Acclaro Partners' Research and Strategy Weblog

Using Customer Research to Prospect for Sales Leads

Ask for the Sale?

For most companies, the business development research process typically begins at "ask for the sale" sstage.  But there are actually several steps that occur before we get to this point in the lead development cycle (see a new whitepaper on our website).  When you “ask for the sale,” be sure to demonstrate your superior knowledge of the lost account’s or prospect’s pain points (section 2 of the white paper).  Think about the opportunities to get your foot in the door (section 3), and be sure to tie those steps into your overall solution.  Be prepared to overcome specific obstacles (section 4).  Mention that you have done your homework and that you are aware that they have a budget (section 5), but that they may not be satisfied with all vendors they are currently using (section 6).  Try to demonstrate superior strengths in areas that are most important to this customer (section 7).  And finally, be sure the specific offer (section 8) is a solution to a problem or a step forward toward a strategic goal. 

Feel free to visit our website to learn more.

The Eight Pillars of an Effective Market Study

There are several elements that occur, or should occur, in every good market study.   Think of these elements as the foundation, the core infrastructure of the study.  And this foundation is constructed of eight critical pillars.  These eight components should be found in any market study. 

1.    Market Size

The first step in determining market size involves putting a border around the market and carefully defining what we are talking about.  We are not only concerned with what products or services are included and which are excluded.  We also need to be clear about which geographies are being covered, and which time period we are reporting on.  A market can be sized both in terms of units of production and in terms of revenue produced. 

 

2.    Market Growth

We need to be careful with labels on this aspect of the market study.  Are we talking about CAGR, the real growth rate over last year, a change versus the same time period last year, etc?  Growth can, and should, be reported in both currency and in units.  But growth can also be reported for a specific region, a specific product, segment, channel, or customer type, for example.

 

3.    Market Segmentation

Markets can be segmented by product or service, by channel, by market share, by region, and by customer type.  And there are countless other ways to segment a market.   Segmenting a market clearly is important because it shows the user of a market study more granular insights than would be seen with merely a top-level view of the market.  For example, learning that there are five types of customers and that one dominates is interesting.  But going one level deeper and revealing that the largest customer segment is also the most averse to paying a premium for rapid delivery is clearly more valuable.

 

 

4.    Market Trends, Dynamics, and Drivers

There are four basic kinds of market trends: political (governmental, regulatory), economic (financial), social (driven by consumer or customer behavior), and technological (innovations).  Market, customer, competitor, or supplier developments may come in the form of political, economic, social, or technological change.  Seeing (and predicting) these changes is important, because some changes will be positive in nature and some will be harmful.  For example, in the health care industry, understanding new health care reforms is critical to forecasting the future profitability of the industry.

 

5.    Market Opportunities and Threats

The fifth critical component of an effective market study involves taking a close look at the opportunities and threats of the market, customers, competitors, and sometimes even suppliers.  What is occurring that could present a benefit or detriment to the Company?  More importantly, what could occur within the foreseeable future that the client could steer its way around?  Changing regulatory environments, aggressive competitor strategies and movements, reducing customer reliance on outsourcing, supplier forward integration – these are all future threats to the current status quo of the market.  It is obviously essential to pick up, report on, and analyze the impact of, these market shifts.   

 

6.    Critical Success Factors

We must understand how to attain success in the market being studied.  Customers certainly will have some of the answers to this question.  How they choose suppliers, the purchase decision criteria that they use, is important to understand.  We also need to understand the competitor perspective on the elements that are required to be successful in the market.  Especially if the client is conducting the market study as part of a new market entry decision, it is valuable to understand the barriers to entry in the market.  Clients need to compare the critical success factors of the market with their own competencies, or the competencies they could easily attain, and decide if they are suited to play in the market.

 

7.    Customer Needs and Behavior

Assuming they are qualified to play in this market, clients will want to drill deeply into customer needs and behaviors.  A good market study will involve more than current customer interviews; it will include conversations with prospective customers and lost accounts, as well.  All three types of customers can reveal their unmet needs, buying behaviors, and impressions of the various suppliers.  Perhaps most importantly, the market study should reveal the degree of loyalty that customers have for their existing suppliers.

 

8.    Competitive Positioning

In addition to addressing who all of the relevant competitors are in the market, it is important to understand each of their strengths and weaknesses.  More than understanding the current capabilities of competitors, we want to understand the directions they are moving in.  Where do they see opportunities, and how are they positioning themselves to take advantage of these presumed opportunities?  What are the strategies to take them there?  Understanding where the real market opportunities and threats are, and comparing these to the intentions of competitors, reveals that some competitors are literally driving themselves off of a cliff.  Others are heading straight for the sweet spot of the market.  Understanding this is critical, because it then enables you to decide if you want to compete head-to-head against the smartest competitors, or position your company toward the white space of the market where there is far less competition.

