CREATING GROWTH
A guide explaining how to create sustainable growth in your company
Part 2. Establishing Market/Product Fit
“The aim of marketing is to
know and understand the
market so well the product
or service fits him and sells
itself.” – Peter Drucker
Part 1 of Creating Growth presented the four approaches to
build revenue within a company. It demonstrated how growth
comes from expanding your existing market, choosing a new
market and developing product and services based on
market’s needs. It also began to share how critical it is to fully
4 APPROACHES
1
MARKET
PENETRATION
understand a market’s specific dynamics before allocating
2
NEW MARKET
DEVELOPMENT
Part 2 will focus on the first strategy required to create
3
NEW PRODUCT
DEVELOPMENT
resources, money and time.
growth. Regardless of which approach is chosen, establishing
Market/Product fit is required to ensure a company’s
products/services reflect the needs of the customers.
4
DIVERSIFICATION
We will discuss how mapping a market can help a company
achieve Market/Product fit more effectively and in some
cases capture share quickly. We will also present the types of
information that should be sought when researching a market
to direct your product/service development and the different
ways to solve the needs of the customer.
Creating Growth: Establishing Market/Product Fit
2
Do wn lo ad
Haven’t read Part 1?
Download a copy.
The right approach
is based on selecting
the right market.
MARKET
PENETRATION
NEW MARKET
DEVELOPMENT
NEW PRODUCT
DEVELOPMENT
DIVERSIFICATION
Choosing any one of the 4 approaches is driven by a company’s past and current activities.
It must weigh what it currently sells against the competition to determine if it can continue to
grow in its market or whether it must transition into a new one. It must compare costs of new
product development to overcome competitors in its market versus bringing current products
into adjacent markets. It also must factor time constraints, goals and business requirements if
it chooses to enter a new market with new products as an unknown.
What helps direct these actions is understanding and defining the market a company exits
from and the ones it’s considering targeting for entry. Now that the world is digitally connected
and commerce has no borders customers of B2B and B2C companies shop for the right
product regardless of where it is located. This makes choosing a market even more critical
because the competitive field has widened.
To effectively compete in a market and/or choose a new one to expand into, a company must
understand what opportunities exist and the forces that create barriers for success and entry.
Mapping a current market and new ones for entry is a critical step to avoid lost dollars (tactics
that draw from your operating budget that have little effect) and inefficient efforts (time and
resources exhausted with minimal impact).
Creating Growth: Establishing Market/Product Fit
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Mapping a Market:
Due Diligence
A company’s internal perspective and use of market
research to fill unknown gaps provide the necessary
Insight to map a market. Internal perspective derives
from a company’s track record and history and its
current client activities and intelligence. These will indicate if there are similarities between past and current
customers with new segments in an existing market or a
new market considered for entry. Research, such as win/
loss, needs assessments and A&U (attitudes & usage)
studies will fill unknown gaps into the untapped needs of
a customer segment. Together both internal perspective
and research when applied to a market map, will provide
the necessary direction to choose one of the four
approaches for growth.
Mapping a market is a key component of product
development and market penetration. By taking the time
to map an existing market, a company builds a base
of knowledge with which they can identify
opportunities that direct new product innovations. The
awareness established within an existing market is
valuable equity that makes it easier for a company to
introduce and have its new offerings accepted. This
insight will also provide a better perspective to increase
the sales of current offerings to an existing market. By
mapping a current market, a company can better
position itself to improve market penetration by targeting
the right group of customers with a more focused
product/service and marketing efforts.
Regardless of which of the 4 growth approaches are
selected, acquiring the information about a market is
essential; whether it is existing or new- it significantly
improves the chances of success and the investment
made. A company who just uses intuition to select a
market develops products or executes tactics, risks
incurring unnecessary costs impacting the bottom line.
Trial and error is a sure fire way to create larger
expenses, waste time and opportunity, and diminish your
probability of success.
Creating Growth: Establishing Market/Product Fit
4
I
N
S
I
G
H
T
When you choose to research a
market these are the insights you should
be seeking:
1. Who are the competitors in that market?
What is their share? How do they
position their product/services while
conveying their features and benefits?
2. What is the size (population/potential $)
and makeup (characteristics) of the
customers in this market?
