Please use a monospaced font (Courier 12 point, for instance) to view this document. IDENTIFYING AND TARGETING MARKET AND CUSTOMER SEGMENTS: A GUIDE FOR SERVICE PROVIDERS NATIONAL WORKFORCE ASSISTANCE COLLABORATIVE JANUARY 1997 The National Workforce Assistance Collaborative builds the capacity of the service providers working with small and mid- sized companies in order to help businesses adopt high- performance work practices, become more competitive, and ultimately advance the well being of their employees. The Collaborative was created through a cooperative agreement grant from the Department of Labor to the National Alliance of Business. Current partners on the project include the Council for Adult and Experiential Learning, the Institute for the Study of Adult Literacy at The Pennsylvania State University, the Maryland Center for Quality and Productivity, and the National Labor-Management Association. The Collaborative provides assistance in four areas: employee training, labor-management relations, work restructuring, and workplace literacy. For more information on the Collaborative, contact the National Alliance of Business, phone: 800/787-2848, fax: 202/289-2875, e-mail: INFO@NAB.COM. Development and printing of this publication was funded under Grant Number F-4357-3-00-80-60 by the U.S. Department of Labor. Opinions expressed in this publication do not necessarily represent the official policy of the U.S. Department of Labor. _ 1997 National Alliance of Business All Rights reserved. To order additional copies, contact: National Alliance of Business Distribution P.O. Box 501 Annapolis Junction, MD 20702 Phone: 800/787-7788 Fax: 301/206-9789 E-mail: INFO@NAB.COM Acknowledgements This manual was written by an experienced team of practitioners who are successfully addressing the issue of identifying and targeting market and customer segments in a variety of service settings. Tom Tuttle, Maryland Center for Quality and Productivity, served as leader of the writing team. Other team members were Sara Garretson, NYC ITAC; Russell Hamm, Arapahoe Community College; Robert Meyer, Work in Northeast Ohio Council, and Stephen Mitchell, National Alliance of Business. Regina Guaraldi, Miami-Dade Community College also participated in team activities. Terri Bergman, formerly of the National Alliance of Business, assisted in the preparation of this manual. The National Workforce Assistance Collaborative would like to thank the individuals who reviewed draft versions of this manual and provided guidance and assistance: _Nancy Renner, Catonsville Community College _Lynne Fry, U.S. Department of Labor _Jim Van Erden, National Alliance of Business _Jack Wismer, Black Hawk Community College This guide could not have been completed without their help. Thanks also go to Denise Hall, Marvin H. Harden, Rosalyn Johnson, and Karen Randall for their editing, graphics, and production assistance. This manual evolved from the writers' a consensus about the issues facing service providing organizations. The authors focused this guide on the practical, real-life concerns of developing and implementing a marketing strategy. As a result, this manual may appear anecdotal in places. These anecdotes, however, highlight real-life experiences. By placing them within a systematic framework, this manual makes a valuable contribution to the existing body of knowledge. Table of Contents Introduction 1 What Business Are You In? 4 Tom Tuttle Knowing Your Market Profile 10 Sarah Garretson Linking Products and Services to Market Needs 16 Stephen Mitchell Creating Customer Leads 20 Robert Meyer Establishing and Maintaining a Client Relationship 24 Russ Hamm Monitoring and Improving the Marketing and Customer Segmentation Process 34 Tom Tuttle Conclusion 37 Stephen Mitchell Appendices National Workforce Assistance Collaborative Advisory Groups 40 National Workforce Assistance Collaborative Products and Services 41 Introduction Purpose of the Manual Downsizing. Mergers and Acquisitions. High Performance Workplaces. Total Quality. Reengineering. The list of forces transforming today's organizations and workplaces goes on and on. Service providers -- those organizations that help businesses transform and be competitive --face a bewildering task. Businesses are service providers' customers, and customers are what enable service providers to exist. Without customers, there is no need for either services or service providers. How do service providers identify and form relationships with those customers for whom they can add value? A few years ago, Jack Welch, Chairman of General Electric Company stated "For any organization that is not changing as fast as its environment, the end is in sight." The environment in which service providers operate is changing faster than ever before. Therefore, service providers, in order to assure relevance, success, and survival, must also transform. This manual is intended to provide guidance and support in this effort. Its purpose is to help service providers make the changes needed to define, understand, approach, and connect with customers in targeted market segments. Target Audience A business relationship between service providers and clients is a two-way street. Each party makes decisions and choices about seeking and entering the relationship. The National Workforce Assistance Collaborative (NWAC) has, in the past, approached this issue from the client's perspective through its publications about selecting and using consultants. This manual, however, is written for service providers: the other side of the equation. Who are the service providers that this manual focuses on? They include consulting organizations, manufacturing extension centers and programs; centers in universities or community colleges, including quality and productivity centers; literacy programs; labor-management programs; and technical training programs. This manual specifically targets new and "transforming" service providers. New providers need help in establishing themselves, while existing programs facing a changing environment must continually "transform" themselves in order to remain viable. Focus This manual focuses on both marketing and selling. As Tom Peters stated, "markets have never bought anything, only customers buy products and services." Therefore, marketing is necessary but not sufficient to create a viable service business. Markets must be defined and targeted, but unless these markets are converted to customers who buy products and services, you will not survive as a service providers Market and Customer Segmentation Process 1. Determine what business you are in. 2. Analyze the characteristics of the market. 3. Match your capabilities with identified market needs. 4. Engage your customers. 5. Build relationships with individual customers and "make the sale." 6. Assess progress regularly and repeat the process. This manual describes a systematic process for moving from a definition of your business, through analysis of your markets, to linking products and services to market needs, to promotion and generation of leads from customers, to making sales calls and closing the sale. First, Tom Tuttle points out that the marketing and customer segmentation process is fundamentally a strategic one, and therefore must be grounded in an understanding of "what business you are in." His chapter shows how consideration of your mission, capacity, and definition of success can help you define what business you are in. Sara Garretson discusses how to analyze the market you select. This analysis should first be conducted from a bird's eye view. Later, the analysis must be more detailed, using published data as much as possible, but ultimately relying on interviews, focus groups, and surveys. Once the market analysis has been done, it is necessary to link the product and service offerings to the needs of the targeted market. Stephen Mitchell provides a road map for making this vital connection. He outlines two strategies for developing capabilities. The first is to develop internal capabilities, and the second is to develop alliances with other providers and deliver "full service" to customers. The process of converting market knowledge and an appropriate set of capabilities into revenue requires developing customer relationships. There are two basic strategies for doing this. One is to engage in activities that will generate customer requests for information or "orders," and the other is to select potential customers and make "cold" calls. Bob Meyer highlights the first approach: generating leads through various promotional activities. The second approach, making sales calls and following up on leads, is described in detail by Russ Hamm. The systematic process described in this manual is not a one- shot affair. It must be repeated periodically to ensure your products and services continue to address customer needs. Tom Tuttle discusses continuous improvement of this "new business process." Stephen Mitchell concludes by identifying a number of key principles and lessons in the marketing literature that serve as the foundation for the market and customer segmentation process outlined in this manual. While it is possible in a manual such as this to describe a "linear" process, in practice, the process is rarely linear. You can plan the process, and implement your plan, but you must be ready to react to opportunities as they present themselves. There is an element of serendipity in the process. Constructing a plan may create logically ordered opportunities. However, when unplanned opportunities present themselves, the plan must be amended and used to "inform" you about which opportunities to pursue. This manual provides a process that will prepare you to practice "informed opportunism."1 What Business Are You In? Thomas C. Tuttle, Maryland Center for Quality and Productivity Critical Components _ Defining your mission _ Determining your capacity _ Establishing your definition of success A management consulting firm that described itself as being in the business of management and leadership development worked with a number of divisions of a large company over several years. At a dinner with the heads of several of these divisions, someone asked one of the consultants why she thought the company continued to hire them. The consultant suggested it was because they helped individual managers improve their management and leadership skills, and thereby improve the company's performance. The division presidents, as a group, said in response, "Well you are good at that, but that's not why we hire you. We hire you because we need an outsider to create consensus among our diverse viewpoints inside the company. We can't do that ourselves." Without realizing it, this consultant was in the "consensus building business." It is not unusual for service providers to have a different point of view from that of their customers. Therefore, when asked the question, "what business are you in?" you must answer it from the perspective of a customer, as well as a service provider. If you are lucky, the two answers will match. Questions for Setting Strategic Direction 1. As a service provider, what business are we in? 2. What customer segments do we serve? 3. Who are our top three competitors? 4. What are our core capabilities? Answering the question "what business are you in?" helps establish a strategic direction. Before reading further, stop and write down your preliminary answers to the following four questions: 1. As a service provider, what business are you in? 2. What customer segments do you serve? 