Whitepaper: Market Evaluation Approaches

By Julian Poulter, Selling People January 2013 Version 3.0 www.sellingpeople.biz

WHITEPAPER: MARKET EVALUATION & TESTING A NEW APPROACH FOR IT VENDORS

http://www.sellingpeople.biz/

Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270

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Contents

Contents ............................................................................................ 2

1. Introduction – a new approach .................................................. 3

2. Market Evaluation Options ........................................................ 3

3. Market Evaluation Methodology ................................................ 5

4. Longer term .............................................................................. 6

5. Benefits ..................................................................................... 6

6. Investment ................................................................................ 7

7. Summary .................................................................................. 7

8. About Selling People ................................................................. 7

9. Appendix - Methodology ........................................................... 9


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1. Introduction – a new approach

When organisations are deciding on entering a new market they immediately think of two main approaches. Firstly, setting up their own subsidiary or secondly setting up some form of distribution channel. Each of these entails set up costs and risks. If the risks can be minimised and justified then the expenditure may not be a problem. This paper outlines a potential methodology to be used when entering a new market, whether this is a new product or an existing product in a new territory. This paper is of interest to CEOs and international operations directors and investors, Angels and VCs looking at supporting and investing in companies planning expansion, in new markets and products, particularly overseas.

2. Market Evaluation Options

A market evaluation is relevant in several situations:

The Start-up and Early Stages of an organisation’s lifecycle.

As part of the Seed phase

Expansion phase and can be used as a replacement or addition to a traditional sales force

Entry into new market, launch of new product

The market evaluation allows a more informed decision to be made on investment and expansion, hence reducing the risk and potentially significantly increasing the return on investment. When entering a new market a company will usually be established in its main domestic market with existing customers, reference sites, an established sales force, pipeline and cash flow. An establishment of a small team of people to act as your new sales and marketing operation in a new market can cost many 100ks pounds/dollars. The cash to fund the expansion can come from internal cash flow and profits or from external investors. This cash will be used to fund setting up the new operation. This may be an overseas expansion or the launch of new products and services in existing markets. The methodology outlined below allows an initial market evaluation to be undertaken for between £10 and £30k. Our sales outsourcing whitepaper and brochure looks at some of these costs in more detail.


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With a positive result from the evaluation the organisation can then more confidently plan the ongoing expansion and be happy to commit additional investment.

VCs and investors In the VC/Investor community, ring fencing an investment, to be allocated to market evaluation can be a sound option particularly in the Seed phase. As part of an investment of say $200,000 an investment of $30,000 can be made for two to three months in a market evaluation. With a positive result additional funds can then be released. Some markets, products and companies will take a lot longer to produce results and sales orders but a rapid initial ‘feel’ of a market can be obtained. In the Start-up and Early Stages of a company, rapid acquisition of customers is vital and a market evaluation and sales outsourcing can be invaluable. In the Expansion phase, sales outsourcing can be used to augment the sales effort and reduce the time to positive cash flows. Consistent use of this approach can significantly raise the success rate for investments, resulting in a much greater return on investment. The key features of an outsourced sales solution should include:

Results focussed on activity, pipeline and sales orders

Rapid set up in a matter of days and weeks rather than months of a typical recruitment and in-house operation

Flexible solutions that can be modified quickly, or over time, to react to changing conditions. Resources can be started part time and grow with a project keeping costs and risks low

Low upfront costs and reduced long term commitments and employee relationships resulting in lower initial risks

Professional approach, utilizing existing staff and local office facilities with proven processes and systems

The outsourcing model and features outlined above can be used to undertake a market evaluation exercise to allow an organisation to rapidly evaluate the response in a chosen market to a (new) value proposition. A traditional approach to recruiting a sales team or setting up an operation can take many months and cost hundreds of thousands of dollars/pounds. The risk of failure is high. Rather than this being desk based research or ‘market research’ we are proposing the use of a highly qualified sales team to take the proposition to market in a short time frame. The Market Evaluation approach brings to bear a seasoned sales and marketing team to rapidly review a market. The use of experienced resources to undertake telemarketing


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and sales meetings in a matter of days/weeks allows true market feedback to be obtained quickly. The professional approach not only tests the market but uses these results and experience to develop a more accurate sales plan. The results of the evaluation can then be used by entrepreneurs and investors alike to plan future investment, market entry and growth strategies. This approach is outlined below:

3. Market Evaluation Methodology

Figure 1 - Market Evaluation Methodology

The overall approach consists of two main phases:

a. Preparation – Scan & Plan b. Test & Review

The Preparation phase consists of some rapid market research typically using senior sales / telemarketing resources. This allows the proposition to be quickly tested in the market.


