The Opportunity Database: Funding New Markets from Existing Businesses

Many businesses will pull focus, people, and money from existing work to feed growth and new markets. Many will fail. Pulling resources from the existing business to feed the future risks both the past and the future. Both have to do well for either to survive. Since that can be difficult and dangerous it is better to find more resources than to steal them from existing operations. One way to do this is by asking your organization to change their focus on prospective customers.

Most sales teams and distributors call on prospects as demand generation programs uncover them. Until recently, the best practices have relied on entreating prospects to respond using advertising, trade shows, direct mail, and seminars. The response is partial and comes in without priority - only a few of the prospective clients react at any one time. You can only take them as they come. Mediocre leads will get to the top of the list ahead of the best leads if those do not respond to your programs. There are better ways to fund your future. With the advent of faster computers you can reasonably ask not just for 25,000 prospects but to know who each of the 25,000 are, their addresses, revenues, contacts, and buying patterns. You can ask your team to create an Opportunity Database that can sort most of your prospective customers at one time and rank them by standards that you choose. It will have considerable effect on product development, pricing and margins, marketing, sales, and sales management. These effects help you get more resources for growth in existing or new markets1.

Freeing Resources For Growth
When you know in advance which prospects are likely to pay more for your product you can reduce discounting and raise the average sales price. This incremental revenue drops directly to the bottom line. The effect is also felt in marketing. With company by company information on your prospects the marketing team can start to tailor programs that will deliver more results for less investment. And the effect is felt in territory management. If you know the addresses and business niches of most of the likely prospects are for the next twenty-four months, you can allocate sales channels to make sure you are calling on the best ones. All this gives you more time, people, and money to invest in business growth.

The Opportunity Database concept is straightforward - you identify as many prospects as you can and then market to them in order, calling on the best ones first. If you want to fund growth, this is one of the best levers that you will ever have to do that. (For more on how to do this, please see the Sidebar - 8 Steps to an Opportunity Database.)

For example, Aspect Telecommunications competes in the market for call centers, the kind of systems and software that help answer when you call an airline or utility for help. Aspect is justly proud of the fact that they close well more than half the deals they propose, averaging $500,000 per deal. In the United States there are approximately 300 call center contracts sold each calendar quarter. With the old prospect management system Aspect knew about a fraction of those, missing some real opportunities. If the company knows about just 10 more opportunities per quarter in each territory, it could net an additional $7.5M in revenue per territory per quarter with little increase in resources. With an Opportunity Database the company can gain much more than that.

For Aspect, and perhaps for your business, that kind of market knowledge would:

» Allow the sales representatives to call on the best prospects first, maximizing revenue per person per month.

» Enable sales managers to quantify the value of a given territory and assign territories that are equal in opportunity, optimizing profit per person/year.

» Show marketing exactly how to find the niches with the highest potential so they can closely target the right markets, increasing profit per person/year.

» Give your e-commerce group information to tailor your on-line strategies to prospective customers with the highest potential, maximizing revenue per person-day and dollar spent on e-commerce.

» Allow product marketing to aim future products more carefully, augmenting the chances of success in products for the same investments, and

» Help financial analysts to price your products to attract the portions of the market that will be more likely to pay for value. This maximizes return for the same sales and marketing effort.

In other words, more revenue and profits for the same sales, marketing, product, and finance staff. It is an excellent way to get the most resource in the least time to help your business grow in a sustainable manner.

Identifying Common Denominators
The strategy is to identify all the likely prospects in a universe, and then assign each prospect points according to the value of the opportunity they represent. The place to start is with common denominators.

Common denominators happen both intentionally and by accident. For instance the sales teams of each phone system vendor can tell you that there are certain kinds of customers that are "theirs" and some that "belong" to the competition. When certain kinds of customers are drawn to you by effective marketing, you have some intentionally created common denominators. However, this can happen when your sales teams have fallen into the habit of selling into specific niches, an unconsciously created common denominator.

Don't expend resources trying to change either common denominator. Instead, use them as strengths. For example Aspect sells well to companies that have certain common characteristics, both intentional and accidental. These include specific computer hardware and software plus specific markets2. Aspect is developing an Opportunity Database of every company in the United States that is likely to have the right combination of market and installed systems. With this, Aspect is tailoring its marketing. The company directs the sales channels and teams to specific accounts instead of to general areas. This brings a quicker return, offering more resource to help the company move into new markets in less time.