3. Who are your top three competitors? and 4. What are your core capabilities? Getting the right answers to these questions requires that you consider your mission, your capacity, and your definition of success. Defining Your Mission Defining your mission is the first step to determining what business you are in. Does an organization need a mission statement? This question is often debated in academic and consulting circles. There is no issue or debate about whether an organization needs a "sense of mission." The issue is whether a mission statement -- usually crafted as a set of idealistic, generic phrases that have very little to do with the day to day operation of an organization -- contributes to a broad understanding within the organization of its purpose and direction. A well-crafted mission statement can communicate and provide guidance to members on their organization's purpose, customers, and differentiation from competitors. The key is to first clearly define the business, and then reflect that definition in the mission statement. _ Organization purpose. Organizational purpose is the first part of a mission statement. The purpose answers the question "why does this organization exist?" Typically, purpose statements fall into three categories: _ Those that define purpose in terms of benefits to the owners. These statements may say the organizations exist to "increase the wealth of their shareholders." _ Those that focus on returns to a broader range of "stakeholders." These purpose statements might say that the organizations exist to "serve their customers, and in so doing create benefits for shareowners and employees." _ Those that broaden their focus still further, to benefit the larger society. These statements might say the organizations exist "to enhance the quality of life of the citizens of the state." _ Market definition. The second part of a mission statement is a description of who will be served, i.e., a definition of the market. The market can be defined in a variety of ways: geographically, by type of business (e.g. industry definition, size), by stage of evolution or development (e.g. startup businesses, businesses that are shifting markets, businesses that have mature total quality processes in place), or by organizational level (e.g. the CEO, middle managers, non-management employees). Manufacturing extension programs, for example, are set up primarily to serve manufacturing firms. Workplace literacy providers may define their market as firms or as individual employees. Labor-management committees typically define their markets as those firms in a geographic area that have a formal collective bargaining agreement. An effective mission statement will provide a clear definition of the target market to be served. The Maryland Center for Quality and Productivity, in its manufacturing outreach program, defines its market as "Maryland manufacturers having between 20 and 500 employees." While this is a reasonably specific definition that does guide decision making, it essentially treats every manufacturing category as equally relevant. This market might be further defined by targeting manufacturers that are current or potential exporters, or targeting those that are suppliers to larger Maryland firms. We might, for example, explicitly target clusters of businesses that form the supplier base of Maryland's largest employers. The more explicitly the market is defined, the more guidance the market definition provides to members of the organization. In defining the market, a service provider must consider what benefits it can bring to the organizations in the market. (This product-market matching is discussed in more detail in "Linking Products and Services to Market Needs"). It must also consider its own credibility in approaching this market. The health care industry, because it is undergoing change and could benefit from consulting assistance, might be seen as an ideal potential market. However, unless a service provider has the knowledge, past experience, personal connections, or innovative ideas needed to establish credibility with decision makers in this industry, it makes little sense to define health care as a target market. _ Competitor differentiation. The third part of a mission statement is the definition of value the service provider brings to the market. This part differentiates the service provider from its competitors. It highlights the distinctive competencies that provide a competitive advantage to the service provider. Service providers can differentiate themselves from their competition in a number of ways, including cost, the nature of the products and services provided, and the manner in which the products and services are provided. Community colleges providing technical training differentiate themselves from private consultants with similar services by the prices they charge. A community college's 16-hour training program on Excel would typically be less expensive than a similar program provided by ABC Computer Store. Further differentiation might be provided through the willingness of either provider to "tailor" the program to the content of the client firm. An Illustration of Differentiation by Delivery and Cost The state of Maryland has established the Maryland Manufacturing Modernization Network to provide services to manufacturers in the state. As a partner in this network, the Maryland Center for Quality and Productivity (MCQP) provides assistance to manufacturers in preparing for ISO-9000 registration. (ISO is a quality standard required by many industrial customers as a prerequisite for serving as a supplier. As a result there is extensive demand for this service.) Many private, for-profit consulting firms provide similar services which range in cost from $10,000 per firm to over $50,000. With state assistance supplemented by client fees, MCQP uses a consortia approach to help ten to 40 businesses pool their resources and learn together over a 12 to 14 month period. This cuts the per firm cost to approximately $5,000, with an added advantage of facilitating industry networking. Determining Your Capacity The second consideration in defining what business you are in is your capacity. This issue covers three concerns: "breadth," "depth," and "reach." _ Breadth refers to the extent to which a service provider's technical skills cover the technical needs of the market. Assume, for example, that the literacy service needs of the market include literacy assessment, curriculum development, training, and management coaching about literacy issues. Breadth would refer to the extent to which the service provider could deliver all of these services. _ Depth refers to the ability of the service provider to innovate and tailor services to fit the needs of a particular environment. Service providers with "low depth" may deliver packaged services, while service providers with "high depth" have the capacity to adapt existing services and invent new services to meet the needs of individual clients. _ Reach refers to the number of clients a service provider can handle at the same time. Reach typically increases as an organization becomes larger. However, reach can also be increased in a small organization by its choice of service delivery strategy (e.g. consortium approach vs. one-on-one). These three capacity factors are not independent. A larger service provider is likely to have more breadth, depth, and reach than a small provider. However, it is difficult even for large organizations to truly excel in a great number of areas. The strategy of most service providers is to focus on a relatively few speciality areas in order to sufficiently differentiate themselves from competitors. Strategically, service providers need to decide what they will do and what they will not do. Since the market is likely to respond more favorably to a service provider that can meet a range of needs, it is sometimes necessary for service providers to increase their capacity by forming alliances with other providers. For example, providers of Total Quality consulting services rarely possess expertise in literacy issues, and vice versa. However, Total Quality cannot be effectively implemented unless all employees possess sufficient verbal and math skills to profit from the training and to utilize basic group problem solving techniques. Therefore it would make sense for Total Quality service providers to develop partnerships with literacy providers in order to offer a complete service to clients. Similar partnerships might make sense between strategic management or technology modernization consultants and providers of technical training or labor management relations services. Organizations developing strategic alliances or partnerships must understand each other's products and services sufficiently to know when to call the other and how to integrate their services. Strategic alliances are typically formalized by a partnership agreement or a memo of understanding among the parties describing how they will work together. The arrangement must address financial issues -- how billing will be conducted, what rates will be charged, and what "markups" will be permitted. Leaders of service providing organizations must face the issue of capacity to grow their businesses. It is typically when they are considering this that issues of breadth, depth, and reach must be addressed. This is also the time when the classic business "make" or "buy" tradeoff must be decided. In this case "make" refers to those services that will be delivered through in-house people. "Buy" refers to those services that will be delivered through affiliations with partners. After identifying their market, obtaining the appropriate make-buy mix is one of the most significant challenges facing service providers. Establishing Your Definition of Success A final factor to consider in determining what business you are in is your definition of success. This will be affected by your funding sources, ownership and management structure, and the expectations of your owners/managers and funders. How Do You Define Success? _Financial outcomes _Performance outcomes _Customer satisfaction _Innovation _Image in the community "Success" may be viewed very differently by a for-profit consulting firm, a college literacy center, or a manufacturing extension program. All of these organizations will predicate success on financial outcomes, service impact, innovation, and community image in the community. However, differences will be seen in the relative importance of these criteria. If a community college dean sets up a center to generate significant revenue for the college, the primary criterion of success will be financial surplus generated. On the other hand, the not-for-profit manufacturing extension program, funded by state and federal grants, may have more concern for service impact (e.g. number of firms that received services, amount of private investment stimulated, number of hours of private training leveraged, number of jobs created or saved). The for-profit consulting firm will likely be guided by such success criteria as profit, customer satisfaction, product and service innovation, and employee satisfaction. It is important to consider customer satisfaction as a critereon in defining success. Success defined by revenue generated may prove short-lived if customers are dissatisfied with your product or services and do not return. Success criteria will affect your choice of markets to serve. It is unlikely that a for-profit consulting firm will target manufacturers with 100 or fewer employees. Small firms are a difficult market to serve profitably, and are therefore ignored by profit-oriented service providers. However, service providing organizations with an economic development mission may see firms with 100 or fewer employees as a primary market since these firms can be significant job creators. Success criteria can also affect the types of products and services offered. Tailoring services, for example, is expensive. Therefore, for-profit consulting firms may adopt a strategy favoring standardized products and services (e.g. software, survey instruments), which tend to have high profit margins, over customized services. Service providers that have an economic development purpose typically have a geographic focus. Their job is to offer services that will help "all boats rise" within that geographic area. They tend to have longer-term relationships with clients, and place considerable emphasis on helping client firms develop self-sufficiency. These providers will target their services on the firms most likely to benefit from assistance (e.g., those ready to change, with management commitment, and growth potential), rather than on the clients most able to pay or provide profit. Summary The behavior of service providing firms is shaped by their organizational circumstances. This is neither right nor wrong; it is simply a fact. As long as the behavior of service providers is consistent with the needs of the market, there is no problem. Problems arise when a service provider's products and services do not match its clients' needs. Now that you have defined your mission, determined your capacity, and delineated your criteria for success, you can go back to the four questions asked at the beginning of this chapter: 1. As a service provider, what business are you in? 2. What customer segments do you serve? 