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Input from this test is used in producing a detailed sales strategy and plan. Usually 5-10 days of test calling are made in the Preparation phase and on average 10 surveys (discussions with senior decision makers) are made per day. Then a longer Test period is undertaken where the emphasis is on getting in front of as many prospects as possible to test the proposition in detail and build pipeline. The results based approach would mean that if in two months (40 days) of making 10 Surveys per day up to 400 Surveys could be undertaken. This will give excellent feedback on the acceptance of your proposition in the market. The positive results (10%?) are leads for the next phase and potential sales, however the analysis of the feedback of the 90% that are not interested is also important. At the end of the test the results are reviewed and a decision can be made on progressing to the next phase and the sales plan can be updated if necessary. The approach and methodology is discussed in detail in the appendix.

4. Longer term

When the review of the results has taken place the client can then determine whether to progress with their expansion/investment in the chosen market(s).

If they do decide to continue and investment is available then the organisation can now also consider the use of longer term sales outsourcing which has many advantages over traditional set up options.

Please see the Selling People whitepaper: Sales Outsourcing Alternatives. This paper considers the cost, speed and flexibility advantages of the outsourced approach.

5. Benefits

In summary, the benefits of adopting an outsourced market evaluation in establishing a presence in a new market are many and varied:

Local market knowledge and custom

Use of existing relationships

Use of local facilities

Flexibility – start small and grow, use resources 1-3 days per week

Rapid set up – days rather than months

Long term relationship with local supplier

Much reduced initial outlay, reduced risk and relatively high return on investment through deployment of proven, successful sales people.

Flexibility and efficiency is increased through utilising a wide skill pool as required and complementing the vendor’s own skills.

No initial recruitment fees.


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Ability to undertake a ‘proof of concept’ approach, evaluating potential success prior to greater commitment.

Sales resources can be split geographically, vertically or by product. The outsourcer can provide UK wide representation at minimum cost.

A traditional employee relationship is not created, eliminating the associated overheads and risks.

Total resource control and management, as with in house sales employees, with performance metrics and targets – subject to the method of outsourcing initially agreed.

6. Investment

The Preparation and Test phases are typically charged as a single item unless otherwise agreed. The scope and cost of each phase can vary significantly as can the number of people involved in each phase and the experience and skills of those people. Typically however, experienced seasoned professionals would be used as this is important in delivering rapid assessment, results analysis and feedback of a market. However, as a ‘ball park’ figure, Selling People normally aim to undertake the Market Evaluation package over three months for £10-20,000.

7. Summary

Sales outsourcing is a relatively new phenomenon in the IT industry, though these services have been prevalent in other industries for many years. There are pros and cons of sales outsourcing as there are with the traditional direct or indirect models. For some companies the attractiveness of outsourcing this important business process will be compelling. For companies setting up in new territories the outsourced market evaluation model should be given full consideration as a precursor to major investment.

8. About Selling People

Selling People was founded in 2003 and has rapidly become Europe’s leading sales outsourcing agency. SP has provided market evaluation, lead generation and sales outsourcing services to a variety of companies. Selling People is UK based but is part of the Branch Service operation with offices in 20 countries and 60+ sales executives allowing us to put together pan European solutions. We operate in many sectors but our specialism is the demanding IT software sales sector. Within that sector we have particular expertise in: Business intelligence & knowledge management

http://www.branchservice.com/


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Help Desk & service management CRM & customer service ERP

We maintain our own intelligence/data gathering system and watch and research the above sectors as well as the UK’s top 100 IT spenders and the Mergers and Acquisitions market in the UK, as these are often key to our clients. Selling People operates using a number of full time employed sales and telemarketing executives, including in-house project and sales management. We supplement this with external associate resources to extend our skills and geographic coverage. Our external network consists of approximately 200 associates allowing us to operate in many sectors and geographic areas.

Selling People Ltd

Unit 12, The Power House

Higham Mead

Chesham

Buckinghamshire

HP5 2AH

Phone: 020 3397 3270

Email: [email protected]

Web site: www.sellingpeople.biz

http://www.sellingpeople.biz/


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9. Appendix - Methodology

These phases of the Market Evaluation are described in more detail below:

a. Preparation Phase – Scan & Plan This important phase lays the ground work for all the following sales activity. Typically this phase is run concurrently with the plan phase and can be of 2-6 weeks duration. This phase should be carried out by a “SWAT” team of one or more highly experienced sales managers. BIOs or CVs/Resumes should be reviewed of key personnel. Rates paid will be higher for short term experienced personnel. However, this exercise is not just about the results but about the analysis of the results and the negative results are as important as the positive results. Experienced resources are needed to analyze both objectively and subjectively the results of the project. An initial meeting is required to determine the scope of the proposed engagement and involvement of appropriate outsourced country managers, as this may involve operations in multiple countries. This could be a face to face meeting or conference calls with the necessary country/branch managers. An accurate proposal can then be generated for the initial Scan & Plan phase – which would normally be a fixed price item. A contract for the Scan and Plan is signed and payment made for this phase.

