The Opportunity Database: Funding New Markets from Existing Businesses Peter Meyer

M any businesses pull focus, money, and people away from existing work to feed growth and new markets. Many

fail. Taking resources from a business to feed the future risks both the present and the future. And both must do well if either is to survive. Because of the difficulty and risk, it is better to find more resources than to steal from existing operations. One way for a firm to do this is by changing its focus on prospective customers.

Most sales teams and distributors call on prospective customers as demand-generation programs uncover them. Until recently, the best practices relied on entreating prospects to re- spond using advertising, trade shows, direct mail, and seminars. But the response is partial and comes in without priority; only a few of the pros- pects 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 the latter 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 who each of the 25,000 is, along with address, revenues, contacts, and buying patterns. Your team can create an Opportunity Database that can sort most of your prospective customers at one time and rank them by standards you choose. The effect on product development, pricing and margins, marketing, sales, and sales management will help you attain more resources for growth in existing or new markets.

Freeing Resources for Growth

When you know in advance which prospects are likely to pay more for your product, you can re-

duce discounting and raise the average sales price. This incremental revenue drops directly to the bottom line. The effect is also felt in marketing and territory management. With company-by-company information on your prospects, the market- ing team can start to tailor programs that will deliver more results for less investment. And if you know the addresses and business niches of the firms that will become your best prospects over the next 24 months, you can allocate sales channels to make sure you call on them as they become ready. All of this gives you more money, people, and time to invest in business growth.

Aspect Telecommunications competes in the market for call centers, the systems that help answer when you phone an airline or utility for help. Aspect is justly proud of the fact that it closes well over half the deals it proposes, aver- aging $500,000 per deal. In the U.S., about 300 call center contracts are sold each calendar quar- ter. With the old prospect management system, Aspect knew of only a fraction of those. But if it discovers just 10 more opportunities per quarter in each territory, it can net an additional $7.5 million per territory per quarter, with little in- crease in resource costs. And with an Opportu- nity Database, it can gain much more than that:

?? Sales reps can call on the best prospects first, maximizing revenue per person per month.

The Opportunity Database: Funding New Markets from Existing Businesses

?? Sales managers can quantify territory value points according to the value of the opportunity and assign territories that are equal in opportu- each one represents. The place to start is with nity, optimizing profit per person per year. common denominators.

?? Marketing can see exactly how to find the niches with the highest potential so it can target the right markets closely

??The e-commerce team can gain informa- tion to tailor strategies, allowing focus on the high-potential prospects and a higher return on your resources.

?? Product marketing can aim future products more carefully, augmenting the chances of suc- cess in products for the same investments.

Common denominators happen both inten- tionally and by accident. The sales teams of every phone system vendor can tell you that certain kinds of customers are “theirs” and some “belong” to the competition. Effective marketing intention- ally locates the correct common denominators with which to identify customers. However, sales teams can accidentally create common denomina- tors for customers by falling into the habit of selling to certain niches.

?? Financial analysts can price products to attract the portions of the market that will be more apt to pay for value, maximizing return for the same sales and marketing efforts.

In other words, the company ends up with more revenue and profits for the same sales, marketing, product, and finance staff. This helps provide the business with the resources to grow in a sustainable manner.

Identifying Common Denominators

As outlined in the Sidebar below, the strategy of the Opportunity Database is to identify all the likely prospects in a universe, then assign them

Don’t expend resources trying to change these common denominators. Instead, use them as strengths. Aspect sells well to companies that have certain common characteristics, both inten- tional and accidental, that include specific com- puter hardware and software as well as specific markets. It is tailoring its marketing by develop- ing an Opportunity Database of every company in the United States that is likely to have the right combination of market and installed systems. Aspect directs the sales channels and teams to specific accounts instead of to general areas. Such a strategy brings a quicker return, offering more resources to help Aspect move into new markets in less time.

Business Horizons / November-December 1999

Another example is a leading manufacturer of products for improving meetings. The com- pany has done very well selling to Fortune 1,000 firms, and is now exploring the universe of mid- sized companies with many branches. The result will be a list of tens of thousands of good pros- pects-a list that can be stored on a laptop com- puter. By sorting that list against other common denominators, the company can direct its distribu- tors to the prospects most likely to buy today’s products.

Dun & Bradstreet found that the best leads in one of its regions were companies that fit into a few specific four-digit SIC codes-a clear set of common denominators. An outside service sorted the territory lists for the region and assigned pri- orities to those common denominators. D&B not only discovered thousands of companies that had not yet heen on a prospect list, it increased sales per rep by almost 50 percent.

system. However, you should plan on dealing with other issues that can surface as a result.