3. What un-met customer needs exist
and are desired? Is there any level
of dissatisfaction with the current
offerings?
4. How well does your product/service fit
the needs of this customer or will
modifications be necessary to make
them relevant?
5. What level of awareness and relevancy
will your products/brand need in order to
gain acceptance in this new market?
7. What is the required investment needed
to successfully target this market?
Mapping a Market:
Inward perspective
Market selection is fraught with challenges if a company is not certain what it represents
to the customers it serves. More often than not, a company will focus on a broad market
thinking the largest body of water will yield the best results only to learn their attempting to
boil an ocean with little success. Alternatively, a company can lose touch with the market they
currently occupy, becoming a lost captive in their own land. They wait to long to recognize
the changes their current customers’ desire and are left to ponder where did everyone go.
Market selection for a company is as much about understanding the market’s unique
dynamics as it is a company’s own abilities. Selecting a market without understanding if a
company is equipped to serve is potentially setting the approach up for failure.
Areas a company must evaluate before choosing a market to pursue:
Company Self-Assessment
Company Self Assessment
1. Can the company effectively serve the size of the market?
2. Can a company serve a market that has unique needs?
3. Does a company have the resources to meet the needs of the market?
4. Are a company’s current products relevant to the customer who resides in this market?
5. Is a company’s proposition translatable that it can attract customers in new markets?
6. Is the team aligned to the proposition of what the company represents to the market?
7. Are the product development, marketing and sales teams focused on the same goals?
8. Is management ready to commit time, resources and dollars to expand an existing market or grow within a new one.
Creating Growth: Establishing Market/Product Fit
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Mapping a Market:
Outward perspective
Once a company understands its own capabilities it must look outward to understand
what barriers exist that can prevent success. True today as when Michael Porter first
conceptualized the five Forces, industry analysis uncovers market weakness that can be
capitalized and areas that must be shored up to defend a position.
C om petitive R ivalr y
Uncovering the share of the four top companies, will determine if the market is concentrated or
fragmented. A concentrated market indicates that few players occupy the greatest share and a fragmented
market shows many players exist with a minority share. A concentrated market may be more difficult to
grow or breach without having a point of difference or credibility because of the strength of its brand/company. If a company can capitalize on a change that the four top companies are slow to adapt to, a point of
difference can be established. A fragmented market is ripe for a leadership company if it can position its
solutions to the needs of the customers better than the others.
Threat of S ubstitutes
Determining how easily a customer can switch products/services from other companies will indicate how
vulnerable a market is to enter or challenge to protect. If minimal difference exists between current products/services, a company can take advantage by either establishing price leadership or creating product
differentiation. If differentiation exists, finding customer segments that are under served can inspire tailored
solutions that protect against substitution once acquired and adopted by these segments.
B uyer P ower
If the market is saturated with too many suppliers, the customer has the power to dictate price. Differentiation by addressing specific customer needs is one way to offset buyer power by creating new demand that
other suppliers have yet to establish. This will remove a company from the pack of competitors who are
battling solely on price. If entering the market with on par products/services, me-too products or services
without any significant point of differentiation, it is important to assess if a company will be able to take a
cost leadership position. Battling on price alone can be a path to the bottom.
S upplier P ower
If the market has fewer suppliers they can drive price by leveraging customer demand. This works for both
the company who has minimal competition or the supplier who controls the raw material to a company.
This advantage occurs when there is extensive cost to switch suppliers or a market is concentrated. A
company must be careful to reconsider entering a market with too many suppliers and/or one in which the
solution needed to be competitive is built from materials with few suppliers. The first influences pricing and
the second costs.
Threat of N ew E ntr y
If a market is expanding and profits are high, it creates an opportunity for entry which also threatens an
incumbent trying to maintain market share. Those entering a market will look to find holes in current
products/services in order to develop alternatives that fill these voids. This could be an alternative price
strategy, new product innovation or other benefits that entice customers. For those companies that are
entrenched in a market, those same points of engagement must be seen as strategies to maintain or
expand position to offset any threat of entry.