Market Scan

The Market Scan does a short term, high level review of the market and covers some or all of the following items:

Description of markets (by country)

Value chain – what type of approach should be considered – a direct sales approach or perhaps a partnering / channel approach or a combination of both

Partners – even in a direct approach, partners such as Systems Integrators or Management Consultancies can be important

Training – before undertaking test calling resources will need some initial product/service training – usually one day

Competitors – overview of competitors in the market – mainly web research Data / contact availability and research – identifying the correct targets/contacts is very important. Will the client provide this or does the data need to be purchased or researched and how?

Test telemarketing – in order to initially test and validate the proposition in the market and gauge early reaction and metrics, these resources were the ones trained above.


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Typically this would be a 5 day exercise including about 50 surveys – conversations with senior decision makers.

Test meetings – if possible initial prospect meetings can be obtained and visited alone or in conjunction with the client to obtain first hand feedback from the market

Network – are there any contacts or Intelligence that can be used? The output from the market scan is early but limited feedback on the acceptance of the proposition in the market and input into the strategy and sales metrics of the sales plan and initial operations phase.

Sales Plan

In parallel with the market scan a detailed sales and marketing plan needs to be produced. This consists of several items; Workshop - a management workshop to review the market scan and go through all aspects of the sales and marketing plan. This will be attended typically be 2-3 senior managers from Selling People: Plan development: (GOSPA)

Goals – the overall goals for the project Objectives – financial and sales targets and non financial objectives Strategies – the main strategies to be employed Plans – the detailed plans for execution of each strategy Actions – check list of actions in 30/60/90 day time frames

Products / value propositions – a description of the key value propositions – each value proposition is the triad of product or service, target prospects and their benefits /value to the prospect

Ambitions & resources – what overall target is expected and what budgetary constraints exist

Targets – which organizations to approach with the propositions

Data / contact availability continue the research started in the Scan phase if necessary

Sales Model Development/definition – what sales approach is to be used

Workshop review – sales plan review and finalization Payment terms are payment with order.

Deliverables

for the scan and plan phase you should receive: o 1 day workshop with several experienced senior sales managers o Summary sales and marketing plan – about 20+ pages outlining strategy, plans

and actions for all aspects of sales and marketing o Meeting or conference call to review the plan o Proposal and costs and targets for the following phases. o Test results and analysis from c50 surveys


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o Analysis of the chosen market(s), competitors etc

b. Test Phase Sales activity starts in earnest with initial calling and meeting activity and building the pipeline. The Test phase is typically fixed at two months plus the ramp up time. Given a typical relatively complex value propositions there is usually limited realistic expectation of making sales/orders in this phase. Therefore companies should expect that the evaluation exercise whilst providing invaluable feedback and a pipeline or future potential orders is not likely. The sales plan is at best a ‘guestimate’ of how much activity/cost is required to generate a lead or sale, however only real experience of taking a proposition to market will help provide more accurate figures. The preparation phase calling is not always accurate or indicative of longer term results. i.e. the 5 days test calling in the Preparation Phase can give very different results to those obtained in the longer term. The Test Phase is about confirming the sales metrics assumed in the plan. If these are not correct then the assumed sales metrics can be adapted accordingly or future phases. Important sales metrics typically include:

Cost and effort and different techniques of obtaining a lead

Number of leads required to obtain a qualified lead and pipeline opportunity

Sales model required to progress sales Initial targets would be set in the plan for activity (phone calls, conversations with decision makers and generation of leads, prospect meetings) and pipeline build. Activity is usually focused on one or two value propositions and activity and the results closely monitored and reviewed with the client to ensure all parties are aware of the results and progress being made. The relevant resources of the outsourced local offices will be utilized, as required, whilst minimizing upfront costs. The sales team may include any or all of the following:

Telemarketers

Field or telesales executives

Sales manager

Campaign planner

CRM specialist

Technical sales support

Marketer

The client does not need to know the details of all the resources being used but is aware of the key sales elements of the resources and can have input into choosing them. It is


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normal for only a small team to be used in the test phase until the proposition and approach are proven. In order to keep things as flexible as possible and minimize the risk to the client typically the contract termination arrangement is a period of two weeks. The cost of the team is usually fixed in advance and no commission is expected to be earned in this phase.

Review As mentioned the progress made will be reviewed against the sales plan regularly and formally after 2 months. The experience from early activity may mean a revision of the plan before moving into the Initial Operations phase. The metrics can be revised in the plan for the initial sales phase as necessary.

The costs of this phase are an agreed fixed monthly amount with the focus on the deliverables.

Deliverables

Understanding of the sales metrics involved in the value propositions

Pipeline of potential deals

Minimum number of client facing meetings/calls, decision maker surveys.

Initial resources, allocated, training and executing plan.

Whitepaper: Market Evaluation Approaches

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