Finding new customers in new markets is a major element of any profitable business growth strategy. However, many companies struggle with how to do this successfully and as a result they keep mining the same markets and the same customers, even if neither are profitable anymore. This is article #2 in a three part series that will provide proven ways to find new customers and explore new markets.
Last week we covered the first step in this process: Identifying attractive new markets to explore: what works & why. This week our focus on How to Identify the best prospective customers in new markets.
Take the time to read article #1 on Identifying New Markets before reading this article by going to my Manufacturing Line Blog at AllBusiness.com, http://www.allbusiness.com/manufacturing-services/4967954-1.html.
Finding New Markets
Last week we worked through the process of identifying the most profitable markets that your company currently serves and how to look for “adjacent markets” similar to your most profitable ones. A successful market diversification plan should start with these markets first to build momentum before you begin looking at radically different markets, like the current hot markets in Alternative Energy, Medical Devices, Aerospace, or Defense. The problem with these hot markets is that everyone is pursuing them and they all take considerable time and resources to penetrate.
In the example last week, we identified that the following market segments were the most profitable current ones:
- 333132 Oil & Gas Field Equipment
- 335221 Household Cooking Appliances
- 333294 Food Processing Equipment
The Adjacent Markets we identified for each were:
- 333131 Mining Machinery Manufacturing or 333120 Construction Machinery
- 335222 Refrigerator & Freezer Equipment or 335224 Laundry Equipment
- 333295 Semiconductor Machinery Manufacturing
Identifying the Best Customers
The best strategy to find new customers is to identify the characteristics of your current Most Valuable Customers and then use that to guide your efforts to segment the prospective customers in the new markets you’ve identified.
Start by meeting with the cross-functional team you formed during step one. Review the analysis they did on your current customers that yielded the data on your most profitable current markets. Make a list of those customers that your team rated #1 on both Margin and Hassle. These are likely to be your Most Valuable Customers (MVCs). Work with the team to describe the characteristics of each of these MVCs and then find those that appear to describe most of your 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 or High Volume to Many Markets
- NAICS or SIC codes
- Geographic Location
Finding the Best Customers in New Markets
The next step in this process is to pick the target market segments you want to explore. Using our example, choose 333131 Mining Machinery Manufacturing and 333120 Construction Machinery. The steps your team should follow next are:
- Purchase a Dunn and Bradstreet Marketplace listing of the companies in each of these NAICS codes
- Segment this list by the Geographic Locations you feel you can serve the best or by where the most companies are located
- Purchase the full company information listings on each location
- Segment this list by your MVC characteristics
Voil?, as they say in France, you now have the beginnings of a prospecting list for potentially the best customers in the new market segments you have identified. Next week we will discuss how to launch a successful sales & marketing campaign in new markets aimed at these customers.
Charlie Alter owns Bentbrook Advisors LLC based in Sylvania, Ohio. He specializes in Growth Strategy, Innovation and Coaching and can be reached at firstname.lastname@example.org visit http://bentbrookadvisors.com/ for more information on his business advisory practice.