 

Conclusion

Good market studies are not check-the-box exercises.  While they may have some common characteristics in their core foundations, they are not cookie cutter products.  The best market studies reveal far more than “answers” to these eight issues.  They offer options and recommendations to help clients position their companies as effectively as possible, given the newfound knowledge about customer, competitor, market and supplier opportunities and threats.  For more information about Acclaro's competencies in conducting market studies, click here.

Product/Service Competitive Intelligence

 

Existing Products and Services -- In a competitive intelligence study, we would go beyond learning what percentage of sales each product area represents.  We may learn which areas the competitor is placing more attention on, and which product categories the competitor is less interested in, at this time.

 

Competitor Perceptions of its Existing Products and Services – Knowing precisely how the competitor defines its unique selling point or value proposition for its products, or types of products can be very helpful.  Imagine plotting all of your competitors’ product positioning strategies on a map and learning, for example, that not one of your competitors is focused on being the clear service leader.  Depending on your core competencies, culture, and the dynamics of your market, that may spell an opportunity for your company.

 

New Products and Services – It is important to learn what is most important in developing new products: speed to market, low product cost, low development cost, product performance, innovative features, quality and reliability, service –ability or flexibility.   How are new product developers rewarded?   What metrics and measurements of success do they use?  Generally speaking, how important is new product innovation to this competitor?  It is obviously also important to know what the competitor is developing. Sometimes competitive intelligence researchers learn precise details about a new product, its launch date, and its benefits and characteristics.  In other cases, it might be helpful to learn merely some insights about a general problem being addressed, an opportunity being seized, or a threat being dealt with. 

 

Customer Demand -- All new product developments are obviously intended to please customers in a new way.  It would be interesting to know what drives new product development (is it the direct result of internal engineering or external voice of the customer research?) 

 

Suppliers and the Role of Sourcing -- Some companies expect suppliers to advise and offer inputs to the new product development process; others do not.  Suppliers can sometimes offer a technological improvement or development that results in a new end-product feature or benefit.

 

The Market -- The final aspect of product competitive intelligence concerns the intended  marketplace for the products.  There may be specific geographies, channels, or end-customer segments being targeted.  It would be helpful to know if it will have universal appeal or if it is designed to serve the needs of a specific niche. 

 

For more information, read our white paper on the subject:  Click here

Resolving Business Inflection Points with Facts

During periods of change, uncertainty, and transition, there is a need for actionable facts in order to make strategic decisions. 

Senior decision-makers in most corporations are unable to articulate the precise path the business must take to move from the point where the business is today to the point where the business needs to be in three years.  Connecting the dots between the current positioning of the Company and its desired future positioning rarely results in a straight line.  Most companies need to pick up a new skill, develop a new product or service, enter a new market, or change/develop/grow in some way that represents a branching out from the standard way of doing things inside the company.  There are likely to be unseen hurdles or obstacles in the way.  Facts, data, research is needed to ensure that the company is able to identify and steer clear of these obstacles and hurdles.  At the same time, the Company must zero in on what capabilities it will need in order to be a legitimate player when it arrives at its final destination.  The Company would not want to arrive at its desired destination (a new geographic market, for example), unprepared to compete against existing competitors, or unable to meet customer needs.

No company can effectively embark on a plan that involves the pursuit of numerous growth initiatives simultaneously.  Companies may be considering new acquisitions and joint ventures at the same time they are contemplating new market entry via new channels, product lines, or geographies.   These organizations are facing a period of uncertainty, change, or transition because of the newfound opportunities they are facing.  There is a need for fact-based insights to help resolve their uncertainties. 

Sometimes the inflection point involves an external threat or challenge which is thrust upon the Company.  Examples include a rapidly changing marketplace (or one that looks like it is ceasing to exist), a new competitive threat, changing customer needs that make customers less interested in your company’s products, or supplier forward integration that looks like it could create a new class of competitors.  What is the cause of the threat?  Is there a way to resolve the threat?    What are competitors’ plans, given the threat?  Are there opportunities surfacing as a result of the threat? 

Primary research, direct conversations with industry participants, can answer these questions.  The research should be conducted by an objective, third-party firm, experienced in gathering insights on privately held competitors and obscure, niche markets.

 

For more information, click here to see a white paper on this subject.

