Whitepaper: Market Evaluation Approaches

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When organisations are deciding on entering a new market they immediately think of two …

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.

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  • 1. WHITEPAPER: MARKET EVALUATION & TESTING A NEW APPROACH FOR IT VENDORSBy Julian Poulter, Selling PeopleJanuary 2013Version 3.0 www.sellingpeople.biz
  • 2. ContentsContents ............................................................................................ 21. Introduction – a new approach .................................................. 32. Market Evaluation Options ........................................................ 33. Market Evaluation Methodology ................................................ 54. Longer term .............................................................................. 65. Benefits ..................................................................................... 66. Investment ................................................................................ 77. Summary .................................................................................. 78. About Selling People ................................................................. 79. Appendix - Methodology ........................................................... 9 Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 2 of 12
  • 3. 1. Introduction – a new approachWhen organisations are deciding on entering a new market they immediately think of twomain approaches. Firstly, setting up their own subsidiary or secondly setting up someform of distribution channel. Each of these entails set up costs and risks. If the risks canbe 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, innew markets and products, particularly overseas.2. Market Evaluation OptionsA 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 productThe market evaluation allows a more informed decision to be made on investment andexpansion, hence reducing the risk and potentially significantly increasing the return oninvestment.When entering a new market a company will usually be established in its main domesticmarket with existing customers, reference sites, an established sales force, pipeline andcash flow.An establishment of a small team of people to act as your new sales and marketingoperation 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 fromexternal investors. This cash will be used to fund setting up the new operation. This maybe an overseas expansion or the launch of new products and services in existingmarkets.The methodology outlined below allows an initial market evaluation to be undertaken forbetween £10 and £30k. Our sales outsourcing whitepaper and brochure looks at someof these costs in more detail. Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 3 of 12
  • 4. With a positive result from the evaluation the organisation can then more confidently planthe ongoing expansion and be happy to commit additional investment.VCs and investorsIn the VC/Investor community, ring fencing an investment, to be allocated to marketevaluation 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 twoto three months in a market evaluation. With a positive result additional funds can thenbe released. Some markets, products and companies will take a lot longer to produceresults 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 vitaland a market evaluation and sales outsourcing can be invaluable.In the Expansion phase, sales outsourcing can be used to augment the sales effort andreduce 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 systemsThe outsourcing model and features outlined above can be used to undertake a marketevaluation exercise to allow an organisation to rapidly evaluate the response in a chosenmarket to a (new) value proposition.A traditional approach to recruiting a sales team or setting up an operation can takemany months and cost hundreds of thousands of dollars/pounds. The risk of failure ishigh.Rather than this being desk based research or ‘market research’ we are proposing theuse of a highly qualified sales team to take the proposition to market in a short timeframe.The Market Evaluation approach brings to bear a seasoned sales and marketing team torapidly review a market. The use of experienced resources to undertake telemarketing Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 4 of 12
  • 5. and sales meetings in a matter of days/weeks allows true market feedback to beobtained quickly.The professional approach not only tests the market but uses these results andexperience to develop a more accurate sales plan.The results of the evaluation can then be used by entrepreneurs and investors alike toplan future investment, market entry and growth strategies.This approach is outlined below:3. Market Evaluation Methodology Figure 1 - Market Evaluation MethodologyThe overall approach consists of two main phases: a. Preparation – Scan & Plan b. Test & ReviewThe Preparation phase consists of some rapid market research typically using seniorsales / telemarketing resources. This allows the proposition to be quickly tested in themarket. Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 5 of 12
  • 6. Input from this test is used in producing a detailed sales strategy and plan. Usually 5-10days 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 asmany 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 10Surveys per day up to 400 Surveys could be undertaken. This will give excellentfeedback 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 thefeedback 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 onprogressing 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 termWhen the review of the results has taken place the client can then determine whether toprogress with their expansion/investment in the chosen market(s).If they do decide to continue and investment is available then the organisation can nowalso consider the use of longer term sales outsourcing which has many advantages overtraditional set up options.Please see the Selling People whitepaper: Sales Outsourcing Alternatives. This paperconsiders the cost, speed and flexibility advantages of the outsourced approach.5. BenefitsIn summary, the benefits of adopting an outsourced market evaluation in establishing apresence 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. Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 6 of 12
  • 7.  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. InvestmentThe Preparation and Test phases are typically charged as a single item unless otherwiseagreed. The scope and cost of each phase can vary significantly as can the number ofpeople involved in each phase and the experience and skills of those people.Typically however, experienced seasoned professionals would be used as this isimportant in delivering rapid assessment, results analysis and feedback of a market.However, as a ‘ball park’ figure, Selling People normally aim to undertake the MarketEvaluation package over three months for £10-20,000.7. SummarySales outsourcing is a relatively new phenomenon in the IT industry, though theseservices have been prevalent in other industries for many years.There are pros and cons of sales outsourcing as there are with the traditional direct orindirect models. For some companies the attractiveness of outsourcing this importantbusiness process will be compelling.For companies setting up in new territories the outsourced market evaluation modelshould be given full consideration as a precursor to major investment.8. About Selling PeopleSelling People was founded in 2003 and has rapidly become Europe’s leading salesoutsourcing agency. SP has provided market evaluation, lead generation and salesoutsourcing services to a variety of companies.Selling People is UK based but is part of the Branch Service operation with offices in 20countries 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 salessector. Within that sector we have particular expertise in:Business intelligence & knowledge management Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 7 of 12
