Are you vertical, horizontal, or something else?

In the book “The Discipline of Market Leaders”, written just over 20 years ago by Michael Treacy and Fred Wiersema where they looked at competitive business strategies, the overarching conclusion was that a business needed to;

Choose your Customers, Narrow your focus and then Dominate your market.

A key reason for doing this is to make best use of your sales and marketing resources.  This requires a focus around a well-defined market or in most cases a logical subset of the wider market.  Deciding how best to do this is a common topic of debate with our customers and the most common dimensions considered are; vertical, horizontal, geographic and e-location.

Vertical refers to a market consisting of businesses in a particular sector where the product or service addresses issues particular to that type of business; insurance brokers, engineers, logistics companies, etc.

Horizontal applies to a market where the product or service satisfies a need that is common across a wide range of businesses regardless of sector.  For example; a software product that produces invoices, calculates vat and automatically produces the vat return would be of interest to any business.

Geographic; this model is common with; taxi companies, decorators, service engineers and in fact any business that needs to travel to get to and service its customers.  This is also a very common model with bricks and mortar retailers who know they need a physical presence in the locations where their customers will want to shop.

e-location; the arrival of the on-line environment has to some extent removed the need for a geographic dimension but the vertical and horizontal dimensions are in many cases even more important.  It is now all too easy for someone to ‘wander by’ your website; just browsing, and in the process they may trigger you to respond but if your on-line presence is too general many enquiries could be a waste of time for you.

These dimensions are important when you are planning how and where to focus your outbound sales and marketing effort but they are also important, as mentioned under “e-location”, to focus the nature and volume of in-bound enquiries that you receive.

Blending various combinations of the four dimensions is also common and this can help to further refine the focus of your efforts and a typical mix will see a geographic component with one of the others.  There are also many other parameters that can be used to further refine a target market including; business size, private rather than publicly quoted and demographics such as age, lifestyle and interests.

Matching your market strategy to your product/service

Defining a business’ marketing strategy as being ‘vertically focused’ has become very popular in recent years.  If you do actually have a vertical offering and you adopt a vertical go-to-market strategy then you and your customers will benefit hugely.  However, I see various companies that have adopted a vertical go-to-market strategy when their product or service actually provides a horizontal proposition.

I recall an example of a company that provided IT support services that considered itself to have a vertical offering for the utilities sector.  It is true that around 40% of revenue did come from contracts with utility companies and this spurred them on to approach other utility companies with the message “we are a supplier to the utility sector”.  As a result they gained an appointment with the CIO of a large electricity company and during the meeting he asked the supplier what they knew about smart metering systems.  The answer was actually very little.

It is said that perception is truth.  The CIO believed that someone claiming to have utilities experience would know about the business issues specific to a utility whereas the supplier only knew about the technical issues of the IT systems.

This example illustrates very well that doing a lot of work in a particular vertical market does not mean you have a vertical offering.

The experience the supplier had with that CIO proved to be invaluable as they re-evaluated their offering and realised they had a horizontal proposition.  Their knowledge and expertise was focused on the IT issues around processing very large volumes of batch data; they had developed experience in tuning systems to optimise performance.  Their market focus thus became any company needing to process large volumes of data; utilities, insurance companies, membership organisations and many others.

Points to consider when deciding on your go-to-market strategy

  • If your products or services directly address specific business issues of companies in a vertical sector then you have a vertical offering.  If your offering solves issues of; infrastructure, processes, systems or methods that are common in many different types of businesses, what you have is a horizontal offering.

Once you have a clear view of your proposition measured against the two dimensions of vertical and horizontal you can now overlay other parameters such as location or company size to further refine the definition of your preferred target market.

The above will feed into creating appropriate sales and marketing messages specifically aimed at your target market.  The messages can be accurately framed to appeal to the needs of your target customers and specific individuals with relevant responsibilities; financial director, production manager, HR manager, quality manager, etc.

  • Next to consider is how your proposition addresses the question “why you?”  Unless you have something truly unique your prospective customers will be able to buy it somewhere else so why would they choose you?  Although propositions are rarely unique the way a company delivers it may be and hence the ‘how’ will provide fertile ground for creating your unique proposition.

Incidentally, not many prospects will actually ask “why you” but naturally they will be thinking it so you need to ensure your sales and marketing messages proactively answer this question.

  • The previous points  help you to build a profile of the industries, business sectors and specific companies that are most likely to be interested in what you provide which in turn enables you to better focus your sales and marketing efforts.  However; what you have so far is a well formed but possibly ill informed picture as you have formulated your opinions primarily from internal reference points.

Before you can consider this part of the job as finished you need to take account of what your potential customers might think.  Unless you do this there is a risk you will be telling your prospects what you want them to hear rather than what they need to know.

To ensure you have a complete picture you need to gather external inputs from customers past and present plus a range of external stakeholders such as; your suppliers, relevant trade bodies and publications, government legislation, general media commentary and if justified specific market research.

  • The final task is the process of deciding which routes to market you will use and how they will blend together to form a complete go-to-market solution.  The previous steps will provide valuable inputs to the decisions that need to be made on the routes to market and how the mix should work to satisfy your needs for new business generation.  During the conversation with past and present customers you should ask how they actually found you and their preferences in terms of marketing environments they prefer to use when looking for products or services such as yours.