Another example is a leader in technology products to improve meetings. They supply audio and video conferencing equipment to the Fortune 1,000. Who else might be a customer? Looking at their installed base lists outside that select group they are exploring the universe of middle sized companies with many branches. You'll have tens of thousands of these companies - a list that can be identified and then stored on a laptop computer. By sorting that list against other common denominators the company can direct their distributors to the prospects most likely to buy today's products.

A third example is Dun and Bradstreet. Like any other sales force the company would prefer to have their sales teams call on the best leads first. In an experiment one D&B region found that their best leads were companies that fit into a very few specific four digit SIC codes, a clear set of common denominators. An outside service sorted the territory lists for the region and assigned priority to those common denominators. D&B not only found that thousands of companies that had not yet been on a suspect list, they increased sales per rep by almost 50%.

Territory and Quota Integrity
A benefit of an Opportunity Database is that you can use it scientifically to spread opportunity among the components of your channels and sales teams. Instead of assigning quota according to history, you can assign it by a logical point system. However, you should plan on dealing with other issues that this will bring to the surface.

For example, one distributor for a high-tech capital equipment has convinced the manufacturer that their quota should be based on how they did in recent years. With no evidence to the contrary, the manufacturer agreed to this. When the manufacturer created the Opportunity Database, it found that the distributor had 18% of the national opportunity in their territory but carried only 10% of the quota every year. The manufacturer asked the distributor to carry more quota, and the distributor demurred. These conversations were quite active.

Eventually the manufacturer realized that they could do better with their own people in the field. The distributor lost their franchise. The result? More direct customer contact and more fuel for the manufacturer's growth. They could spend about the same in time, people, and money to get a higher return. That is fuel that they are using for growth.

What is Required?
The object is simple. If you know the common denominators of existing customers, you can identify businesses you don't yet know but which share the same common denominators. This impacts sales immediately. Instead of asking a sales person to drive down a city street looking for new businesses, identify the likely prospects in advance and send the sales people directly to them. Instead of marketing to a large group, you can tailor your marketing and save time, people, and money while you improve effectiveness.

A requirement for success is involving the correct disciplines. To increase sales efficiency you need only involve the sales or channel organizations. However, if you want to gain time, people, and money across the organization you will want to involve support from pricing, product development, marketing, field sales, and channels. The Opportunity Database will give each discipline information to extract a little more fuel for growth from the same products and markets.

This gives your business three incremental forms of fuel for growth. One is that your best people will be more focused in their work, allowing them to avoid time investments in marginal markets. That extra time is fuel your business can use to explore and open new markets.

The second fuel is people. When your people get used to the idea of using Opportunity Databases to target very clearly, they can take that skill and experience into new markets. Learning to focus as with a rifle instead of a shotgun helps identify key markets in less time.

The third fuel is incremental profit from sales. When you sell more and discount less, that profit will be cash you can use to create and dominate your next market without stealing from this one.

Once you have assigned your internal team, you will need:

» A fast desktop computer,

» A programmer who understands databases, and

» A manager who understands how your sales process works.

The work is not easy or fast. You can develop the skills to do this internally or call on two or three companies to do this for you.

After the team delivers the opportunity database, ask them to take an important next step. If you have a 30% market share, build common denominators for the 70% to whom you do not sell and then build products to support the second Opportunity Database.

Quantifying your opportunity can give you access to resources that will help grow your business without robbing your existing operations of vital resources. You can harvest opportunity with the teams you now have in place. An Opportunity Database can affect your pricing, marketing, product development, channel strategy, and of course your sales strategies. This allows your teams to save time getting to these sales. If they can get more revenue from the same products in less time, your business has time to invest in new products and markets. You can use this do help existing markets fund new ones. This can give a business the resources to grow without necessarily stripping away the resources you need to maintain your core business. It can reduce the risks of growth and fuel your future.

Sidebar - 8 Steps to an Opportunity Database

Step 1
The first step is to go back into the data you have for your existing customers. You want to find enough of them that you can get a significant sample - at least 20% to start. You'll need to have the data cleaned to correct addresses and remove duplications. If you do not have them, you will need to add DUNS numbers or some other common identifier.