Primary Research for Private Equity

 

Private equity groups are hiring research and consulting firms to conduct primary research with increasing frequency.  For those considering this trend or unfamiliar with third party primary research, it makes sense to describe what primary research is, how and why it works, who does it, and what to look for in hiring a firm providing primary research. 

For Acclaro Growth Partners, primary research means candid, direct, person-to-person phone conversations with a wide range of industry experts in four vantage points of the industry:  suppliers, competitors, third party experts (e.g., associations and industry expert consultants), and customers.  

The best primary researchers are “Renaissance” men and women.  They are knowledgeable about a wide range of subjects and are able to carry on conversations fluently, with interest, and in a way that generates enthusiasm from the conversational participant.  Analysts build rapport with phone contacts and develop meaningful, interesting, and mutually useful conversations with their contacts.

 

Primary researchers typically rely on one or more of several motivators.  People talk with researchers for the following reasons:

· To satisfy their own egos (“I know more than this consultant.  I am the expert.”)

· To enjoy playing the role of coach or teacher (“You have it all wrong; let me explain what is really going on.”)

· To satisfy their own curiosity and need for intelligence (“This researcher knows more than I do; maybe I could learn something here.”)

· To help the researcher out (“You are under a deadline and you know nothing about this space?  Let me help you out for a minute.”)

 

The process involves a multi-step process for jump-starting a conversation from scratch:

· Introduction – Primary researchers must identify themselves by name and by the name of their company.

· Explanation – The reason for the call.  Primary researchers must tell the truth, but not necessarily the whole truth.  For example, they could say they are studying the industry (but not hone in on the specific niche segment of interest).  They could say they are doing market research (but not mention an acquisition).

· Hook – The interesting trend, dynamic, threat, opportunity, or other popular topic of conversation facing the industry.  The researcher may mention that they have heard the opposite of what is actually occurring, or may compare trends in this country to those in another country, or may simply share the insights he has gathered.  The point is to say just enough that the person on the other end of the phone simply cannot resist responding.

· Steer the conversation – By asking follow-up questions to what the other party has already said, the researcher covers a lot of ground without appearing to be working off of a script.  The real answer to any problem is usually two or three questions deep.

 

The telephone conversations Acclaro conducts are useful because they are:

· Interactive – you can ask follow-up questions in response to what the contact has already said.

· Direct – you go straight to the horse’s mouth.

· Precise – you get the exact answer you need – faster and more reliably than through other means.

· Inexpensive – solid answers for the cost of a phone call.

· Recent – you may not be able to read about a very recent development in the industry, but you can ask about it.

 

There are four suggestions of capabilities or philosophies to look for in a primary research vendor:

· Experienced researchers – a team that has been conducting primary research for years and is not fresh out of college.

· Blind approach – eliminate the biases that exist when the contact knows which organization you are studying, or the identity of the client.

· Collaborative, interactive approach – to avoid having the research head off in the wrong direction mid-project.

· Actionability – Instead of a data dump, the research should lead to intelligence, which leads to analysis, which leads to options, and finally, a recommendation.

 

To learn more about our capabilities, visit our website

Competitive Strategies

The ultimate purpose of competitive strategy is to anticipate competitor moves and countermoves, and take the initiative to thwart the effectiveness of their plans.  There are several steps to enable your company to do just that.

The first step of competitive strategy is to develop a comprehensive list of competitors in your market.  Your competitors have a sense of others’ strengths and weaknesses, as well as their own.  We ask each competitor to identify and describe its unique capabilities, competencies, and/or value proposition to understand where its strengths lie, relative to other companies in the same market.  Similarly, we ask each competitor to describe aspects of its company and its competitor’s businesses that could use improvement.

We ask each competitor to reveal the opportunities and threats they see in the market.  We look for the clear paths to growth and profitability that competitors have already identified.  We may later determine that a particular competitor’s view of an opportunity or a threat is false, but first we need to identify all of the viewpoints.  The next step is to examine the intersection of strengths and weaknesses with the opportunities and threats identified.  Include detailed implications for your company in the analysis.  By comparing each strength and weakness with each opportunity and threat, implications will emerge for actions your company could take. 

We cannot start to develop competitive strategies in earnest, though, until we have discovered the actions that our competitors will be taking.  It is not enough to see the opportunities and threats that they perceive;  we must also strive to understand what they are doing about these threats, and how they are taking advantage of these opportunities.   We need to be able to plot the present and future state of the competitors. 