3. Who are your top three competitors? and 4. What are your core capabilities? Keys to Success _ Think through why your organization exists, the market your organization serves, and the value you provide that differentiates you from your competitors. _ Ascertain your own organization's breadth, depth, and reach, and then form "strategic alliances" in order to provide complete service to clients. _ Align your "definition of success" with your organization's purpose. Do you still agree with your preliminary answers, or do you need to make adjustments? Once you are sure you identified what business you are in, you are ready to analyze your potential market. Knowing Your Market Profile Sara Garretson, New York City Industrial Technology Assistance Corporation Critical Components _ Constructing a bird's-eye profile _ Taking a close-up view Before forming a new organization or starting a new program you need to define the potential market, analyze it, gain an understanding of what market needs you might be able to meet, and determine the market constraints (pricing, timing, delivery methods, etc.) that will be in effect. This chapter will review some of the techniques, principles, and resources you can draw upon to construct this market profile. Profiling your market is a critical stage in your planning process, and must be undertaken with a totally open mind if it is to be successful. If you go into this planning phase with a predetermined expectation, you risk the danger of only asking questions related to that expectation; you will miss clues that could open up new opportunities or tell you you are on the wrong track. Three activities must be completed during this stage of the planning process: _ Define your market. This definition may come from your mission statement, or possibly from the program whose funding you are pursuing or have received. Some examples of a general market definition include, "manufacturing firms located in New York City," "any business that employs more than 50 employees in the greater Miami area," and "the tri-state workers who have been laid off because of the decline in defense contracts." _ Create a list of questions. Typical questions include: How many potential customers are there in this market? Are there customer sub-sets (market segments) that may have different needs? If so, what are the segments, and how do their needs differ? Are there clusters of companies that share common problems? What are the characteristics of the firms most likely to use your services (size, location, industry, ownership, age, customers, etc.)? What do these business owners see as the primary issues facing them, and do they see your services as possible solutions to these issues? What are the constraints on this market (financial, time, geographic, etc.) and how will these have an impact on your ability to reach this market? Is the market for your programs individuals, rather than firms? If so, are they currently working? What are the demographics of this population (age, income, education, location)? _ Start gathering data. There are two steps to gathering data: developing a bird's-eye profile of the target market, and developing a "close-up" picture of the target market. Once you have completed these three activities of the planning process discussed above, you should have a strong sense of the needs of your target market and can begin to determine what services to provide. The remainder of this chapter focuses on the two steps involved in collecting data on your potential market: the bird's-eye profile and the close-up view. Constructing a Bird's-Eye Profile Bird's-eye profile of a local target market _Number of businesses by employment size, county and SIC code _Employment trends by SIC code _Location of target markets (clustering or dispersion) _Labor market profile (age, wage rates, skills) _Major issues having an impact on your local industrial or economic base _Interrelationships between and among local employers _General trends within the region and within specific local industries _Projections by industry or the local economy _Service providers, what they provide, and which markets they serve A bird's-eye profile of the local economy, or that segment of the economy (whether employers or employees) you have targeted, is a macro view of your potential market. Creating a bird's-eye profile is accomplished by amassing and analyzing macro-economic data which you can then embellish with qualitative information obtained through interviews and research. _ Macro-economic data from published sources will provide you with a gross picture of your target market and some of its basic characteristics. This data is quantitative in nature, is relatively easy to access, and will give you a sense of the size and scope of your target market. In reviewing macro-economic data, you should look for answers to such questions as: _ Are there dominant industries? _ Which industries are growing? _ Which industries are declining? _ Are the industries clustered by counties? _ Are some industries dominated by larger firms? _ Are others dominated by smaller ones? There are many published sources that can help answer these questions. Start your search at your local or state economic development agencies and employment/labor agencies (policy groups or departments where they exist), and the regional office of the Bureau of Labor Statistics. These departments may have conducted studies or already amassed and analyzed data which they would share with you. They also may have published studies which they will provide you as well. The local public library is also a good source; it may give you access to many of the governmental data publications, or possibly to the Internet. Some of the more useful sources include: _ County Business Patterns, published by the Office of Domestic Commerce, a unit of the U.S. Department of Commerce. The latest publication for your state can be ordered through the U.S. Government Printing Office. This publication provides you with county-specific data on the number of firms by four-digit SIC code and by firm size (number of employees). Unfortunately, there is usually a two to three year lag in this data so its usefulness is limited in locations with significant recent change. Analysis of this data over time can be useful in giving you an understanding of trends. _ The U.S. Census Bureau maintains a current and comprehensive database of U.S. business establishments and companies. This data is the base for County Business Patterns and for other customized reports which are sold on a reimbursable basis. In addition, the Bureau conducts a Business Census every five years which provides more in-depth information about specific economic segments. For example, the Census of Manufacturers publishes geographical-area reports by state, metro area, and selected counties. Data from this census includes operating ratios, capital expenditures, products, materials consumed, and value added. The Census Bureau can be accessed through the Internet at: http://www.census.Gov. _ The state agency that manages the unemployment insurance system for your state can often provide you with up-to-date data on firms by SIC code, and also total employment by SIC code. If individuals are your target market, you will be able to gain some information from the data sources discussed above, but you will also need to research additional sources, such as the general population census, local employment data, and educational data. _ Qualitative data will round out your macro profile of the market. Research of news articles in the local press, as well as interviews with local bankers, utility managers, economic development officials, and other professionals knowledgeable about the local economy, should be used to further develop the profile. Some of the questions qualitative data can help answer are: _ What are the key factors affecting the local economy? _ What are the key factors affecting specific industries? _ What are the impediments to growth in specific industries? _ Which industries are linked through customer and supplier relationships? _ What organizations and businesses are providing the same or similar services to your target market? Search indexes of local newspapers for articles on your target population; where the articles cite special reports, try to obtain copies. Make copies of relevant articles. Look for articles and data on market projections: what are anticipated future trends -- what industries are growing and which are expected to decline? Identify major industries and major local employers; research national and international trends for these firms and these industries. Try to gain an understanding of the dynamics and relationships between different types of businesses. Also try to determine how your local industries are likely to be affected by upcoming national and international events (e.g., NAFTA, new environmental regulations, defense cut-backs, changes in federal or state budgets, domestic or international immigration patterns). Interview some of the key people within your community who can help you round out your picture. The key is to locate individuals who have a good overview of the local economy and the particular segments in which you are interested. These individuals include the voluntary leadership and paid professionals of local trade and professional organizations, local chambers of commerce, and community development organizations; local economic development professionals; marketing officials from your local utilities; bankers responsible for servicing your market segments; and faculty members from local institutions who may be researching the local economy or certain industries. You should also visit other service providers so you can understand what they are doing, and learn what they have found does or does not work. Also, explore partnerships: are there areas where you can collaborate with other service providers? The bird's-eye or macro profile should give you enough data to develop a set of assumptions about how you want to segment the market, what priorities you might want to set for your market, and what type of services you believe your market might need. Taking a Close-Up View Once you have developed a macro profile of your local market, you need to develop a "close-up view" of your target market. This close-up view will enable you to test the market and service assumptions you have developed based on the macro profile, and determine market receptiveness to your plans. This stage of your market research is also the first step in marketing your direct services. Each visit or contact has the potential to win over a customer who will use your services in the future. Your market research effort should generate a list of potential prospects, a database of local firms which you can use later for your marketing. The database should include, at the least, the firm name, address, phone and fax numbers, CEO (or other contact) name, number of employees, and SIC code. Even if you cannot obtain all the data initially, you will want to