  • 8. Help Desk & service management CRM & customer service ERPWe maintain our own intelligence/data gathering system and watch and research theabove sectors as well as the UK’s top 100 IT spenders and the Mergers and Acquisitionsmarket in the UK, as these are often key to our clients.Selling People operates using a number of full time employed sales and telemarketingexecutives, including in-house project and sales management. We supplement this withexternal associate resources to extend our skills and geographic coverage. Our externalnetwork consists of approximately 200 associates allowing us to operate in many sectorsand geographic areas.Selling People Ltd Phone: 020 3397 3270Unit 12, The Power HouseHigham Mead Email: enquiries@sellingpeople.bizCheshamBuckinghamshire Web site: www.sellingpeople.bizHP5 2AH Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 8 of 12
  • 9. 9. Appendix - MethodologyThese phases of the Market Evaluation are described in more detail below:a. Preparation Phase – Scan & PlanThis important phase lays the ground work for all the following sales activity. Typicallythis 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 experiencedsales managers. BIOs or CVs/Resumes should be reviewed of key personnel. Ratespaid will be higher for short term experienced personnel. However, this exercise is notjust about the results but about the analysis of the results and the negative results are asimportant as the positive results. Experienced resources are needed to analyze bothobjectively and subjectively the results of the project.An initial meeting is required to determine the scope of the proposed engagement andinvolvement of appropriate outsourced country managers, as this may involve operationsin multiple countries. This could be a face to face meeting or conference calls with thenecessary country/branch managers.An accurate proposal can then be generated for the initial Scan & Plan phase – whichwould normally be a fixed price item. A contract for the Scan and Plan is signed andpayment made for this phase.Market ScanThe Market Scan does a short term, high level review of the market and covers some orall of the following items:Description of markets (by country)Value chain – what type of approach should be considered – a direct sales approach orperhaps a partnering / channel approach or a combination of bothPartners – even in a direct approach, partners such as Systems Integrators orManagement Consultancies can be importantTraining – before undertaking test calling resources will need some initialproduct/service training – usually one dayCompetitors – overview of competitors in the market – mainly web researchData / contact availability and research – identifying the correct targets/contacts is veryimportant. Will the client provide this or does the data need to be purchased orresearched and how?Test telemarketing – in order to initially test and validate the proposition in the marketand gauge early reaction and metrics, these resources were the ones trained above. Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 9 of 12
  • 10. Typically this would be a 5 day exercise including about 50 surveys – conversations withsenior decision makers.Test meetings – if possible initial prospect meetings can be obtained and visited aloneor in conjunction with the client to obtain first hand feedback from the marketNetwork – 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 theproposition in the market and input into the strategy and sales metrics of the sales planand initial operations phase.Sales PlanIn parallel with the market scan a detailed sales and marketing plan needs to beproduced. This consists of several items;Workshop - a management workshop to review the market scan and go through allaspects of the sales and marketing plan. This will be attended typically be 2-3 seniormanagers 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 framesProducts / value propositions – a description of the key value propositions – each valueproposition is the triad of product or service, target prospects and their benefits /value tothe prospectAmbitions & resources – what overall target is expected and what budgetaryconstraints existTargets – which organizations to approach with the propositionsData / contact availability continue the research started in the Scan phase if necessarySales Model Development/definition – what sales approach is to be usedWorkshop review – sales plan review and finalizationPayment terms are payment with order.Deliverablesfor 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 Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 10 of 12
  • 11. o Analysis of the chosen market(s), competitors etcb. Test PhaseSales activity starts in earnest with initial calling and meeting activity and building thepipeline. The Test phase is typically fixed at two months plus the ramp up time. Given atypical relatively complex value propositions there is usually limited realistic expectationof making sales/orders in this phase.Therefore companies should expect that the evaluation exercise whilst providinginvaluable 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 generatea lead or sale, however only real experience of taking a proposition to market will helpprovide more accurate figures. The preparation phase calling is not always accurate orindicative of longer term results. i.e. the 5 days test calling in the Preparation Phasecan 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 arenot correct then the assumed sales metrics can be adapted accordingly or futurephases.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 salesInitial targets would be set in the plan for activity (phone calls, conversations withdecision makers and generation of leads, prospect meetings) and pipeline build.Activity is usually focused on one or two value propositions and activity and the resultsclosely monitored and reviewed with the client to ensure all parties are aware of theresults and progress being made.The relevant resources of the outsourced local offices will be utilized, as required, whilstminimizing 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  MarketerThe client does not need to know the details of all the resources being used but is awareof the key sales elements of the resources and can have input into choosing them. It is Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 11 of 12
  • 12. normal for only a small team to be used in the test phase until the proposition andapproach are proven. In order to keep things as flexible as possible and minimize therisk 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 beearned in this phase.ReviewAs mentioned the progress made will be reviewed against the sales plan regularly andformally after 2 months.The experience from early activity may mean a revision of the plan before moving intothe Initial Operations phase. The metrics can be revised in the plan for the initial salesphase as necessary.The costs of this phase are an agreed fixed monthly amount with the focus on thedeliverables.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. Copyright © Selling People (SMDI Ltd) Contact: www.sellingpeople.biz 020 3397 3270 Version 3 Page 12 of 12