A distributor for high-tech capital equipment convinced the manufacturer that its quota should be based on how it had done in recent years. With no evidence to the contrary, the manufac- turer agreed to this. But when the manufacturer created an Opportunity Database, it found that the distributor had 18 percent of the national opportunity in its territory but carried only 10 percent of the quota every year. The manufac- turer asked the distributor to carry more quota, and the distributor demurred. The conversations became quite active.

Eventually the manufacturer realized it could do better with its own people in the field, and the distributor lost the franchise. The result? More direct customer contact and greater revenues. The manufacturer could spend about the same in time, people, and money to get a higher return, generating fuel that it is now using for growth.

Territory and Quota Integrity What is Required?

One benefit of an Opportunity Database is that it can be used scientifically to spread opportunities among the components of your channels and sales teams. Instead of assigning quota according to history. you can assign it by a logical point

The object is simple. If you know the common denominators of existing customers, you can identify businesses you don’t yet know hut which share the same denominators. This has an imme-

Step 4. Once you have a sense of the commonalities you want, look for the same data for your competition’s customers. This does not require buying their customer lists, it can and should be done other ways. Several companies, such as ZD Market Intelligence of San Diego, do extensive telephone surveys of business customers. They will sell you their lists sorted by such data as customer size, decision-makers, names, products, and so on. Because no vendors rigorously call every company in the U.S., this will give you a small portion of the marketplace. With these data, you will have a list of perhaps 25% of your prospec- tive customers.

es are focused on computers and technology, ZD Market Intelligence. If the common&ties are focused on SIC codes, perhaps Dun & Bradstreet would be appropriate. Con- sider the option of buying from or trading with other suppliers.

Step 7. Rank priorities for the common denominators. Create a scaIe from one to ten, with ten beiig the most value to your sales force. Then examine each common denominator and assign a value on the scale. A customer that buys inventory labels might be worth eight points; if it has a client-server based architecture, it might be worth four more points, more than four subsidiaries might be worth an additional six points. Some pro-

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’I E, and so on. You cannot place too much emphasis on the value of having clean databases, Most national database suppliers allow for inaccura- ties; 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. So 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 ir yourself.

spective customers will have 25 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 custom- ers rank low, you have missed the target somehow. Most prob- ably your team has assigned points for what they wish the cus- tomers would do, not what actually happens.

Step 8. Finally, sort all the lists against the common denomina- tors by DUNS number and point value. The result will be a list of potential customers, ranked by relative value to you. Then you can distribute the prospects in a way that helps your direct sales or distribution team focus on them. You have created an Opportunity Database.

StRp 6. Buy the information you need from other databases that highlight the common&ties you care about. If the commonali-

diate impact on sales. Instead of asking a sales rep to drive down a city street looking for new businesses, you can identify the likely prospects in advance and send the reps 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 in your team. To increase sales efficiency, you need only involve the sales or channel organizations. However, if you want gains across the entire firm, you will want to involve support from pricing, product develop- ment, and marketing as well. The Opportunity Database will give each discipline the informa- tion to extract a little more fuel for growth from the same products and markets.

Once you have assigned your internal team, you will need (1) a fast desktop computer, (21 a programmer who understands databases, and (3) a manager who understands how your sales pro- cess works. The task is not easy or fast. You can develop the skills to do it internally, or you can call on two or three firms to do it for you.

After the team delivers the Opportunity Data- base, ask it to take an important next step. If you have a 30 percent market share, build common denominators and a database for the 70 percent to whom you do not sell. Then build a plan to find out what they would buy.

Y ou can supply your business with three kinds of fuel for growth by building an Opportunity Database. The first is time.

Your best people will be more focused in their work, allowing them to avoid wasting hours in marginal markets. That extra time can be used to explore and open new markets.

The second is people. When your employees get used to the idea of using the Opportunity Database to target customers more clearly, they can take that skill and experience into new mar- kets. Like focusing with a rifle instead of a shot- gun, they can learn to identify key markets in less time.

The third kind of 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 markets without stealing from your current ones.

Quantifying your opportunities can give you access to resources that will help grow your busi- ness without robbing your existing operations of vital resources. You can harvest more and better prospects with the teams you now have in place, reducing the risks of growth and fueling your future. 0

References

Peter Meyer, “Creating and Dominating Markets: The CEO’s Role,” Business &Economic Review, April-June 1999, pp. 9-12.

Peter Meyer is a principal of The Meyer Group, a consulting firm in Scotts Valley, California. His next book on management, Warp Speed Grow-h, to be published by AMACOM in the spring of 2CC0, will include some material that has been presented in arevious issues of Business Horizons.

40 Business Horizons / November-December 1999