Imagine a company that creates complex technical products (the same applies to sophisticated services). This product could be marketed and sold into several markets. Each of these markets demands its specific product configuration. Because of the product’s complexity, these configurations need extensive effort.
Next, imagine that this company has technical people who are well aware of the product’s complexity. These people are the product’s developers. Then there is a small but influential team of people who see their job as selling the product. So far, so good.
But then it gets tricky. The second group of people doesn’t realize how extensive the modifications are to make the product suitable for a given market. They go after any and all market opportunities. Then the sales team asks (demands) that the technical team deliver. To make matters worse, the available budget to configure the product is often quite out of whack.
As a result, the company is yanked from a project to configure the product for markets A, B, and then C.
The sales team does not give any thought to these questions:
- Which market is the product most easily configured for? Which market is the proverbial “low-hanging fruit”?
- How much effort is involved in configuring the product for market X?
- Is the potential customer willing and able to cover that cost?
- Or, if the answer is “no,” is market X so lucrative that a company-internal investment makes sense?
- What is the opportunity cost from taking on a project in market X, given that the company has limited people resources? Would a project in market Y lead to product advances that can be sold to more customers?
Simple products that need little to no configuration from one market sector to another might lend themselves to a sales-driven approach. You sell what you have wherever you can sell it. Even there, having market familiarity is helpful. If a company doesn’t have many salespeople focusing on one or two market sectors is likely still a good call. Get good sales in that sector. Then expand using the profits from these sales.
When the product is not simple and not simply transferrable from one sector to another without significant development, a strategic roadmap is not a luxury. It is a must-have. Sales- and product development strategies have to come together in one plan. Let’s first sell our product into the most straightforward available market. Then the product is developed further/ reconfigured for the next market.
What is needed for the successful implementation of that strategy?
- The salespeople and technical people need to be in a respectful synergy. They need to realize that often there is a gap in understanding and communication between these two groups. Neither side should make assumptions. If in doubt, ask the other group to find out the answer to critical questions.
- The salespeople are initially acting more as market analysts. Or, the company may have a different group of people performing that task. Some companies refer to it as product marketing; others may call it market analysis or market research.
- To identify which market to pursue first, consider:
- How close is the current product is to what the customers of market X need?
- What is the size of that market?
- How easy is it to penetrate that market?
- What is the expected profit margin?
Have you ever been in a situation where a complex product or service was sold indiscriminately into many markets simultaneously, and the team had trouble getting good at configuring it for any one of them?
P.S.: I appreciate you commenting and sharing this Treasure Tuesday with others. Thank you!