Finding new customers in new markets is a major element of any profitable business-growth strategy. However, many companies struggle with how to do it successfully, and as a result they keep mining the same markets and the same customers, even if neither are profitable anymore. These steps can help you find new markets.
Identify Existing Markets
The first step is to identify the most profitable markets that you currently serve because these existing markets can lead your business to identify profitable new markets to explore.
Start by forming a small internal team consisting of the people who are responsible for the following jobs: direct sales, marketing, finance, production, and engineering. Challenge this team to complete a table, like this sample, by analyzing all customers for the past three years that collectively generate 80 percent of your company’s total sales. Just use estimates to determine the margin, hassle, and potential categories rather than laboriously analyzing each account. You want to do this analysis as quickly as possible and be reasonably accurate.
Determine Your MVCs
Now that your team has analyzed each of your largest customers over the past three years, they can begin to explore which ones are really your most valuable customers, or MVCs, and which market segments appear to have the greatest potential for sales growth in the future. They should do the following:
- Trim the list down to those customers that rank No. 1 in margin and No. 1 or No. 2 in hassle.
- Identify which of these customers is expected to have good potential for growth in the future (++ or +). This short list of customers represents your most profitable current and future markets.
- The critical next step is to look for “adjacent markets” that are similar to the best ones you currently serve. To do this, search the North American Industry Classification System Web site for markets near or “adjacent” to your current markets that may have potential to explore.
Identify the Best Customers
The best strategy to find new customers in the markets you’ve identified is to determine the characteristics of your current MVCs. Start by meeting with your team again. Review the analysis they did on your current customers that yielded the data on your most profitable current markets. Make a list of the customers that your team rated No. 1 on both margin and hassle. These are likely to be your MVCs. Work with the team to describe the characteristics of each of these MVCs. These characteristics are likely to be some of the following:
- Size (total sales, number of employees)
- Single vs. multiple plants (identify how many)
- Ownership structure (family-owned, privately held, part of a larger company, publicly traded, etc.)
- Core values
- Low volume to niche markets vs. high volume to many markets
- NAICS or SIC codes
- Geographical location
Find the Best Customers in New Markets
The next step in this process is to pick the target market segments you want to explore. In this sample table, you might choose 333131 Mining Machinery Manufacturing and 333120 Construction Machinery. Next, your team should take the following steps:
- Purchase a Dun & Bradstreet MarketPlace listing of the companies in each of these NAICS codes, or find something similar at your local library or Manufacturing Extension Partnership center.
- Segment this list, either by the geographic locations you feel you can best serve or by where the most companies are located.
- Purchase the full company information listings on each location.
- Segment this list by your MVC characteristics.
Voilà, you now have the beginnings of a prospecting list for the new market segments you have identified.