It is important to understand the various unmet needs of different segments of customers.  Comparing the needs of different segments of customers with the positioning strategies of competitors reveals that some competitors are positioning themselves in a no-man’s-land of white space.  They are effectively driving themselves off a cliff – where no customer needs exist.  Other competitors will be found clustered around the same small customer need that many of its competitors are going after.  As a result, they will all starve for lack of sufficient customer need.  The wise competitor observes where the competitors are positioning themselves, and where the customer needs are, and looks for the customer opportunities that are not being met by many (or any) of its rivals.

 For more information on competitive strategies, visit our site.

Competitors' Corporate Strategies

Competitive Intelligence can be used to determine the corporate strategies of competitors.  The utility of this knowledge is significant.  While your strategy should not depend on competitors’ strategies, your strategy may be influenced by them.  Moreover, getting inside the minds of the competitors, being able to think as they would think, enables you to predict future moves and to predict reactions to your own moves. 

Competititve intelligence can reveal the key corporate goal(s) of competitors.  Since strategies and tactics roll down from a corporate goal or objective, it is important to understand that core goal as a starting point.  Does the competitor want to focus on growth or profitability?  Is it concerned about quality or service or price leadership?  Where does the organization focus, and what is it willing to sacrifice? 

Once we understand the core goal, we can identify the strategies in place to attain this goal.  If the goal is to become the easiest organization to work with in the industry, what are the steps it is taking at a corporate level to ensure this happens?  Practically, this means asking competitor contacts just how they plan to achieve the core goal.  “What steps are you taking to ensure the goal is achieved?”

Strategy is about choice – the selection of one option from an array of alternatives.  We would also probe into the core competencies, unique selling points, and value propositions of the organization.  What does it believe it is uniquely good at, compared to the competition, that is critical to its business model?  In addition to understanding this core capability, we would assess its impact.  What benefits or difference does this capability make that exceed the benefits of working with other providers of the product or service?  How does it intend to convey this unique capability to its customers and prospects?  And what does it admit to being weak at?  What presumed opportunities does it admit to walking away from?

Primary research is the only way to glean the strategy.  While there is evidence of its strategy on its website, in its press releases, in its financial reporting (except for private companies), the strategic direction can only be gleaned by asking knowledgeable employees about what action steps they are taking to take advantage of opportunities and to circumvent threats. 

Conclusion.  Much of competitive intelligence is tactical.  Profiling a list of competitors, determining an arcane quantitative answer, or answering a so-what question.  Competitive intelligence should be utilized more effectively as a strategy tool.  To influence and shape, and challenge our own, strategic choices.  Predicting competitor actions and reactions is a good thing.  We should do more research around the corporate strategies of our competitors.

Competitive Intelligence for Private Equity Portfolio Companies

Over the past couple of months, Acclaro has fielded several inquiries from private equity groups curious about what can be learned about competitors’ operations. 

Competing in niche industries with few or no public companies as proxies and limited published market data, portfolio companies must operate somewhat blindly in their industry segments.  However, some private equity groups have encouraged their portfolio companies to utilize competitve intelligence practitioners.  They do so to augment their internal understanding of the competitive landscape, competitor capabilities, and most importantly, competitor intentions.

Most private equity portfolio companies have a narrow and shallow understanding of their competitors.  Those subject areas they do understand about competitors (e.g., revenue, product line, and core strengths and weaknesses) do not extend deeply into a range of finance, product or corporate strategy issues.

A one-time review of the competitive landscape is not enough.  The functional understanding described in this white paper can certainly not be achieved in one study.  The portfolio company needs to build up a baseline understanding, with help from a third-party consulting firm with expertise in competitive intelligence.  This baseline understanding should be updated annually, probing both more deeply into known areas, and broadly into areas that are not yet understood.  Over time, a portfolio company will be able to anticipate competitor’s moves and make bold decisions understanding in advance how the competitors will or will not respond.

 

 

Competitive Intelligence by Functional Area

Corporate Strategy -- The smaller the business unit (and the smaller the competitors, and industry sectors), the more critical is competiitve intelligence for making sound strategic decisions.  Competitive intelligence (CI) augments an internal understanding of the competitive landscape, competitor capabilities, and most importantly, competitor intentions.

Competitive Strategy -- Since strategies and tactics roll down from a corporate goal or objective, it is important to understand that core goal as a starting point.  Does the competitor want to focus on growth or profitability?  Is it concerned about quality or service or price leadership?

Financial Strategy -- Financial strategies and intentions related to balance sheet decisions can be uncovered, as well.  These discoveries are helpful in developing an assessment of the owner’s commitment to the business over the long-term.  Where is the owner investing?  How much is the owner willing to risk today in order to generate future cash flows?

