One of my all-time favorite pictures for motivating creative initiatives to increase revenues focuses on lost market share. Thinking about it is this way can help prioritize initiatives in new product development, sales, and marketing.
I was never sure where it came from until I saw it in this book by Kenichi Ohmae, The Mind of the Strategist – Business Planning for Competitive Advantage.
Add up the sales of all the competitors in your market. That is your total market size. Your portion is your market share. All the rest is lost due to lack of product that matches customer’s needs, or the customer doesn’t have a way to buy (channel not covered), or you actually compete but lose the sale to your competitor. This slide suggests opportunities.
To increase revenue, think about initiatives in five areas:
(1) Product – how much of the market does your product or service address? Initiatives here target product specs (form / fit / function) and expanding the offering to provide the whole solution (including accessories, service, training, etc).
(2) Channel — how often is product/service offered for sale to end user? Initiatives here might address the sales presence in a geography, a customer segment, or an individual sale. Alternate channels (direct sales, partners, internet sales) might provide valuable initiatives.
(3) HitRate — the percentage of wins due to price differentials, technical support, perceived value differentials, delivery schedules, guarantees, ease of doing business, etc.
(4) Price – actually a key factor in HitRate, but it is so important that it is useful to highlight and actively manage this separately. Initiatives might be adjustments to capture value, or new pricing options such as “pay for performance” or “unbundled pricing”.
(5) Market — mostly driven by macro economic conditions and affects all competitors. This is usually outside your control, although some political and legal initiatives would fall into this category.