Unless your company has the lowest cost base in its sector it cannot expect to succeed with a policy of cutting prices. The alternative is to offer your customers best value. To do that you must communicate the right features and benefits to all of the key decision makers in a complex set of relationships.
In the past this was relatively simple. Salesmen worked with architects to develop product specifications and then monitored the construction process to ensure that they were not switched when the contractor came to source material. The biggest challenge was ensuring that “equal or approved” become an order for your product or service.
Today, markets are much more complex. The adoption of Design & Build, Management Contracting and the various forms of Private Finance Initiative mean that the traditional structure with the architect making all of the product decisions has changed. Instead of just one decision maker there are now many influencers. In PFI for example, it is the Design Manager within the main contractor who has the final decision when selecting products and services, with input from sub-contractors and facilities management companies as well as purchasing and members of the design team. To be effective, the salesman must have an understanding of who all these people are and be able to handle the inter-relationships between them with tact.
On large projects, the design team will comprise a number of specialist practices to cope with the increasingly complex raft of legislation influencing building design, sometimes with sector-specific requirements (education).
As if this is not already difficult enough, the situation is made even more complex through additional performance requirements. A product may be selected not just on its technical merits but because it needs less skill for installation, helps reduce product inventory, or meets environmental concerns by being carbon neutral.
Companies cannot afford to approach this complex situation in an ad-hoc manner, relying on the luck or skill of the salesman to talk to all of the right people about appropriate benefits. The solution is to use segmentation to simplify the situation, gain maximum return from sales activity and out-perform competitors.
What is segmentation?
Segmentation is a method which allows us to break our market down into groups of customers with similar needs. This could be geographical, by activity, or any other relevant criteria. The objective is to target groups of customers who have the same behaviour and needs with a distinct and compelling offer.
In construction we tend to adopt the sectors used to report statistics (e.g. Public non-residential, Private Commercial, Private Housing). With the complex nature of our markets today there are benefits to adopting a more detailed approach to segmentation, sub-dividing these simple categories and adding an additional layer to reflect the different ways that projects are commissioned. In Education, for example, PFI and Local Education Authority projects will each have a different set of decision makers who will be interested in different benefits.
It is important to get these segments right. They allow us to accurately target our customers, recognise competitors, measure performance and anticipate trends. An effective strategy cannot be developed until these are correctly defined.
Analysis of each segment can then help identify those which offer the best opportunities. Factors to consider include sector growth, company strengths, level of competition, experience and established relationships.
Having identified the sectors which will give you the best return on sales and marketing resources you can then create a strategy to develop them.
Developing a Strategy
In deciding the approach to adopt for each segment it is necessary to identify the relevant benefits for each of the influencers. Many of these will be common across all segments – ease of installation for example. But others will be sector specific. To identify these it is necessary to understand the legislation and the issues facing the client or developer.
It can be helpful to assign characteristics to the different types of companies working in each sector. For example the contractor who is only interested in the lowest cost as opposed to the contractor who recognises the benefit of paying a premium for the product because it enables quicker installation times with consequent cost savings.
It is then necessary to communicate the appropriate benefits to each customer type using their preferred communication channel. For example, an architect may want to use the internet to gather information about BBA certification, but an installation contractor will want to receive site instructions in the form of a pocket sized leaflet.
Development of target companies can then be prioritised. It may be that some enjoy strong relationships with your competitors and are best left alone, others will provide an opportunity for you to build strong relationships.
Remember that this applies to all of those organisations that influence the selection of products – clients, architects, engineers, main contractors and sub-contractors.
Five Point Action Plan
· Define your market sectors.
· Select the sectors which offer most opportunities.
· Categories customers into types and select those that will be the most rewarding.
· Create distinct and compelling offers for each customer type and communicate these through their preferred medium.
· Implement a sales strategy to secure your target customers.