begin building up your database. Sources for your database include local business directories, Dun and Bradstreet, organizations that serve the same population or sub-set of your market and are willing to share mailing lists, and subscription lists for business publications. Once you have built up your database, you may be able to feed it into a mapping program such as MapInfo, to get a good picture of the geographic clustering of firms in your overall market, sub-sets, or market segments. Once you are ready to talk with firms, you should focus your questions on defining individual firm needs. You should ask firms: _ Open-ended questions relevant to your services. What are the key training issues your firm faces in the next three years? What changes do you anticipate your firm making to maintain or increase your market share? Who are your major customers? Have they made any new demands on you in the last year? If so, how did you respond? Who are your major suppliers? Are you satisfied that they are meeting your requirements? If not, where are their problem areas? _ Specific questions about some of the services you are thinking of delivering. Would you be interested in sending employees to a training program at the local community college? In what areas? At what time of day? Would you be willing to pay for training services? How much? Would you prefer services to be delivered on-site at your location? There are several ways to obtain information. You may want to use some or a combination of all of them. _ Interviews with firms. Set up interviews with individual firm owners or managers. Visit them at their plants or offices so you can assess the nature and environment of their businesses. In addition to the questions noted above, ask them if they know of other firms you could talk to. Your interviews should target some of the larger firms in the community, because they will undoubtedly know smaller firms as suppliers, and understand the issues these companies face. Try to visit a cross-section of your target market. _ Focus group(s). Invite a group of firms (or several groups) to a central location, and ask a professional group process facilitator to lead the group through a series of questions similar to the ones described above. Focus group members can be from different market segments or similar ones. This approach is less time consuming than interviews, and benefits from the interaction of the participants. _ Survey. You can also mail a survey out to a large cross- section of companies in your target markets. This method has to be more structured than interviews or focus groups, but will allow you to reach a larger group of potential customers. When designing a survey, it is very tempting to ask every question you have ever wanted an answer to. But if you want the survey answered and returned, keep it simple and short. If you conduct a focus group first, the issues identified there can be a source of potential survey items. As you design your survey, make sure you have a computer program in place to enter and analyze the data. You should analyze the interviews, focus groups, or survey results to determine if individual firms' answers to questions differ by industry, size of firm, market (e.g., defense firms vs. consumer product firms), or location. After this analysis, you should have a clear idea of your local market profile, the key market issues, and the services you should be offering. You should know the answer to what, when, where, how, and how much of your services you should provide. You should also understand who your competition is and be able to develop a strategy for gaining your own competitive edge. You are now ready to design your own program. Keys to Success _ Enter into the task of market profiling with a completely open mind and without preconceived expectations. _ Construct your market profile by defining your market, creating a list of questions, and gathering your data. _ Construct a bird's-eye profile from macro-economic data augmented by interviews and research. _ Develop a close-up picture of your target market by collecting firm specific data and asking firms about their individual product and service needs. Linking Products and Services to Market Needs Stephen M. Mitchell, National Alliance of Business Critical Components _ Targeting a market segment _ Selecting a market segment Having determined what business you are in and developed a profile of your target market, you next need to look at the match between them. Do your product and service capabilities address market needs? Success requires that there be a link between the two. This chapter presents some key questions to determine the link between your products and services and the needs in your target market. Targeting a Market Segment The best service providers think and plan for short-term success and long-term growth. You should make every effort to establish linkages between your products and services and current markets needs, and to anticipate opportunities for growth. _ What do I want in the short term? It is very difficult to be all things to all people. The value of marketing is that it focuses your efforts, thereby increasing your chances of success. Targeting a market segment basically involves determining what you want to be and to whom. This requires that you answer two fundamental questions: 1) What market segment will I serve? and 2) What products or services will I provide to this segment? _ What general market(s) will you serve/start with? Markets are defined by common needs. The trick is to determine the basis of the common need. Common needs may be based on a fairly global distinction such as type of firm (e.g., public sector, manufacturing, service, not-for- profit), geographic area, or size. Or a common need may be based on a finer distinction within a broad classification (e.g., plastic manufacturers or manufacturers using a specific type of process). Defining what business you are in may have already set some parameters on the market segment you will serve. For example, a manufacturing technology center will serve manufacturers, generally in a specific geographic area. Analyzing the market profile should identify the common need, indicating the most appropriate market segment for you to serve. It is important to recognize that a decision on what markets to serve is also a decision on what markets not to serve. For public sector service providers, designating a market to be served, while recommended, may present some political challenges, especially if the services offered are subsidized by a government entity. If tax revenues fund your services, how can you say "no" to a tax paying firm that seeks assistance? One answer to this dilemma lies in techniques to manage the demand (e.g., limiting marketing efforts to firms in a geographic area, establishing "gates" -- such as CEO attendance at a two-day workshop or cost sharing -- that a potential client must pass through to receive your services). _ What products will I provide to this segment? Identifying a market segment determines who you will provide services to. You also have to determine what you will provide, i.e., what product or service will address the common need that defines the market segment? Again, defining what business you are in may have helped set some parameters on the products or services you will offer. To continue our example, a manufacturing technology extension center is likely to offer consulting services on appropriate technology. One of the most important decisions any organization or business has to make is whether it is going to offer pre-packaged products or services (e.g., statistical process control training, energy audits) or customized services (e.g., a training program designed specifically for a company). The marketing process is different depending on which approach you decide to take. Answering these questions requires balancing all the information you have gathered thus far. While the questions can be presented separately and may appear linear, answering these questions is really a dynamic, circular process. _ Where do I want to be in two to five years? Looking for opportunities for growth requires that you consider where you want to be in two to five years. What are the most likely opportunities for growth given the decisions you have made about products and services and market segments? What products or services will you develop/provide next? What segments will you develop/target next? Opportunity For Growth Product/Service Old New M a r k e t Old + + New + + While it is not possible to foresee every opportunity that may emerge, it is possible to consider and plan for likely opportunities. The accompanying diagram provides a framework for this discussion. It shows that the opportunities for growth come from offering: _ Old products or services to old markets. The prime opportunities for growth using existing products in the same market emerge when your product or service can be replicated with the same client (e.g., repeat a training program with new employees) or you can expand your market share (i.e., there are companies in the market that are not yet your clients). _ New products or services to old markets. It is often easier to keep an existing customer than it is to get a new customer. You should look for opportunities to offer new services to your current clients. Use your familiarity with the market to identify needs that you can address with new products and services. This may be an expansion of a current product (e.g., advanced training to follow up on basic training), or a product to address a new need that you identified in working with a client. _ Old products or services to new markets. The needs that define your target market segment may be shared with, or similar to, needs that exist in other markets. If so, you may be able to offer your existing products or services to a new market with little or no modification. _ New products or services to new markets. Perhaps the most difficult growth opportunity to predict is new products or services to new markets. This requires being ever vigilant, studying trends in different markets, and looking for opportunities to apply your competencies to address emerging needs. Selecting a Market Segment Your chances of business success increase appreciably if you target the right market. Unfortunately, there are no hard and fast rules for selecting an appropriate market segment in which to offer your products and services. You analyze your market profile, do an honest assessment of your strengths and weaknesses, and make an educated decision. Some of the criteria that should inform your decision include: _ Opportunities (short and long term). Targeting a market segment is about recognizing opportunity. The quality of your market profile data is a key factor in your ability to determine which segment offers the most potential. Knowing about critical trends -- whether the segment is growing, shrinking, or undergoing change -- will help to determine the potential market for your products and services. _ Capabilities (short and long term). Realizing an opportunity requires that your products and services "fit" the needs of the target market. Which segments are you most qualified to serve? Your selection of a market segment should capitalize on your experience and credibility. It is important for you to identify limitations in resources and skills which may constrain your capacity to serve the market. What can you realistically do? _ Success criteria. Your definition of success is one of the elements that defines what business you are in. You should target a market segment that will enable you to meet your criteria for success. Which market segments fit best with your mission? Which segments link with your purpose or values? Which market segments allow you to satisfy your investors' priorities? _ Competition. Most service providers face competition for their products and services. You want to target a market segment in which you can add value and