Here’s a simple calculation that tells you how well your organization is executing on product, marketing and sales initiatives that will drive growth over the next 12-24 months.
How To Quantify Your Market Focus in 5 Steps
- List Your Target Markets
List the market segments that will account for 80% of your revenue over the next 24 months across the entire product portfolio. For B2B companies, these are vertical market segments in most cases – retail, telecom, healthcare, non-profit, etc., or sub-segments of those categories.
- Evaluate Your Marketing Program Spending
Determine the percentage of your marketing program budget that has been spent year-to-date on lead generation programs specific to the market segments listed in step 1. For example, if you have a $10 program budget and you’ve spent $6.50 on collective programs for the market segments listed in step 1, your number is 65%. Do not include corporate campaigns that are not segment-specific.
- Evaluate Your Sales Pipeline
Take the most recent snapshot of your sales pipeline and calculate the percentage of prospective customers that fall into any of the market segments listed in step 1.
- Evaluate R&D Resource Allocation
Determine the percentage of R&D resources allocated to projects with broad market value for one or more of the segments listed in step 1. Do not include one-off projects that correct quality or design flaws or projects that are specific to a single customer.
Total the numbers from steps 2-4 and divide that total by 3. The result should be a number less than 1, for example .67.
Interpreting the Result
- The closer your score is to the number 1, the better aligned your organization is to its target markets, greatly improving your odds for success.
- A score of at least .51 means your organization is slightly more market-focused than not!
- The closer your score is to 0 the less market-focused you are. Resources are spread thin and the impact each initiative will have on overall growth is small.
- The younger your organization, the closer this score should be to the number 1. Trying to be too many things to too many markets too soon will bury most start-ups before they get out of the blocks.
- If the marketing lead generation machine is working the way it should, 80% of the sales pipeline should consist of buyers in the target markets listed in step 1.
- R&D initiatives typically falls into three categories; market growth, customer satisfaction and competitive. One of these categories should command a substantially larger share of the R&D budget than the other two in order to make a significant impact on your longer term objectives.
The above calculation is based on a “market segment first” approach that aligns corporate goals and objectives with the goals and priorities of target customers in the “market segments” most conducive to your strategic and financial goals.
If your organization is a “product first” environment, each product has its own strategy, product managers compete for R&D and marketing resources, everyone believes their view of the market is the correct one, and sales does anything necessary to make quota. Having fun yet?
Contact Proficientz and learn about our unique framework that makes the top-down business priorities of your target customers the focal point of product management, product marketing, sales and customer success teams. It’s a can’t-miss approach for consistently delivering a portfolio of solutions with strategic value.
How to do a Market Analysis for a Business Plan