications of all sorts.

Rising above the noise, and getting people’s attention just to focus on the problem and how you can solve it, is very difficult, and getting harder all the time.