Creating Growth: Establishing Market/Product Fit
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Mapping a Market:
The right fit
Upon assessing potential growth opportunities it becomes important to clearly define the
market and customer segments worth pursuing. Too often a company will see a market in its
totality assuming that its size will drive immediate growth. Size can be a mirage that makes
a company believe opportunity is in abundance. In the end, choosing a segment that best
fits the product will help to develop the necessary growth and loyal customer base to enable
further expansion into adjacent customer segments. Market segmentation guides product
development by identifying key segment needs and directs marketing to position the offerings
so they are relevant and resonate with the potential customers within the segment.
Consideration for effective segmentation:
1. Identify a market by the industry that is most relevant to your products and services.
2. Within that market, identify segments of customers that best fit your products and services?
3. Within those segments identify where the greatest opportunity exists based on the 5 Forces:
- Rivalry: What is the Competitive Makeup of the segment (concentrated or fragmented)?
- Threat of Substitutes: Is there opportunity to establish product or price differentiation?
- Buyer Power: Are their more suppliers than buyers?
- Supplier Power: Are their more buyers than suppliers?
- Threat of Entry: Has the segment expanded, increasing the entry of a surplus of competitors?
4. Understand the customer need for each segment to determine if your products fit or what new solutions can be developed.
Segmentation Example
MARKET: TRAVEL INDUSTRY
Segment 1
Frequent
Flyers
Segment 2
Business
Travelers
Creating Growth: Establishing Market/Product Fit
Segment 3
Business Travelers
Flying Domestically
7
Segment 4
Business Travelers
Flying Domestically
On the Eastern
Seaboard
Conceptualize the
right solution
With a clear perspective on the customer’s needs and the products and corresponding
marketing of the competitors, a company can begin to conceptualize what types of products
or solutions to introduce. While multiple opportunities may have presented themselves during
investigation of a specific market, it becomes important for a company to prioritize these
opportunities before beginning the process. Prioritization is based on a company’s internal
capabilities versus finding an external resource and the related investment required to
address an opportunity that will guide the development of a solution.
There are 4 Product Strategies that help a company bring products to market.
Solution alternatives
for existing
products
Inspiration from
other industry
analogs
PRODUCT
STRATEGY
Acquisitions/
partnerships
to fill product gaps
Re-Package
Existing
Products
Creating Growth: Establishing Market/Product Fit
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The Four
Product Strategies
E xplor e S olution Al t e r n a t i v e s f o r E x i s t i n g P r o d u c t s
Evaluating current products and services against customer needs will help determine if new features
are required to keep them pertinent. In addition, by adding these features to an existing product it
can make it relevant to a new customer increasing market share. Exploring solution alternatives with
existing products allows a company to extend their product’s life and profits beyond expected returns
from the initial investment. As evaluation is occurring, a company should also consider what features
it must jettison to lessen confusion of the new features and potentially save costs as these features
may no longer be significant to the core or future customers.
S eek Inspir ation f r o m o t h e r I n d u s t r y An a l o g s
Evaluating other industries’ products, services or even approaches can drive new ideas and product
development solutions. While those industries may not present the same needs, share similar
dynamics or cater to the same customer, the products and services designed for their customers’
may be the genesis of a new product idea. A comparative assessment can uncover trends that may
cross over into a company’s industry changing customer expectations. It can drive ideas that enable
a company to be first to market in their industry and it can offer insight into the obstacles the
company in the comparative industry had to overcome to be successful with their product.
Seek A cquisitions / P a r t n e r s h i p s t o f i l l P r o d u c t G a p s
At times a company will find it more beneficial to either partner or acquire a company that can
extend their product portfolio. In these cases, lack of resources, expediency to address a market
need or budgetary factors will drive this decision. This product strategy approach can shorten the
time to meet market demands while extending the offerings a company can sell especially if it is
losing share to competitors with more pertinent offerings. Partnership can reposition a company to
its customers without heavily investing in infrastructure and acquisition can expand not just a product
portfolio but add new expertise that are lacking in current teams.
Re-P osition/P acka g e E x i s t i n g P r o d u c t s
Current products may need a simple re-positioning and packaging to introduce them to new customer
segments. A company can use this product strategy when the needs of the new customer segment
are similar to current customers. Re-positioning is successful when a company communicates the
benefits and features with messaging in the appropriate voice of the new customer’s industry. This
product strategy falls in line with the growth approach “sell current products to a new market.” It also
is a way to extend profit on an established, saturated product line within a current market.
