Researching the Customer Environment
Market Research
April / May 2010
Volume 8 Number 2
Entrepreneurs with industrial, high-tech products have fewer potential customers than companies with mass-market products. Having fewer customers can be easier to deal with, but having fewer customers also means that learning about each one, or at least categories of them, is necessary for sales success once you launch your product. Part of your market research should be devoted to this research—before you embark on sales—to ensure this success.
At a minimum, you will need to research budgets and fiscal years, operational details, influencers and purchasing processes.
Budget information will help you determine if a potential customer’s income and expenses will allow some wiggle room for your product. If some of your potential customers are public companies, you should be able to get their 10-K reports (www.sec.gov). This isn’t an actual budget; rather, it’s a record of past revenue and expenses, as well as industry information that may help you spot up or down trends. From there, you will need to contact some individuals at the potential customer sites and ask more detailed questions about their budgets. You are not likely to get any specifics, but certain questions can get to some of the information you need. For example, if the company’s income has trended up, you might ask if it is planning to replace any equipment in the coming year. What kinds? Is there sufficient money budgeted for those capital purchases? What kind of return on investment (ROI) does it require? If a product proves to meet or exceed the ROI, is there an opportunity for a sale? If you are dealing with a private company, you will probably not find an annual report or budget, but you might be able to find revenue information from databases such as D&B Million Dollar Database, Reference USA or even sometimes Hoovers.
Many companies operate with a fiscal year that mirrors the calendar year, but don’t bet on it. If you are attempting to sell a piece of equipment at the end of the customer’s fiscal year, there will probably not be enough money to cover your equipment and chances are good that the customer has already developed its next-year budget.
Operational aspects is a big item and one that should not be overlooked. Assuming you have identified the industry need for your product, it is imperative to learn as much as possible about how your products or service will be used by potential customers and what they might have to do to accommodate them. If it’s difficult or costly to incorporate or maintain in their current routines, they might take a pass. Likewise, if your product replaces union workers, that might not be possible. Does it really meet or exceed the industry need in terms of savings, efficiency, or whatever the industry need is that you are trying to solve? To ensure your understanding of the potential customers’ operations, you need to ask questions of the direct users and of management to determine how your product may best fit and whether any enhancements of your product may be necessary.
Influencers is a tough category. What really influences purchase decisions? It will likely differ from company to company. There are internal and external people and factors influencing purchasing decisions at industrial companies. Internal influencers comprise users, purchasers and executives, at a minimum. ?External factors influencing purchasing decisions include trade journals, industry analysts, customers and competitors.
For the internal influencers, you will need to talk with a number of people at all levels. People who may be considered users of your product should be able to tell you the benefits they would derive.
Purchasers of industrial technology products may get recommendations for equipment purchases. The influencers on these recommendations may be users or executives. Cost may be a consideration. Vendor relationships may influence decisions. Your job is to try to ascertain the source of the internal influences and position your product accordingly.
Executives sometimes get involved in purchasing decisions. What makes them decide to get involved? In some cases, they are driven by the competitive landscape and their desire to be seen as leaders in the industry. But where do they get their information? Much of it comes from external sources.
Different levels of people may get their industry knowledge from different sources. Mid-level managers may be more likely to attend trade shows, and executives may be more likely to read trade journals and talks with industry analysts. Find out which trade journals and shows are favored. Trade shows often list the previous year’s attendees and exhibitors on their websites; this information can help you source the types of outside influences and the marketplace messaging.
Yes, the task of learning about the customer environment can be daunting. Even if you do this for only a few potential customers, think of the benefits: learning information to use in developing sales materials and sales pitches; understanding your competitive advantages; and learning more about and meeting people in your industry.
Betsy Gillette is market research director at Technology Ventures Corp.
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