Step 2
The second step is to sort the data for common denominators that show up in a structured sort. This could include common four digit SIC codes, common geographic tendencies, similar business family structures, size ranges by people or revenue, and so on. Direct your team to be careful - you are not looking for what marketing or sales wants to see. You want to know what customers are actually doing.

Step 3
The third step is to identify the key common denominators for a purchasing decision. Avoid looking for budget information. The temptation of many sales teams is to talk about budget and cost savings. However you can look at your own business to see that budgets and cost savings do not drive major purchases. Other business needs drive these.

For example, a large regional accounting firm found that they were developing a lucrative business in managing inventory taxation issues. It was not intentional, just one of those tendencies. The partners decided to leverage that newly discovered tendency and look for commonalities.

If they had looked for clients who had budgeted inventory tax work, they would have found no prospects. Instead, they looked beyond budgets and discovered that most of their clients bought special bar code labels before they did inventories or hired a specialist tax firm. The accounting firm went to the major inventory label companies and offered to rent their customer lists and co-market. What better way to get a view of future customers than to be there when they decide to do an inventory?

Since asking about budget is not the right tack, you should encourage your team to ask other questions. Four such questions are:

» What do our customers buy just before they buy from us?

» What markets do our customers use us to enter?

» What markets will our customers be entering over the next twenty-four months?

» Why do our customer's customers buy from them?

Don't ask your team - ask the customers. Here again you will want to involve your sales, marketing, and finance teams. As a group they will uncover trends that individual disciplines may miss. When done they will have common denominators that may show such things as:

» Four digit SIC codes (e.g., community colleges are some good markets but Universities are not)

» Organization structures (multiple division are a good or bad trait for your customers)

» Revenue trends (growing customers do/do not gravitate to your product)

» Product purchases (e.g., the specialized bar code labels, Sales Force Automation software, or certain computer installations),

» Financial structures (perhaps your customers are usually family owned),

» Organization structures (e.g., your customers always have or never have a HR department), and

» Common target markets for your customers.

These will be facts, not assumptions. Working from fact may settle some arguments. It will make it easier to increase margins at your future customers.

Step 4
Once you have a sense of the commonalities that you want, look for the same data for your competition's customers. This does not require buying their customer list - it can and should be done other ways. Several companies, such as ZD Market Intelligence of San Diego and Dun & Bradstreet, do extensive telephone surveys of business customers. These companies will sell you their lists sorted for such data as customer size, decision makers, names, phones, size of installations, and so on. Since no vendors rigorously call every company in the United States, this will give you a small portion of the marketplace. With this data you will have a list of perhaps 25% of your prospective customers.

Step 5
Now match the list against a standard (such as DUNS numbers) for identifying locations and buyers. This allows you to keep your data clean - avoiding the usual problem of having General Electric listed as GE, G.E., Gen'l E, and so on.

You cannot place too much emphasis on the value of having clean databases. Most national database suppliers allow inaccurate data - it is simply not worth the cost to correct all errors as they enter data. When you start sorting for commonalities you can quickly multiply the effect of bad data and drive the quality of your results below acceptable levels. The only answer is to clean the databases before you use them. It almost never works to let the data suppliers do it. You have to assume that you will spend time and money doing it yourself.

Step 6
The sixth step is to buy the information you need from other databases that highlight the commonalities you care about. If the commonalities are focused on computers and technology, you might call ZD Market Intelligence. If the commonalities are focused on SIC codes, perhaps Dun & Bradstreet would be appropriate. Consider the option of buying from or trading with other suppliers.

Step 7
The seventh step is to create ranking priorities for the common denominators. Create a scale from one to ten with ten being the most value to your sales force. Then look at each common denominator and assign a value on the scale. For example: A customer who buys inventory labels might be worth eight points. Has a client-server based architecture might be worth four points. More than four subsidiaries might be worth six points. Some prospective customers will have twenty-five points, some two points. The actual scoring is up to you.

It is a worthwhile exercise to randomly select some existing customers to see how they would rank. If your existing customers rank low, you have missed the target somehow. Most probably your team has assigned points for what they wish the customers would do, not what actually happens.

Step 8
The eighth step is to sort all the lists against the common denominators by DUNS number and point value. The result will be a list of potential customers, ranked by relative value to you. In Aspect's case, this was the 16,000 best prospects in the country. Then you can distribute the prospects in a way that helps your direct or distribution team focus on them. You have created an Opportunity Database.