None of this is especially difficult but it can be time consuming which can be frustrating when all you want to do is get out there and make some more sales.  However, you will find this structured approach will pay you back handsomely as the key result is to make your sales, selling and marketing effort more focused which in turn will give better return in terms of conversion ratios leading to more orders won and therefore more revenue to bank.

 

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Addressing the complete sales cycle

There’s many a sales methodology in the market, but most focus only on large deals, and typically only on the skills required at the point of sale completely missing everything that must happen before an opportunity has been identified.

Such sales methodologies fail to assist businesses with their overall sales process and their need to ensure their energies are focused where they will gain maximum return from their sales and marketing budget.

Knowing how to deal with an opportunity is great, but how do you find one in the first place? If all you do is respond to inbound enquiries what control do you have over the pace or direction of the development of your business?

Comparative focus of different sales methodologies

Comparative focus of different sales methodologies

Performative Structured Selling®  provides the foundation for your own go-to-market model. It creates a lean, agile selling engine that addresses the complete selling cycle enabling you to build a manageable customer base from which you can then fill your pipeline with opportunities that you can objectively assess for your chances of winning.  This not only helps the sales force to use their time more effectively, but also enables your sales management to deploy their resources for maximum return.

The Performative Structured Selling® framework permits the flexibility to incorporate the things that are already established and working well within your existing processes, into the final solution.

Performative undertook three assignments for us between 2002 and 2005 including the customisation and deployment of Performative Structured Selling® of which the key principles are still in use today. We have come to realise the true benefit of this robust methodology as it remains a constant in the business regardless of the changes in personnel, market and proposition. The work done by Performative created a great foundation for what is now a very successful business.
May 2009

Want to increase the return from your Sales and Marketing budget? Get in touch with us to discover how you can tune your selling operation and build valued customer relationships.

What would be the second thing you looked at if you wanted to make more profit?

A recent post on LinkedIn asked “What would you look at first if you wanted to make more profit – sales, product, marketing, staff, overheads, purchasing or something else?”

The answers contained many good suggestions, but all focused on cutting overheads or purchasing costs.  To us it seems highly likely that anyone that has been in business during the past four years has done all the cutting they can.  Cutting fat is of course a good thing, regardless of the economic circumstances, but there is a limit to how far this can go before it damages the business’ ability to grow and it is certainly not a strategy for long-term sustainable growth.

So, after all the cost cutting, what is the second thing to look at?  The answer; strategies to grow the top line.

Become lean by all means, but not skeletal! How can you grow if you're mal-nourished?

Become lean by all means, but not skeletal! How can you grow if you’re mal-nourished?

So, our answer to the question was; cut everything you can, deploy good cost control processes so the fat does not grow back then pay attention to the systematic growth of the top line.  You cannot cost cut your way to success, it is a tactic for surviving not thriving.

If you have not already started, now is the time to look to your strategy for growing the top line.  We suggest the following multi-facetted approach:

  • Expand your efforts to hunt for new customers in your existing markets with your established offerings
  • Look for new customers in new markets for your established offerings
  • Continually farm existing customers for add-on and new business
  • Devise new products and services to sell to existing markets
  • Once your new offerings are established take them to new markets

There is a danger that during a period of relative inactivity, as is common during a cycle of cost cutting, the organisation loses its “hunting” edge.  So, it is important to devise and deploy different and proactive go-to-market strategies that will drive a program of hunting.

Finally, back to cost control.  Always keep a focus on the costs and if you find you have activities that are no longer core either divest them or outsource them.

IMRglobal

The Outcome:

Over the one year period of the assignment, the customer achieved:

  • Revenue growth of 40% from $158m to $222m
  • Reduction in cost of sale from 9% to 7% equivalent to $8m
  • Reduction in the cost of marketing by $7m.

The Challenge

IMRglobal, a well-established IT solutions provider with a sales force operating in the USA, wanted to grow and expand its reach across the globe:

  • The company had just gone public and needed to conform to the rigorous NASDAQ quarterly reporting requirements.
  • The company embarked on a rapid programme of acquisitions (11 completed in 37 months) in eight countries across four continents.
  • Each acquired business brought its own approach to sales and marketing.  However, a consistent approach was needed across all business units enabling accurate and consistent reporting.
  • Previous consultancy advice, from a reputable company, had led to a global sales training programme, which had not been successful; there was no reinforcement after completion of the courses, there was no corporate sales methodology, and there was no consistent approach to sales management.

The Performative Solution

Performative analysed the situation and convinced the senior management that for any solution to have wide, deep and lasting effect, there needed to be a programme of change across the organisation – not just in the people, but also the underlying infrastructure, methods and processes.   A one year programme was authorised, with the key goal of developing a sales approach that could be easily and consistently implemented in each region.   In our roles as interim global sales and marketing VP the following was achieved during the programme:

  • Developed a new go-to-market model with a supporting sales methodology.
  • Overhauled and restructured the US marketing operation which also functioned as the global marketing function.
  • Profiled, re-structured and rebuilt the sales teams and their compensation schemes.
  • Developed and rolled-out sales skills and process education programmes globally.
  • Developed and implemented a new, more structured, sales management approach.
  • Recruited sales directors and sales managers for the US operation and supported other regions in similar recruitment activities.
  • Continued mentoring and support for a further 18 month period.