Investors Love Market Leaders
If you’re going to raise money you’ve got to be able to prove that you have the ability to achieve market leadership. I remember a story involving IBM during the early 1990’s when they were running into some trouble, so they hired a major consulting firm to help them. IBM spent hundreds of thousands of dollars sending consultants all over the world to interview groups and figure out why IBM was struggling and what to do about it. When the consultants compiled all their data, analyzed it and put together their final conclusions they came to an earth-shattering conclusion, “The number one reason that IBM is falling behind is because we have low sales. The solution is we need to increase our sales. Your sales people are spending far too much time on non-revenue generating activities and not enough time in front of the customer.”
The number one reason for business success is high sales, and the number one reason for business failure is low sales. Sales, market share and profits are the keys to business success. Once IBM figured out what was going on, they instituted what they called the 75 percent rule. What that meant was that sales people and managers of sales people had to spend at least 75 percent of their time in front of customers face-to-face or ear-to-ear.
In fairness to IBM their business is extremely complicated and the organization is enormous. The point is that even in a very successful, highly sophisticated company as IBM, it’s the basics that make all the difference and getting back to the basics will get you on track. The number one thing to focus on is staying in front of the customer so you can make a sale. When we begin to put more effort in measuring effort rather than talking to customers we begin to take our eye off the ball. Customer engagement is the only way to know if you are on the right track or not. They will be more than happy to tell you if you will only spend time with them.
4 Key Principles To Any Marketing Strategy
There are four key principles to any marketing strategy that you will need to demonstrate to investors if you want to convince them of your ability to obtain market leadership.
Specialization in a product, a market, or a customer is critical to differentiating yourself above your competition. You have to decide if you are product centric, market centric or customer centric. You’ve got to figure out which one you are. Walmart focuses on the 70 percent of the market that lives paycheck to paycheck. By focusing on that demographic, they know that their prices have to be the very best.
The second area is differentiation. You need to be able to differentiate your area of excellence, your competitive advantage, and your superiority. It’s the heart of your business. If you don’t know what it is or what it should be or what it could be, then there’s no way you’re going to get your business past any investor. Southwest Airlines operates in a highly competitive marketplace but they’ve differentiated themselves by making airline travel affordable for the common person. “You’re free to move about the country,” is not just a catchy jingle. It clearly and simply articulates what sets them apart.
Segmentation is the process of determining your ideal customer for your product or service. Who’s the product aimed at? What are the demographics of the ideal customer? What’s their age, education, income, status? These are the physical traits. Another way you can create a segment is through the psychographics. What are their hopes, their worries, thoughts, and desires?
The fourth principle to a solid marketing strategy is concentration. You’ve got to be able to focus all your marketing and sales efforts on your best potential customers. There are plenty of people you can do business with if you have a good idea. The question is who should you spend your money on to go after. Marketing dollars should be highly concentrated and not a scatter shot to see who shows up. You fish with the kind of bait that attracts the fish you want to catch.
When you develop clarity in all four areas of your marketing strategy you will drive business results and earn confidence with potential investors.
After Steve Jobs came back to take over Apple, they were months away from potential bankruptcy. Steve quickly realized they had hundreds of products in production as well as under development. One of the first things he did was to call his team together to say, “I want to know the ten best products we have as a company.” Panic ran through the organization because everyone knew that meant certain products would be on the chopping block. Once all of the internal meetings were conducted and reports were analyzed (which required weeks of effort) his management team was ready with the top 10 products for the company. Steve then told the team, “Now I need you to narrow that list to the top four.”
When Steve came back into Apple, they realized that there was no way that they could continue to compete against the personal computer market. And from that was born the iPod. As big as Apple is, they are not in the business of creating hundreds and hundreds of products. If you think that you’ve got marketing nailed down, I have a simple question for you. How many people are sleeping in the streets waiting in line for your product when you announce it? Now that’s a real marketing strategy.
Obviously we cannot all be IBM or Apple Computer. Let’s face it, it’s even hard for Apple to be Apple without Steve Jobs. We can all learn from their example though. If you’re going to meet with an investor you need to demonstrate the opportunity and path to becoming a market leader. It’s vital that you address your ability to specialize, differentiate, segment and concentrate your marketing efforts to achieve market leadership. When you can demonstrate market leadership or the ability to get there, you will gain an investors attention, trust and possibly their wire transfer.