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Segment and Gain Market Share: A Different Perspective

2 Oct, 2006 By: Tom Callinan imageSource

Segment and Gain Market Share: A Different Perspective

Many companies in the document management industry still allow their sales
force to make the critical decision of who to target.  The rep is assigned a zip
code or circumscribed by some other geographic boundary, and asked to make 30
cold calls per day.  After all, hard work, cold calling and developing our own
customers is how we all succeeded in the copier business.

Well to use a cliché, that was then and this is now.  For years—decades in
fact—there were product extensions or technological improvements that drove
companies to upgrade their copier equipment.  Speeds continued to increase;
features that are mundane today, such as duplexing and scaled reduction and
enlargement became integrated, and then came the transition from analog to
digital.  The vendor first to market with specific technology or speed class had
an advantage over other vendors, and end users were willing to switch vendors
rather easily to gain the advantages.  The world was dominated by dealers as the
channel choice of the Japanese manufacturers with Xerox as the only national
player, but they did not wrap aftermarket into the lease like they do today,
which makes competitive buyouts almost prohibitive.

Today, all major manufacturers have full product lines through segment six
and all are making a strong transition to B2C.  The functionality of printers
and copiers has converged, with low end printer-based MFPs eating through
segment one and into the low end of segment two. IKON has matched Xerox’s
national span and many manufacturers are building substantial direct operations.

With the correct planning and strategy none of these changes spell trouble. 
Focusing your sales force on the prospects that provide you with the greatest
return on your investment is clearly a tactic you need to employ to maximize
success in this highly competitive market space.  Let us take a quick
statistical look at the issue.  If you sent a sales representative out randomly
cold calling over a period of time, the ratio of what they find would probably
look similar to the chart below:

If you think these numbers are in the ballpark, what they tell us is that a
rep that randomly cold calls is wasting 60 percent of his time.  I do not
believe it is unrealistic to believe that this is the best case scenario. So,
what is the solution?  That’s simple—it is the inverse—focus 100 percent of your
sales force’s time on the other 40 percent of the market space, which includes
high volume or multi-unit prospects that can buy locally.  If you currently have
5 percent market share, and over time with the proper focus you could win 25
percent of the remaining 40 percent, you would triple your market share to 15
percent.  Would that make you happy?

Now let us take this one step further.  We now know that there is 50 percent
of the market where we want to focus our efforts. This is made up of the 5
percent that we already have; the 5 percent that is already being cultivated by
our sales force; and eventually, the 40 percent we have identified as good ROI
prospects.  In order to accomplish this, we are going to design territories by
populating them with that remaining 40 percent.  Are there any differences
between the prospects within that 40 percent?  Of course there are.  You will
have prospects with a single segment III unit and you will have prospects with a
mixture of 12 segment III through segment V units.  Since you probably do not
have enough sales reps to cover the entire 40 percent, make certain you focus
first on the accounts that have the highest possible return.

There is no chart that shows all of the companies in your area and the
current population of copiers and printers, but here is where all of your market
knowledge provides you with advantages.  You know that a law firm with five
employees probably has a segment III MFP plus a couple of printers.  You know
that a manufacturing company with ten employees probably has a segment I unit. 
Advertising and engineering firms will have color units to complement their B &W
units.  I could continue but you have the point.

Brainstorm with your management team and define the businesses you want by
either employee size or revenue.  Set bottom thresholds, and where it makes
sense, top stops by SIC code (business segment)  i.e., law firms with > 5
employees or manufacturers between $50M and $1B in revenue with > 100 employees
in my marketing area.  Go to a reputable list agency and get a count of the
businesses that fall within your defined focus in your marketing area.  If the
count is not logical you probably made an error so go back through the counts to
ensure you did not leave something in or out by mistake.  You do not need any
retail establishments!  You do need all of the accountants, consultants,
architects, and financial services companies within reasonable employee counts. 
Adjust your SIC, revenue, and employee counts until you feel good about the list
you are buying.  Nobody gets it correct the first time so approach the project
with the mindset that you will go through a few iterations of list refinement
before you actually make the purchase.

Once you get your list you will need to populate your reps’ CRM with
prospects.  I suggest you circumscribe each rep’s territory geographically, and
if you have not already started, use this process to begin to move your reps to
vertical markets by populating the prospects within vertical segments.  Keep the
major accounts with your major account reps and make certain you populate with
those accounts with the greatest ROI first. For example, if you have law firms
with between 5 and 75 employees, start populating with the 75 employee firm and
work backwards.  Do not feel compelled to assign out the entire list but rather
set up a “dummy territory” to store the uncovered accounts for future territory
growth.  Make certain that you take the necessary time to get this work
substantially correct.  Since you will be working with your CRM make certain you
make a back-up copy before you start your work.

Your sales team will now be spending 100 percent of their time on accounts
that can provide you with a fair ROI for the risk that you take by adding sales
professionals, and the money you invest in training them. Your sales
productivity will increase, your sales turnover will decrease, and you will grow
market share.

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