differentiate yourself from any competitors. It is important for you to know if similar products and services are available now, who your competitors are, and how well the segment is being served. Looking at this information, determine how you can best differentiate yourself from your competition. _ Connections. The old saying "it isn't what you know, it's who you know that counts" applies to targeting a market segment. All the analysis and preparation you can do doesn't get you in your potential customer's door. Do you have contacts in the target market segment that can help to open doors? Summary As you go through the process of selecting a target market -- and before you reach out to the customer -- it is a good idea to check yourself, i.e., to audit where you are regarding your definition of market, potential customers, and capabilities. You should be able to clearly delineate the problem or need in your target market, how your product or service addresses that need or solves that problem, and why a potential client should come to you rather than a competitor. Keys to Success _ Focus your efforts. Do not try to be all things to all people. _ Anticipate opportunities for growth. Creating Customer Leads Robert P. Meyer, Work in Northeast Ohio Council (WINOC) Critical Components _ Determining the content _ Selecting the channel Successful service providers sell products and services that meet the needs of clients. All of your work to this point -- determining what business you are in, analyzing the characteristics of the market, and matching your capabilities with identified market needs -- was necessary, but not sufficient to ensure success. You have yet to engage your customers. This chapter presents some advice and guidance on making initial contact with customers. The goal is to create a demand for your services. You want to achieve two objectives through your initial contact with customers. First, you want to increase customer awareness of your firm and its products and services. People cannot purchase products and services that they do not know exist. Second, you want to establish your credibility as a service provider. Customers should see you as an expert whose services can help solve their problems. There are two dimensions to initial customer contact: content and the channel through which your message is delivered. Determining the Content2 The specific content of your marketing message will depend on the nature of your services and your target market. However, regardless of these, the content of your message should: _ Establish your expertise. Business people are wary of providers that do not have experience 1) in the areas in which they are delivering services, and 2) in delivering those services to businesses like them. One way to establish your expertise is to be an information source to businesses about the need for change. Educate and inform businesses about trends affecting their industry and how your services can help them take advantage of the opportunities these trends present. Wherever possible, use examples from your past practice to illustrate your points. Get testimonials from previous clients and use them as part of your message. _ Emphasize your value-add. Every morning, as soon as small business owners awake, they focus their energies on "making the payroll." You need to remember company owners' financial imperative and link all of your activities to producing bottom-line benefits. Show that money spent on change efforts will be returned to them in increased productivity, higher quality, and/or lower costs. You should make it easy for companies to determine the quality of your services. One way to do this is to connect potential customers to current and past clients. _ Maintain a customer focus. Small and mid-sized businesses want services focused on their requirements and the realities of their workplaces. Many of these companies know that they have to change, but don't know what to change. Because each individual business is unique, business owners want customized programs. Your marketing should emphasize your ability to design services tailored to meet their needs, instead of trying to fit company needs into an off-the-shelf package of services. Your marketing should also outline your willingness to tailor your services to meet individual operating structures and schedules. Many small and mid-sized businesses cannot train employees on company time since they do not have enough workers to substitute for those in training. Some businesses operate around the clock and want services delivered at a variety of times in order to meet their shift schedules. Because businesses often come to you when a problem is critical, they also want you to meet their needs right away. Selecting the Channel Your marketing message can be delivered through a variety of channels, most of which do not require extensive outlays of money. These channels can advertise your services, and build awareness of your training and consulting capabilities among a large number of people (potential clients). The following initiatives have proven successful for numerous service providers: _ Host conferences, workshops, or training. Most non- profit/educational service providers plan public events, such as conferences, as part of their normal outreach. These educational events also serve as indirect advertising. Providers should develop appealing direct mail flyers or brochures that not only describe the specific program being advertised, but also lend credibility to the provider's organization (see the section below on direct mail). At the event, be sure to have a plan to cultivate potential clients. Put up a display table showing some of your programs and corresponding support material. Have staff members mingle with the audience and be available to answer questions. Be sure to have them wear badges that identify them as staff members. Hand out evaluation forms that not only note the specific program, but also ask if attendees would like a follow-up call on a specific topic. _ Speak at public events. Many local organizations -- such as Rotaries, Chambers of Commerce, and chapters of technical /business associations -- are constantly looking for speakers. Set up a speaker bureau with your staff and volunteers. Give them some prepared speaking aids such as slides or overheads, as well as handouts. Develop information on timely topics which show that your organization is a thought leader, as well as an expert on specific subjects. Also look for opportunities to speak at regional and national conferences, and distribute written copies of your presentations afterwards. Depending on your locale, you may also have the opportunity to appear on business-oriented radio and cable programming. _ Write articles for publication. An excellent way to establish individual, as well as organizational credibility, is to publish articles or books on your specific specialties. Start with your own quarterly newsletter. Write guest columns for local newspapers or magazines. Submit articles for regional or national trade publications in your target market. Consider writing a book or booklet. There are numerous "ghost writers" who can help you organize your knowledge. You probably will not make much direct money from your book, but it can be a great "give-away" to potential clients. Whenever you write a piece, be sure to include your address or phone number so readers know how to contact you. _ Use direct mail and telemarketing. Direct mailing of program flyers and service brochures is a cost-effective way to promote your organization. With the availability of PC desktop publishing and the use of professional printers, first-class material can be developed cost effectively. Developers of this type of material should remember to keep the copy simple, and to the point. Be sure to use your organization's logo on the front page, and have your address and phone number in an easy-to-find location. Also, remember that union organizations like to see the printer's union label "union bug" on all printed pieces, indicating that a union printer did the work. Include some kind of "call to action" in any kind of direct mailing, to give recipients an opportunity to respond. Make it as simple as possible for them to respond, e.g., postage paid reply card or 800 number. If you choose not to use the "call to action" approach, mention that you will be following up with them. Make sure your mailing lists are up to date and in zip code order. Specialized mailing companies can handle large numbers much more effectively than you, so use them. The use of telemarketing can be effective for promoting specific events or soliciting feedback from potential clients. Be sure to approve the script used by the phone caller. You may also want to consider a reversal of telemarketing, i.e., open a technical assistance hot line that would enable potential customers to call you for free advice. _ Service catalogs and brochures. Potential customers like to see that service providers have established products and services. One way to show this is to develop an extensive service guide or catalog. The guide can briefly describe the provider's in-house advisory, training, and implementation services. Mention in the catalog that services can be tailored to meet each client's unique needs and circumstances. _ Advertise. Most non-profit service providers believe that they cannot afford paid advertising. Some groups find creative ways to fund advertising, such as getting corporate co-sponsorships. Local utility companies do economic development advertising and may be willing to help showcase your organization. Build paid advertising into your seminar budgets. Remember, one ad on a particular subject or promoting an upcoming event is not enough. A minimum of three ads is needed for people to see the ad, remember it, and act upon it. Small and mid-sized businesses want to work with service providers who are interested and involved in their companies, and understand their needs. Initial contact should create an interest in or demand for your services. Direct contact is needed to strengthen these bonds and build a client relationship. Establishing and Maintaining a Client Relationship Russ Hamm, Arapahoe Community College Critical Components _Preparing for the contact _Making the first contact _Making the first visit _Conducting follow-up actions Sales and contracts are the result of solid, often long-term customer relationships. While your ultimate goal is to consummate a contract or sale, your intermediate goals include finding companies/persons who are most likely in need of your products or services, learning as much as possible about them, qualifying them (confirming your assumptions with real data), beginning a "friendly" relationship, and maintaining that relationship. This chapter introduces methods that help you to make and build client relationships in a methodical and practical way. Preparing for the Contact Identifying Your "First-Try" Group _Leads generated through conferences, speeches, articles, catalogs, and advertisements (outlined in the previous chapter). _Mutual connections and natural links you and your company may have to companies in your target market. _Acquaintances, local business groups, or associations that refer you to potential clients or provide additional information about target customers. The key to quick relationship building is customer/client knowledge. Careful preparation, using good information about clients and their companies, increases your probability of success. The information you gather in preparation for a meeting will help you plan and conduct the sales calls you will make. You should have already collected both primary and secondary data in order to develop your market profile3. The primary data will prove most valuable in preparing for an initial sales call. As you narrow the list of companies you want to visit, stop by and request a collection of their printed material, especially copies of their annual reports. This