Part 3: Target Segments
Position on the Matrix
Capsule: You should compare the percentage of your Company’s sales made to the industry’s larger customer segments to that of the industry as a whole. If you are one of the top competitors in the market, you should have a better than average mix of your sales with these customers. If you have a medium to low market share in your industry, your customer mix would be more strongly tilted toward the Medium and Small customer, sometimes a weak position.
You assess the Company’s positioning on the size/role segment matrix. You would like to know whether the Company’s customer size mix and its role positions with customers are as good as the best in the industry. (See Perspective: “If Whitey Ford Ran My Company.”) You would also like to know whether your customers are growing as fast as those of the best in the industry are. These analyses pay particular attention to the performance of the Company in the Primary and Secondary role relationships with the Very Large and Large customers, the Heart of the Market. (See Symptom: “Large customers are getting higher discounts.”) These segments dominate the industry’s volume.
Position on the Matrix Questions
- How does the Company’s share of sales by customer size compare to that of the industry? (Analysis 6)
- How does the Company’s total volume by position on the market’s size/role matrix compare to that of the industry? (Analysis 11 and Analysis 12)
- What is the Company’s average growth rate by customer size compared to that of the industry?
If these analyses reveal weaknesses (See Perspective: “The Two Best Consultants in the World“), you may wish to pursue them further to expose the reasons for any weakness and to project their implications for Company performance.
- Why is the company below industry average in sales to the industry’s key market segments? These key market segments are the Heart of the Market, the Primary and Secondary roles with the Very Large and Large customers.
- Why would the Company’s customers be growing more slowly than their peers would?
- If the market position remains unchanged, what might the Company expect for growth and market share in the next few years?
A higher-than-industry proportion of sales with the industry’s Medium and Small customers may be a sign of Company weakness. The term weakness may not be appropriate in some cases where you find yourself with stronger positions with Medium and Small customers. You may have chosen to concentrate on these customers as part of your strategy. (See Perspective: “Rare Mettle: Gold and Silver Strategies to Succeed in Hostile Markets.”) If so, you must consider, in the rest of your strategy development, how you can defend this position against your larger competitors. If you have not chosen this customer mix, your Company is in a weak strategic position.
If you find that the Company is doing well on these measures, then you should ensure that you understand how to protect this position as you review volatility in the next section. On the other hand, if the Company has performed poorly, you would like to improve your position on the matrix. In order to do that, you must understand where you might exploit the negative volatility of your competitors and reduce your own.