Product Strategy -- Since product strategy is all about differentiation, we seek input on just that – how the competitor perceives its products or services to distinguish themselves in the marketplace.  Not just existing products.  New ones, too. 

Brand and Communications Strategy -- There are four main promotional tools available to any company (advertising, personal selling, sales promotions, and publicity).  Which one does the competitor focus upon?  And what is the core theme, main idea, or message that permeates customer communication efforts of the organization? 

Distributions Strategy -- Distribution strategies involve planning how to pass the product from organization to organization, entity to entity, until it reaches the final destination, the end-customer.  We can diagram what percentage of sales go through each channel of distribution (distributors, wholesalers, dealers, manufacturer’s reps, direct sales force).  Even starting at the point of sale, one can determine how the customer interface works, how orders are placed, and how orders are fulfilled.  When we study distribution, we look for the current state of reality in how products are distributed, and we look for the intended future state, as well.

Sales strategy -- The sales strategy reveals the core sales steps being taken to achieve the corporate goal.  If the goal is to become the easiest player to do business with, what are the steps the sales organization is taking to make that goal happen? Who are major accounts, and how does the competitor select key customers? 

The sales breakdown by market served helps shed light on the Company’s priorities and successes.  We can also determine the breakdown between domestic and foreign sales.  It can be helpful simply to ask salespeople, who are often highly opinionated, where the company’s priorities lie.

Pricing strategy -- When a competitor prices its products or services, it may have one of a number of possible goals in mind:  profit maximization, revenue maximization, quantity maximization, price leadership, etc.  Depending on the goal in mind, it may select from a range of possible pricing strategies:  competition-based, cost plus, creaming/ skimming, loss leader, market oriented, penetration, dynamic, target, etc.  We are able to determine which goal and which strategy a competitor has selected.

Operations strategy -- Operations ties directly into the corporate goal, of course.  For example, if the goal is to be known as the low-cost and low-price producer, what specific actions are happening in operations to drive costs down?  What are the operations strategies to achieve the corporate goal?

An interesting place to dig deeper is the value chain.  What value-added steps occur where, before reaching the customer (e.g., degree of manufacturing integration, utilization of unique materials, utilization of unique or proprietary processes, etc.)?

While facilities and labor do not tie directly into intent (corporate goals and strategies), the make-up of the facilities and labor force can reveal capabilities. For example, learning about the age, condition, and equipment utilized in a manufacturing plant can help assess production capacity. 

R&D and Innovation Strategy -- The innovation or R&D strategy reveals the steps that the R&D department is taking to ensure it carries out the goal of the corporation.  What is the area of focus or emphasis for R&D (e.g., true innovation and novel concepts, updating of existing products, value-added features and benefits for existing products).  The origin of the competitor’s R&D focus and activities may be internally driven programs, customer/market demands and unmet needs, competitors’ activities, etc.  Our role is to determine not only what the source of the R&D focus is, but what the emphasis and strategies truly are.

The Increasing Importance of Market Due Diligence

Market due diligence, often the most critical aspect of diligence, is becoming even more important. The risks of doing deals are higher than they have been in recent memory.  Drivers (related to lender interest in market data, the need for industry/sector attractiveness assessments, the demand for analysis of the target’s attractiveness/positioning, equity vs. debt allocations, and other issues) are making buyers even more apt to utilize outsourced market due diligence.

Unlike other aspects of due diligence, market due diligence does not base its findings on information provided by the company.  Instead, market due diligence involves gathering data from industry experts, competitors, customers, and sometimes suppliers and other third-party market participants.  In niche markets, it is essential to gain the perspective not only of customers, lost accounts and prospects, but third party market experts, and, most importantly, direct and indirect competitors.

Market due diligence therefore provides a “more accurate, independent, future-centric, and ultimately more reliable view of the…prospects of the business.”  (“Counsel: Commercial Due Diligence and Acquisitions,” The Edge Malaysia, Issue 759, Marcus van Geyzel, June 15, 2009).

While those involved in M&A seem to hear more about financial and legal due diligence, “the core of every transaction” is the market due diligence.  “Financial and legal aspects are only tools necessary to complete the transaction.” (KPMG Benchmarking Study – Internal Commercial Due Diligence, February 2009).  Market insights are the most critical aspect of all due diligence because they are not only helpful in facilitating a Go/No Go decision on the deal, they are also instructive in pointing out a strategic direction for the newly acquired target, post-closing.  The ability to gain access to a vast array of market experts (customers, competitors, third-party market participants) is one of the key benefits of outsourcing market due diligence.

 To learn more, click here.