material will provide you with a basic orientation, along with a fiscal view, of the companies. Using all the company data you have available, create and complete company data sheets. The data sheets will be the basic tool for assigning and preparing your sales staff for their assigned calls. The more information you have about each company, the easier it will be to conduct the calls and leave the impression that you're a knowledgeable and prepared service representative. You will add additional data to these sheets after your visits to the companies. Company Data Sheet _Names, titles, phone numbers, locations of each potential company contact person _Major customers and their requirements _Major products and services _Size of their customer base and their sales volume -- Are sales growing, level or shrinking? _Age of the company _Ownership structure (i.e. public or privately held) _Financial strength -- is the company growing, down-sizing, etc.? _Primary service or sales region _Are they a part of another company? _Principal competitors _Size and maturity of their workforce _Name of the union if they are unionized _Key suppliers _Status of their industry in the U.S. or the world _Any other information to help you plan your first contact Making the First Contact Before making a visit, you must discover who the right person to contact is within a company. This will depend on what your products or services are. If you are offering products or services that will have an impact on the entire client firm (e.g. Total Quality, strategic planning, etc.) you will have to meet with the chief executive officer. It may be necessary however, to meet with another member of senior management prior to meeting with the CEO. Experience has shown that the people most likely to respond favorably to a service proposal are the individuals who are in direct line management roles or have actual service delivery responsibilities. They are the people with problems that need immediate solutions, and who frequently could make contractual commitments. These managers hold a variety of titles, such as vice president for manufacturing, plant manager, plant superintendent, service manager, customer service manager, product manager, production manager, or human resource director, among others. If you are not working from a lead, place a call to a company's switchboard, identify yourself, and ask who is in charge of production or of the company's service delivery operations. Normally, after a question or two, the operator will be able to identify whom you ought to contact. Spend as much time as necessary on the phone asking for information that will help identify the right person. Be frank and open with receptionists, as they will almost always help. Be certain to ask for the correct spelling of the potential contact person's name along with his or her correct title. Your first contact should be a letter explaining who you are and that you intend to call for an appointment within a day or two. If you are responding to a lead, refer to this connection. If this is a "cold call," introduce your organization and describe the purpose of your intended visit. Your letter should be brief, less than one page, and should say you wish to discuss how your product and service offerings can meet their needs. Within a few days, phone your contact person and ask for an appointment. If he or she seems amenable to your visit, suggest two possible times and dates for the meeting. Avoid asking "What's a good time for you?" since that places the burden of suggestion on the other person and makes you seem less aggressive or assertive. Besides, you want a time that fits your calendar, since you will most likely be making six or eight of these calls at about the same time. In some cases your target client (or his or her secretary) may exhibit resistance to meeting with you. At this point, two activities need to be initiated: first, ignore the nervous discomfort in your stomach, which is natural, and second, begin a mild sales presentation. This will require you to be assertive. For example: Mr. Smith, you sound as if you have very little time to listen to me, but I would very much like your reaction to our new business initiatives, and I will take less than 15 minutes. I think you may be surprised at what we are planning and especially at the level of expertise we offer. I speak for our president, Dr. Jones, in expressing appreciation for just a few minutes. How about it? Can we meet on Friday at 8:00 a.m.? If the answer is still no, then thank him for the phone time, write him a note expressing your hope that he may say yes at a later time, and include your new brochure. Making the First Visit Arrive five minutes early for the appointment, hand your business card to the secretary at the front desk, and explain why you are there. While waiting for your meeting, study any written material lying about. When your target client appears, shake hands firmly while smiling and saying hello. Hand him or her another business card, thank him or her for the time, and begin your presentation. The ultimate goal of all this work and worry is to enter into a contract with a company to sell your products or services. The presentation made to the company contact is the vehicle to reaching a point of offering a written proposal and signing an agreement. Two objectives accomplished during the presentation will lead to the contract: 1. The contact will learn enough about your capabilities to have confidence that you can meet your claims, and 2. You will discover the company's need for products or services. Thus, the presentation both offers and gathers information; in fact, the giving and getting of information should be blended into a comfortable conversation. You should look upon this first meeting as an investigation or probe, where you give information about yourself and your organization in order to get the client to talk about his or her company. The accompanying "Company Call Interview" provides some questions that you may consider using and adapting to your own style. You will find that within a half hour, you will easily be able to cover most of the items if you stay on task (if the appointment was established based on your promise to keep the meeting to 15 minutes, you will need to focus the meeting more tightly). Of course, let the conversation wander into areas that the client wants to talk about and keep it conversational. The conversation should not sound like a list of questions. Upon returning to your office, review your notes and add information into your company file. Note the personal things you learned about the contact person, so that you can use them in the next meeting to build rapport. Also, make a list of the service opportunities and company needs that you observed. Contact the instructor or consultant who will be delivering services to the company, and begin to prepare for the next call. Conducting Follow-Up Actions You will spend considerable time preparing for and making your first call on a target company. Your goals during the initial contacts will be to impress company personnel with your knowledge of their company and with business generally, and with your responsiveness and professional approach. These goals remain important as you move toward securing a contract with the company. Key follow-up activities include preparing for a follow-up meeting, assessing company needs, and preparing a proposal and contract (and, of course, delivering the services required). Experience underscores one phenomenon: no matter how urgent company personnel seem when discussing a project, they will most likely move through the process very slowly. On average, the time from the first call to the beginning of a training or consulting endeavor is six months. While clients will typically move more slowly than expected, you must remain both responsive and patient. It is to your advantage to let them feel as if you are waiting on them. _ The follow-up meeting. Within a day of the initial call, prepare a letter and send it to each of the individuals with whom you met. In a brief manner, offer thanks for the time they provided, make a positive comment about the company, mention your desire to respond to a specific potential training or consulting need, and explain when and how the next contact might occur. Approximately two days after they have received the letter, call the contact person and arrange for the next visit. During this phone conversation, explain what you would like to accomplish during the meeting. Review, in specific terms, your understanding of the nature of the situation or problem you are going to address, and inform him or her that you are bringing your "expert" along to discuss the potential solutions you may offer. Company Call Interview I. Introduction: Getting Started A. Review your company. 1. Product/service overview. 2. Location. 3. Investments made in buildings and equipment. 4. Outreach plan. 5. Current successes or your client list. 6. Information about your experience. B. Deliver your printed material (after your introduction). C. Review and check the information you have gathered about the company. II. The Interview/Probe A. Learn more about the company's products or services. 1. Ask about the production process, how it is operated; ask for a tour of the facility if it is allowed by company policy. Learn as much as possible about what employees do. 2. Ask how quality is controlled, whether it is done during the process or after the product is created. 3. Get a feel for the numbers of employees involved in different parts of the company and in different parts of the production process. 4. Without necessarily asking directly, try to determine whether the company is growing, stable, or downsizing (different types of opportunities or services are needed in different company environments). 5. Ask what has an impact on the company's success: competition, the economy, the success of its customers? B. Try to learn a little about the person you are interviewing. Discover both professional and personal information so that you can build a good personal relationship. C. Listen for indications of problems or situations where your services might help. 1. Is the company buying new equipment, starting new production processes, or going through production changes? 2. Does the company have a high turnover rate? 3. Is the waste percentage too high? 4. Are its customers making new and higher- quality demands? 5. Have new people been hired recently, or have operators recently been promoted to supervisory roles? 6. Is the company subject to new or more stringent government regulations? 7. Without asking directly, discover what type of relationship exists between management and the union if the company is organized. 8. Ask how people are promoted and whether new skills are required. 9. Ask if operators' manuals exist for the machinery. 10. Discover how employees are evaluated and rewarded. 11. Ask a similar series of questions about the company's suppliers. D. Ask about employee training and development currently conducted by the company. (This step applies only if you deliver consulting and training services.) 1. Discover what skills, knowledge, and procedures are needed and taught to new employees. 2. Have task analyses been conducted for jobs? Do job descriptions exist? 3. What basic skills are required by employees at different levels (reading, math, problem solving)? 4. Ask who does the training, where and when it is conducted, whether it is a formal process or done informally on the job. 5. Discover if there is a training budget, or if any resources are dedicated to development. 6. Ask if outside vendors have been used for training. Lately? How successfully? III. Closing the Interview A. Quickly review with the client some of the key information you have discovered. 1. Be complimentary in most of your comments. 