In this down market everyone is looking to maximize profits from their existing customers while searching for additional opportunities to bring in new customers. Last month in this space, I proposed partnerships as a way to extend your capabilities and leverage the strengths of other ISVs. This month I’d like to examine another approach, one that could include partnerships, and that is to open up new markets for your business through market extensions.
By expanding into new markets, you can often find opportunities that build on your strengths and provide additional outlets for your products and services. We tend to throw the “market” word around without really thinking about it. So, what's your market? Most ISVs are in more than one market since they have multiple products and services, and customers’ needs vary by industry. Your markets can be broad or narrow, geographically-based or technology-based and, of course, they can also be tied to traditional SIC classifications, such as specific industrial or retail sectors, medical specialties, or whatever.
The first step is to analyze the market(s) that you are already in. Step back and define them in relation to your business. Don’t take the easy way out and define your market as “POS systems for retailers in Ohio.” That doesn’t give you any valuable information and does little to reveal where your strengths lie. Rather, boil it down to specifics that help you understand the value proposition that your customers see in their business relationship with your firm.
Once you distill the broad parameters into details, you’ll almost certainly have at least a few specific markets that stand out. See if the customers in your core markets are looking for additional products or services that you could easily offer. Then, look at the outliers -- the customers that don’t neatly fit into your core markets but are in related or similar industries. Often you are servicing them because they invited you or you “tripped” over them in your normal course of business. Chances are you’ve developed some expertise with them that could be expanded to other customers within that market.
Also try to determine adjacent markets – these are markets that have very similar needs to your core business offering but that you have never pursued. With a focused 30-minute brainstorming session with others from your organization, you should be able to quickly identify these other customer candidates. To a lesser degree, you can use Internet search engines to help you identify adjacent markets. Type in common words that you use for your current customers and see what other industries appear in the results. These new industries can quickly become natural extensions for your business. Of course we think that digital signage is an amazing new buisness marketing industry.
Finally, look internally. What are the skills of your current staff (especially sales) in regards to these new markets? Will they be able to make the step to translating their expertise to new business areas? At the same time look at your product/service mix in order to identify your most profitable lines of business. Clearly, these are the ones that you’ll want to take into new markets.
Once you’ve taken a hard look at the external and internal opportunity/skill mix, you can begin to extend into the new markets.
The word “extend” is important here because you should not be remaking your business in the middle of a recession. Don’t throw out the playbook and expect your staff to embrace change and immediately adapt. They may even panic and think that the end is near if you suddenly announce that you have a “change of strategy” and are pursuing new markets. An extension makes it easier for the staff to understand that your current customer base is still at the center of your business strategy.
If you position the move into new products/markets as an extension, your staff will also be better able to understand the logic and be more comfortable with approaching the new markets. The transition will be smoother and they’ll be more confident when they approach new prospects. They’ll also appreciate the fact that you are not hunkering down and allowing the crummy economy to define your business.
From there, focus your sales and technical staffs on the new markets to begin the sales and support process. You can extend your business markets on your own or with partners. See last month’s article for some thoughts on that.
Whether you go it alone or with others, succeeding in new markets won’t happen overnight, but a market extension gives you a new short-term business opportunity and opens doors for you and your staff.
Is market expansion a magic bullet? No. But it is a way to uncover new prospects with minimal marketing and training costs and keeps your staff focused on revenue-producing activities. If nothing else, it provides you with the opportunity to review and update your business plan to enable you to have a better understanding of your current business and the challenges and opportunities that you face.
Remember, your current customers are the most natural market of all. If you keep servicing them and keep them happy, the new business markets will represent incremental business that will help you get through these tough times and position you for a stronger recovery when the economy finally turns.
Mike Strand is founder and CEO of StrandVision LLC, an Internet-based subscription digital signage service that is distributed through resellers. Previously, Mike founded StrandWare, a leading bar code software and AIDC company. Prospective resellers may contact Mike at mjstrand@StrandVision.com.