It is all too easy for any B2B business looking for increased sales to opt for the short term fix of hiring new (or replacing underperforming) sales resource. Sales people with an existing potential customer contact base or from competitors are often seen as a low risk route to more B2B sales.
To be fair simply recruiting a sales person can sometimes work in the short term but to really achieve long term sales growth requires vision and the courage to see through that vision in the face of considerable risks. In this post we cover the four most common routes to increased B2B sales and consider the value and level of risk of each.
There are four main routes to increased sales over the medium to long term, they are:
- Market penetration.
- Market development.
- Product development (upgrade/variant).
- True new product development.
However, before setting out on any journey it is important to note your starting point, your destination (gap analysis) and a return route should you need it so it is important to have a solid strategy in place. Know your customer and have firm plans (and processes) in place to retain those customers.
Market penetration strategies are based on delivering existing products to existing market segments. They are therefore primarily based on taking competitor market share and/or increasing the quantity, mix or value of product taken by existing customers
This approach is by far the most common and explains the ‘new salesman’ approach outlined above. The dynamics are well understood and customers and their preferred products well documented. There is also usually an intimate understanding of the competition, their strengths and weaknesses and their key accounts.
There are limits to this approach. For existing customers to take more their business will need to be going well and that is not something that can be controlled. Opportunities may arise if a competitor drops the ball in a key account but in general they are not going to give ground without a significant fight. Concentrating on market penetration leads to a ‘me too’ approach that can only impact on price and margin in the medium to long term.
Market development takes existing products to new market segments or converts current non users of the product or service to customers. A strategic approach is required to identify the best segments to attack but once in place market development usually delivers higher sales growth than the market penetration approach.
The challenge is to gain a foothold in new market segments probably against entrenched competition. Hiring those with specific expertise of the segment may be a short term (but expensive) solution but in general an awareness and credibility building campaign will be required before any real results materialise.
Product development can be a route to sales growth. It may be a new market segment will require a variation of an existing product. Market niches may be identified that need particular products or variants. A classic example in the electronic component marketplace is taking a standard product and protecting it, screening it and qualifying it for use in extreme environments like the oil and gas industry.
The product development route, if implemented correctly, can reduce competition, increase sales and increase margins but a robust approach to market analysis and planning is required. Investment in product development will be required with that comes an element of risk. Combined with the market penetration and market development approaches outlined above it may be sufficient to deliver the required growth but if a step change is required then only a true new product development process can deliver.
True New Product Development
A true new product development is not simply a development of an existing product – it is something entirely new to the marketplace. However, it is not that easy, look around in any marketplace and there are not many products that are actually disruptive and really new and innovative.
Finding these new products is far from easy. A logical approach may seem to be ask existing customers but as Henry Ford said ‘If I had asked people what they wanted they would have said a faster horse‘. The product idea therefore often needs to come from within and those with the appropriate vision are few and far between.
If a new product concept can be identified the problems do not end there. Bringing a true new product to market carries significant financial risk but, if successful, the rewards can be substantially higher than those available from the other three strategies combined.
Should you wish to discuss growth plans for your business and how they may be achieved please call on 01670 513378. We cover the North East of England including Tyne and Wear, Durham and Northumberland.