2. List the areas you have noted as possible sales opportunities or consulting needs. Be specific. B. Ask if you can return with a technical expert or consultant to spend time analyzing and assessing specific problems. Set a tentative date. C. Explain the process you follow to consummate a sale or a contract. Even though you have an informal agenda for a follow-up meeting, it is useful to remind yourself that all your activities are still sales-oriented. You are attempting to capture a contract to perform a service you are qualified to deliver or provide a product the company needs. It is quite possible that the company may also be talking to others about the same problem or product/service, so you should assume that you are working against a competitor. Whether or not you are is not important, since the assumption that you are competing will make your performance better. Agenda for a Follow-Up Meeting _Opening: Have all parties introduce themselves and identify the roles they play within the company, and the roles each will play at the meeting. _Review the purpose of the meeting. _Describe the company's needs based on the information gathered at the first meeting, and continue discussion until you believe you know all that is necessary. _If you are using a technical assistant, have your person introduce himself or herself with a short prepared statement, followed by questions and answers. _Continue discussion of the problem or situation to determine if further study and assessment are needed or, if not, to suggest solutions. _Spend adequate time having company personnel describe their goal for your service activity. In specific terms, they should describe how the situation will be different once the contract has been filled. _If further assessment is needed, discuss how that is to be accomplished and when. _Conclusion: Summarize the points of consensus and clarify who will do what as the next step. _If permissible by company policy and if time permits, tour the plant to help complete your education about the company. This meeting should occur at the company so that your consultant can observe the situation first hand. Because the meeting is being hosted by company staff, they may feel compelled to chair and conduct the events at the table. That is not a cause for concern, because company staff probably will be trying to accomplish much the same agenda. You may still introduce the topics that you need discussed sometime during the proceedings. You may also, tactfully, accomplish some of your agenda by asserting yourself. For example, early in the meeting you should turn to your colleague and request that he or she provide an overview of appropriate past experience and education. You may consider using the accompanying agenda during the meeting so that your objectives are reached. Following the meeting or the tour, find a place where you and your technical person can spend a few minutes debriefing each other. Review your notes, adjust any differences, and make plans to accomplish the next phase of the program. As a service provider, you help companies prepare for and manage change. The first step in preparing for and managing change is to know what to change. A significant part of the conversation with a potential client should be devoted to clarifying his or her expectations, and ensuring that the client's and your own expectations are aligned. You and the client must come to an understanding of the client's problem, your expertise, the cost of the proposed program, the time needed to complete the project, and the expected results. A surprising number of companies are clear about their needs. After a meeting or two they are able to provide enough information for you to prepare a proposal complete with objectives. This certainly shortens the time frame and facilitates the design of project activities. It also places the company personnel in a good position to evaluate your services fairly, since it is clear, from the outset, what the desired outcome is to be. Some company staff, however, are unable to see the relationship between the problems they are experiencing and the impact that your services might have. They want a problem solved; They do not realize the problem may be training or work process or labor-management related. In such a situation, if the company is interested enough to cover the expenses, a formal needs assessment should be conducted. _ Conducting a needs assessment. Significant change should be based on an assessment of the company, and the assessment should be used to develop an action plan for change. The ideal action plan should include specific change activities, timelines, and measures for evaluating progress. Small and mid-sized businesses often lack the "intellectual capital" needed to conduct a comprehensive assessment. You can add value by using an assessment to clarify the clients' problems and identify practical solutions. A needs assessment is used to gather data about a person, process, or environment in order to make a judgment about performance, efficiency, and usefulness. Conducting needs assessment programs is not an exact science. For reasons that include both cost and time factors, the assessment process is never fully complete or comprehensive. You do as good an assessment as time and resources permit and get on to the design of a solution. A generic process for conducting a needs assessment is described below. Step one: Obtain a good overview of the company. During your initial discussions with the company, you should have sought several pieces of information that are basic and critical to assessing the company's process or procedures. These include: _ The company's ultimate goal for seeking to change the current situation; _ How the company normally has handled issues in this area; _ The nature of the company's production systems; and _ The needs of individual employees. Step two: Choose two or three approaches or methods to assess. The dozen or so methods for assessment fall into three categories: 1) analysis of existing data; 2) communication/interview activities; and 3) surveys and direct data gathering. Each of these methods has its strengths and weaknesses. _ Analysis of existing data. The type of data typically available in a company includes quality reports, job descriptions, incident reports, production records, and employee appraisals. Obviously, since the information already exists, using it will not require you to collect original data, and can save you time and resources. The most substantial benefit of this assessment approach is that it generally requires very little interaction with personnel, which avoids both potential disruptions and "queering" of the data. It is possible, though, that the best information to illuminate the situation or problem has not been collected. The best course of action is to see what does exist, and determine if it answers the critical questions, before looking at alternative data gathering processes. _ Communication/interview activities. Various individual and group formats will enable you to communicate directly with the individuals involved in the process you are investigating. Interview activities are a time-efficient assessment approach because they can be done almost immediately after choosing the questions you will ask. The greatest single advantage of this approach is that you may find unanticipated data that will move you closer to the real cause of the problem and cause you to change your focus. Good interviewing techniques help the interviewee explore all possible answers to questions while presenting the interviewer with the opportunity to probe. The downside of interviews is the chance that you will get biased or incorrect information if the people you are interviewing want to resist the process. You will also end up with more information than you desire and from many areas that are of little use, since some employees will use the communication to air "gripes" and personal opinions. This data is also the most difficult to quantify as you attempt to reach conclusions or predict behavior. _ Surveys and direct data gathering. You can use a wide variety of instruments available on the market to collect facts from personnel in a formal and quantifiable manner. Usually the instruments come in the form of a booklet and response sheet that can be analyzed to provide clues for training or consulting. These instruments are valuable to the degree that employees surveyed are open and honest. They are especially useful in discovering the prevailing attitudes and climate within a department. Another method that fits within this category is direct observation of employee performance on the job. This is useful when duties and tasks are easily identified and described, but is difficult when a job requires more reasoning and communication. Choosing the best assessment method is easiest when your goals for the project provide criteria for reviewing the methods. In most cases you should choose more than a single approach so you can compare results as a validity check. Criteria For Selecting Data Collection Methods _Time available for conducting the assessment, including how quickly the entire project must be completed. _The involvement, motivation, and interest required and available from management and employees. _The cost of the process both in lost production and actual expenses incurred. _The type of information required for the problem. _The validity and reliability of the assessment process in producing information good enough to base decisions on. Step three: Collect the data. To ensure the best possible data collection, announce and explain the project ahead of time, and provide a chance for those involved to ask questions and receive answers. Enlist the support of all groups (management, mid-managers, union, supervisors, etc.) with a promise to share the results. Plan to conduct the assessment in a structured and organized manner to minimize the disruption of normal activities. Post explanations of how the assessment will be accomplished, who was chosen to participate and why, and what assessment results will be used for. Be sure that the sample of information you take is large enough to represent the whole department or group you are studying. Keep accurate records of how the assessment was conducted, noting any problems or distortions that may affect the results. Finally, conduct the assessment in exactly the manner you have announced, for any change will cause anxiety and possibly distrust. Step four: Analyze the results and make a recommendation. The goal of the analysis is to describe, in specific terms, the deficit situation or problem, and the activities that will improve the situation or address the problem. These activities will become the content of your proposed project. If the processes you choose to investigate client needs are appropriate, this last step will require only that you organize the data to support the obvious conclusions. If your choice of method was not on target, you will struggle with this step until you conclude that another assessment method must be applied. Success requires you to continue working the client relationship. Keep your ears open when on site, constantly inquiring, providing feedback, and addressing problems as they emerge. You need to continually assess your services to ensure that they remain on track and retain company support. Keys to Success _ Build relationships with companies before you try selling to them. _ Preparation, preparation, preparation. Learn as much as you can about a company before contacting it. _ Determine the most appropriate person in a company to contact, and present your sales pitch to him or her. _ Use visits with companies both to highlight your skills and services, and to learn more about the companies. _ Use follow-up meetings to determine the customers' goals and define the scope of work. _ Use the least costly and invasive needs assessment that will yield the information you need. Monitoring and Improving the Market and Customer Segmentation Process Tom Tuttle, Maryland Center for Quality and Productivity Critical Components _ Using