Many businesses can draw a pyramid of their customers. As you climb up the pyramid, the average customer spend goes up and the number is smaller. The lowest tier has many small customers. You can define the number of tiers within your business. It is possible that only top-tier customers will be dealt with directly in a 5-tier pyramid. All other tiers will be handled by channel partners.
The pyramid’s purpose is to force suppliers to define their channel strategy for each tier. It must describe eight parameters for each tier in order to do this.
Products
Many businesses offer different products and services to different customers. It is important to determine what products and services are to be sold at each level of the pyramid. This will impact the channel strategy.
Customer Description
Next, describe the end-customers within this tier. Are they service companies, manufacturers, or independent consultants? Are they self-employed, SME’s, or nonprofit organizations?
Number of customers –
It is possible to determine if the sales goals are achievable by knowing how many potential customers are present in the target market. This is a sign that market entry strategies are based on hope and not data. This is not an exact number but rather an estimate of the order of magnitude.
Spend on programs –
Customers with smaller budgets will spend less than customers with larger pockets. We classify them as small because of this. You can define what the “typical program expenditure” is for each tier, regardless of whether you are delivering a hosted service such as Salesforce.com or electronic components such NXP. These two examples might indicate the average number per company that subscribes to Salesforce. This will correspond to the company’s annual revenue. NXP may refer to the average semiconductor spend of a company for each product it develops. As you move up the pyramid, so does the number of programs per client.
Fulfillment and Demand Creation
It doesn’t matter who delivers the product, but you need to recognize who is creating the demand. You may have to generate leads through your website, via Google Ads, mail, radio advertising, etc., but these may be taken up by third-party partners who can then fulfill them. You may also have a partner that does all the lead generation. However, your enterprise software is complicated and needs to be customized, so you might have to close the sale yourself and commission the product.
Sales Strategy
What is your sales strategy? If you have a tier that caters to catalogue distributors like Wehkamp in Germany or Argos in the UK, your strategy could be to provide the product and then support them with every resource possible. It could be that you provide only the minimal support to these channels and then spend your resources building the brand via space advertising, direct mail, and other means to drive customers to catalog resellers. This strategy should be carefully planned and supported by the channel partner.
Examples –
It is essential to identify your target market customers before you invest resources and money into a market penetration. It is not enough to simply describe them using generic characteristics, unless you are in a B2C setting. Names and more than one must be given. About one-in-seven leads will move on to the engagement phase. This is a meeting in traditional sales situations. In distance selling, it means engaging in a two-way dialogue with you via phone, eMail, or the internet. In the short-term, about one-fifth of these interactions will result in a sale.
Conclusion
You need at least 35 leads to close one business piece in the short-term. We’ve seen many situations in which a client has identified 20 target customers in a new market and believes he can close half within the first year. The reality is often disappointment and frustration. Before entering a new market, we encourage our clients to identify at most 50 qualified prospects.