Creating Growth: Establishing Market/Product Fit
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Do we have the
means to build it?
The idea is clear, the concept created, vetted and approved - now the question remains does
a company have the discipline and resources to build it? If the company is adding to existing
products or developing a new solution, the most important question is what is required of the
team to take the concept and make it real.
The formula to effectively build a desired solution is:
one-part collaboration, one-part context and one-part common goals.
G
Co
xt
n
te
oa
ls
llaboration
o
C
Creating Growth: Establishing Market/Product Fit
Com
10
n
o
m
Team Requirements
When it is time for a company to pull the team together, take a concept, and turn it into a
solution the measure of success will have as much to do with the ideas as it will the team’s
ability to bring it to market.
C ollabor ati o n
In order for a team to develop a successful solution, collaboration is
key. Collaboration will help define the roles and responsibilities of
the team, indicate where accountability lies for key milestones and
define major deliverables. Collaboration establishes the procedure
for the handoff from one phase to another and identifies who will
carry the baton on the next leg. Establishing a collaborative team and
process helps ensure a solution meets the desired time frame
and budget.
C ontext
Context gives a team the direction and insight required to develop the
right product. It comes in the form of market segment information,
customer needs insights, competitive weakness intelligence and
uncovered market opportunities. It guides the design and development process so the concept built comes from a place of informed
design not opinion. Without intelligence driven direction, the team
is in the dark to guess customer needs, spending budget and time
on assumptions.
C om m on G o a l s
The last requirement for a team to share is a common goal. This
common goal gives everyone a target to strive for and hit. It keeps
everyone honest with what remains on the to-do list in order to bring
the product to market. It will also become a measure for where the
team is at any given time and what changes may be required to
ensure that time frame and budget requirements are fulfilled.
Creating Growth: Establishing Market/Product Fit
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In Conclusion: Part 2
As customers within markets become more discerning and new ventures emerge to meet
their ever changing tastes, product development is critical to stay ahead of trends and remain
relevant. Product development can be a necessary, costly proposition in the allocation of time,
dollars and resources. To ensure an acceptable return on this investment, a disciplined,
strategic approach is necessary.
Part 2 of our series discusses how critical it is to map a market before investing in product
development or any tactical expense. A market too large with many competitors will make it
extremely difficult for a company that does not have a distinct enough product and make it
near impossible to develop a product that fits every customer. Selecting the right market can
help you establish a solid base with loyal customers that you can replicate in an adjacent
market or customer segment and use as a repeatable strategy.
As your team understands the unique dynamics of the selected market, making sure you
consider all product strategy options will help your overall budget, the company’s committed
resources and ultimately chance for success. In a situation where resources may be
stretched or knowledge is limited, a partnership or acquisition will be key. If internal product
development is the solution, make sure your team focuses on the same goal, is working
collaboratively and is following a playbook of researched insight not individual opinion. This
area of your business is an important investment because of the effect it can have on your
ability to optimize opportunities in the market and grow as a company.
Creating Growth: Part 3 Building a Desired Proposition
Preview: Part 3 our next installment of Creating Growth will
focus on how to ensure your product effectively engages your
customer. Before any dollar is spent on social media, trade
show, advertising campaigns, all tactics must be built on a
foundation of true differentiation and in the language of your
customer. Developing the right positioning and proposition is
the difference between your products being ignored or acquired.
Creating Growth: Establishing Market/Product Fit
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About Inventis Strategies
Inventis Strategies partners with Mid-Sized Companies to overcome flat or negative growth due to
revenue and customer decline. We solve problems in the critical areas to create sustainable growth:
PRODUCTS
BRANDS
SALES
We partner with companies in need of external resources, researched insights and strategic planning
required to connect with their target market and increase competitiveness. We work with our clients
to build and sustain growth by becoming an extension of their team, applying our process, and
remaining focused on their success.
If you’re interested in learning more about how we can help your business
grow, please contact:
John White
[email protected]
215.962.2768
Or visit us at:
www.inventisstrategies.com