performance measures As with any other key business process, the market and customer segmentation process can be subjected to process improvement activities. Improvement requires you to identify, track, and analyze key performance indicators, and define and implement improvement steps as appropriate. The performance of the market and customer segmentation process can be assessed using a variety of performance measures. Some of these, with their purposes, are listed below. Using Performance Measures _ Number of clients contacted on cold calls that request a proposal / Number of cold calls made. This indicator can provide information on the effectiveness of your market segmentation and product matching activities. The higher this percentage, the more effectively the process of matching products and services to market needs is working. If this ratio is low, it suggests that the process of qualifying prospects is not leading to a good "fit" between your offerings and the needs of potential customers. It could also suggest that you are visiting the wrong contact person within the firm. _ Number of sales calls that are based on leads / Total number of sales calls. This measure indicates the percentage of sales calls that are the result of a lead (vs. those that are not the result of a lead, i.e. "cold calls"). One would expect that the ability to convert sales calls based on leads would be greater than that based on cold calls. Thus one explanation for a low-yielding sales process would be that it relies to too great an extent on cold calls. More effort should be placed on developing leads. _ Number of sales calls that lead to a sale / Total number of sales calls made. This measure indicates how well the entire process is functioning. It might be called the "yield" of the process. In general, the higher the ratio of successful calls to total calls, the more effective the process. If this ratio is low, you need to determine which aspects of the process are failing to perform. _ Number of solicited proposals submitted that are accepted / Number of solicited proposals submitted. This indicator assumes that a successful sales process leads to a client request for a proposal. The indicator measures the proportion of these submissions that are accepted. If the yield is low, there are a number of possible causes. First, your prices may be too high. Second, your proposals may be based on an inaccurate understanding of clients' needs. Third, the clients may have concluded that the capabilities you offered were not as strong as those offered by the competition. Fourth, your proposals may be fine; the clients are turning you down for internal reasons. Perhaps a contact person could not "sell" the idea internally, which would suggest you need to make future calls to higher level managers. Or it could be that a firm chose not to proceed with the project for any number of reasons you can't affect (e.g. budget cuts, redirection of priorities, etc.). You will need additional data from clients to determine the real cause. In this situation, request debriefing meetings with the clients. _ Number of contacts with potential clients (this month) / Number of contacts with potential clients (rolling average of past six months). There are two ways to increase sales: one is to increase the yield, and the other is to increase the number of contacts. This indicator focuses on the volume of client contacts, or the latter method. To a large degree, sales generation is a numbers game. Even the best sales process will not close on every contact. If your yield is good (20 percent is considered good), you may need to increase your number of contacts to improve sales. This indicator shows the volume of client contacts and helps ensure that you continue customer interaction on a planned and regular basis. _ Number of sales made / Number of contacts with customers to whom sales are made. This indicator deals with the productivity of the sales process. It assesses how many contacts, on average, are necessary to produce a sale. Since it is possible to develop an estimate of the number of hours involved in a contact (e.g. preparation time, travel time, meeting time, follow-up time) this indicator could be expressed as Number of sales made / Number of person hours spent in selling activities. If, for example, it takes an average of five contacts to make a sale, you should ask "How can I cut this to three contacts per sale?" Cutting the number of contacts from five to three would result in a 40 percent gain in productivity. The time "freed up" could be applied to more sales calls, or could be converted to billable time. _ Dollars of sales revenue obtained / Dollars spent to generate new business. This financial indicator is a useful measure of the cost of obtaining new business. In addition to demonstrating marketing efficiency, this measure could guide decisions about the types of business to pursue. If this measure is calculated by customer segment, it can help you determine where to focus your marketing, sales, and promotion investments to get the greatest return. This indicator must be interpreted with judgement, since the cost per dollar of sales generated may be greater when entering in new markets than when operating in markets where you are already well established. On the other hand, as markets mature and decline, competition for a shrinking market may become intense and the cost to generate a dollar of sales in an established market might actually rise. The indicators described above can be easily calculated if you keep basic records regarding sales calls, proposals, and sales made, as well as financial records. The importance of documenting your processes and capturing your data cannot be overemphasized. Unless you capture basic data on the marketing process, there is little opportunity for process improvement efforts. Without systematic efforts to improve this process, you will have difficulty generating or maintaining success. With systematic improvement efforts, you can continue to reinvent yourself to maintain relevance and perform successfully. Conclusion Stephen M. Mitchell, National Alliance of Business "Gearing all the activities of a business to be responsive to customer or user needs -- a simple but meaningful description of what marketing is all about." B. Charles Ames and James D. Hlavecek The National Workforce Assistance Collaborative's mission is to build the capacity of the service providers working with small and mid-sized companies in order to help businesses adopt high-performance work practices, become more competitive, and ultimately advance the well being of their employees. For you to help small and mid-sized companies, the services you provide must address the needs of these firms. This manual was designed to enhance your ability to better achieve this alignment of services with customer needs. The systematic market and customer segmentation process outlined in this manual highlights a number of key principles and lessons in the marketing literature4: _ Effective marketing involves the development of programs and services to address specific market segments, i.e., customer groups with common needs and concerns. The end point of this segmentation is direct contact, dialogue, and involvement with individual clients. This will allow you to recognize, acknowledge, appreciate, and serve the interests and needs of selected groups of customers whose individual identities and profiles are known to you. _ People buy products and services in order to solve problems. Products and services are problem-solving tools. One of the classic illustrations of this line of reasoning is the recognition that people do not buy quarter inch drill bits, they buy quarter inch holes. Being customer-driven requires that you determine what problems you can solve for each customer segment. _ "To create betterness requires knowing what customers think betterness to be."5 You have to determine the attributes customers use to judge your services, and then assess your performance relative to those attributes. Attributes Affecting the Evaluation of Service _Reliability -- the ability to perform the promised service dependably and accurately. _Responsiveness -- the willingness to help customers and provide prompt service. _Tangibles -- physical facilities, equipment, and appearance of personnel. _Assurance -- knowledge and courtesy of employees and their ability to convey trust and confidence. _Empathy -- caring, individualized attention provided to customers. _ If marketing is seminally about anything, it is about differentiating what you do and how you operate from your competitors so that customers come to you. All else is derivative of that and only that. You have to make your organization distinctive, to make it stand out from the rest in a manner that appeals to your customers. This requires two types of analysis: an external analysis of other providers (a competitive analysis), and an internal organizational analysis. _ One of the fundamental lessons of marketing is that customers buy "hopeful expectations," not actual things. In other words, customers respond favorably to the belief that you will address their needs and concerns. You can use three different types of contact with customers to establish these beliefs: _ Communication to create an image or build awareness. _ Reaching out to get in touch with prime prospects and potential customers. (The ideal here is to identify who and where your prospects are even before they know they are prospects.) _ Interaction with customers once you know them by name and address. At this point, you want to create a dialogue with the customer in order to establish a relationship. _ The management of relationships requires creating and constantly nurturing systems to manage, maintain, and enhance the relationships. You can avoid trouble and enhance your standing by recognizing at the outset that managing your relationships with customers takes more than good marketing -- it takes special attention to what uniquely characterizes a relationship: time. _ The fundamental lesson of this manual is that customer-driven providers should be skilled in market management. You must understand and use the marketing concept, demonstrate the ability to make the tough decisions, and insure effective implementation. This manual has provided the foundation for these accomplishments. Appendices National Workforce Assistance Collaborative Advisory Groups National Workforce Assistance Collaborative Products and Services NATIONAL WORKFORCE ASSISTANCE COLLABORATIVE ADVISORY GROUPS [Pull from Cost Effective Services.] NATIONAL WORKFORCE ASSISTANCE COLLABORATIVE PRODUCTS AND SERVICES [Pull from Cost Effective Services.] 1 Robert H. Waterman, Jr. 1993. The Renewal Factor. New York: Norton. 2This section draws on Terri Bergman and Barbara Kaufman, 1995, Business Assistance Note #1: Meeting the Needs of Small and Mid-Sized Businesses, Washington, DC: National Workforce Assistance Collaborative. 3Primary data is information collected directly by your staff. It can be collected through surveys (mail or interview), informal visits, or even conversations with colleagues. It is original, and you control its type, quantity, and analysis. Secondary data is information that has been collected for some other purpose, and often comes from sources that are in the business of collecting, analyzing, and selling it. It is often published, and generally not tailored for you. 4These lessons draw on the work of B. Charles Ames and James D. Hlavacek. 1989. Market Driven Management. Homewood, IL: Dow-Jones Irwin; Theodore Levitt. 1986. The Marketing Imagination. New York: Free Press; Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry. 1990. Delivering Quality Service: Balancing Customer Perceptions and Expectations. New York: Free Press; Stan Rapp and Tom Collins. 1987. MaxiMarketing. New York: McGraw Hill; Stan Rapp and Tom Collins. 1990. The Great Marketing Turnaround. Englewood Cliffs, NJ: Prentice-Hall. 5Levitt, op. cit.