SCY Welcomes You To

#GuforGrowth

Managing the Risks of Business Growth

Paul KelleyPhill McTaggart

SCY Business Mentors

3 Minute Exercise

What are the chief risks your business faces for growth?

Market Segmentation and Customer Profiling

Paul Kelley

Major Risks to Growth

Two ways to go out of business fast:

Running out of cash

Trying to be all things to all people

A market segment is a cluster ofindividuals or businesses that share

similar characteristics which make themhave relatively similar product/

service needs

What is Segmentation?

What is Profiling?

A customer profile is a way of describing individual customers/clients by using a set of

characteristics that can be linked to their predicted buying behaviour.

Benefits from both

Provides business focusDevelops your products/services

Informs pricingDirects marketing activitiesClarifies true competition

Increases sales

Market example: websites

Blue chips to SME start-ups£99 to £250,000 +

Private sector/public sectorE-commerceInternational

Design and functionality

Market segments should be…

Large enough to be profitableToo large = too imprecise

AccessibleMeasurable

Stable

Methods of profiling : consumers

Demographics – age, gender, family

Socio economic – income, occupation

Geographic – address, region

Behavioural – purchase occasion, benefits sought, brand loyalty

Methods of profiling : businesses

Size – employees, turnover ….

Sectors – healthcare, retail, IT ….

Geographic – local, regional, national, global

Budget size

Buying complexity

Alchemy - data into gold

Data you already hold on customers and their markets

Data you could readily capturenormal business processes (via orders,

contracts, deliveries, etc)

Extra data easily captured via normal business processes

Additional insights - ask, surveys

Learn from the Professionals

‘people who bought this also bought these’

corporate/conferences/breaks/weddingsconvenience/no frills

Exercise

List your current top 3-5 market segments

Describe your top 3-5 clients by key characteristics

…back at the ranch…

Dig for gold nuggets – check your own data afresh

Think segments, think customer characteristics

Identify and target the most attractive.

Using Ansoff MatrixTo manage risk

Phill McTaggart

Background

Ansoff Matrix represents the different options open to a manager when considering new

opportunities for sales growth.

Variables in the matrix

In terms of the market, managers have two options:

Remain in the existing market Enter new ones

In terms of the product, the two options are: Selling existing products Developing new ones

Exercise

On the sheet of paper provided make a list of your existing services/products and which markets you sell these in.

Example: An Accountant- Year End Accounts for SMEs- Payroll Services for IT Contractors- Monthly Management Accounts for social enterprises- Companies House Filings for SMEs

Exercise

List of existing Products/Services & Markets

Products/Services to Market Sector

Existing PRODUCTS NewINCREASING RISK

INC

RE

AS

ING

RIS

K

New

MARKETS

Existing

1. MARKET PENETRATION

Sell more in existing markets

This is the objective of higher market share in existing markets

Selling more of the same to the same peopleDifficult to grow if market is saturatedIn flat market have to grow by taking business from competitionRisks are low but so are prospects of success unless there's strong market growth

Market Penetration

Increase usage by existing customers

Attract customers away from rivals

Encourage greater frequency in transactions by customers

Encourage non buyers to buy

Market Penetration Strategies

When the market is not saturated

When there is growth in the market

When competitors share is falling

When increased volumes can lead to economies of scale

When there is scope for selling more to customers

When to use Market Penetration Strategies

Existing PRODUCTS NewINCREASING RISK

INC

RE

AS

ING

RIS

K

New

MARKETS

Existing

1. MARKET PENETRATION

Sell more in existing markets

2. MARKET DEVELOPMENT

Sell existing products in new markets

This is the strategy of selling an existing product to new markets. This could involve selling to an overseas market or a new market segment

Market development will need changes to distribution channels, pricing and promotion strategy

Market Development

When an untapped market has been identified

When you have excess capacity

When there are attractive channels to access new markets

(This is a moderate risk strategy as you already know the product but are unfamiliar with the customers)

When to use Market Development Strategies

Existing PRODUCTS NewINCREASING RISK

INC

RE

AS

ING

RIS

K

New

MARKETS

Existing

1. MARKET PENETRATION

Sell more in existing markets

3. PRODUCT DEVELOPMENT

Sell new products in existing markets

2. MARKET DEVELOPMENT

Sell existing products in new markets

This involves developing new products or services for existing markets

This can: Be time consuming Involve an amount of research Require a degree of trialling and testing to ensure the

new products/services deliver the expected outcomes or functionality

Need revisiting after the initial process (iterative)

Product Development

New, innovative products Product improvements (fixes or customer feedback) Product line extensions New products to complement existing products Introduce different quality levels to existing products

Product Development Strategies

When you have good R&D capabilities When the market is growing When there is rapid change in the market When you can build on existing brands When competitors have better products

(New product development can be costly and involves moderate risks for the business)

When to use Product Development Strategies

Existing PRODUCTS NewINCREASING RISK

INC

RE

AS

ING

RIS

K

New

MARKETS

Existing

1. MARKET PENETRATION

Sell more in existing markets

3. PRODUCT DEVELOPMENT

Sell new products in existing markets

2. MARKET DEVELOPMENT

Sell existing products in new markets

4. DIVERSIFICATION

Sell new products in new markets

This is the process of selling new products to new customers or new products to new markets. Because there two unknowns this is the most

risky of all four strategies.

Diversification

This is where the development remains within the confines of the sector, often harnessing

existing product knowledge. This closeness to an existing product/service reduces the risk.

(i.e. banks developing insurance products – it is still a financial product)

Related Diversification

Growth risks can differ substantiallyThe matrix identifies different strategic areas in which your business COULD expandManagers need to then asses the costs, potential gains and risks associated with the other options

Summary

You can adopt more than one strategy – perhaps by segment?Keep a balance between the strategiesDon't overcommit and try and do all!

Using Ansoff

Complete an Ansoff Matrix for your organisation

Exercise

Existing PRODUCTS NewINCREASING RISK

INC

RE

AS

ING

RIS

K

New

MARKETS

Existing

1. MARKET PENETRATION

3. PRODUCT DEVELOPMENT

2. MARKET DEVELOPMENT

4. DIVERSIFICATION

An opportunity to put your questions to the Business Mentors

Q & A

Keynote Speech

James AverdieckFounderGÜ Puds

Lakehouse, Ron Cooke Hub

Next Session - 5pm