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Market Selection Strategy Vs. “I Think”

Todd Bergey
Todd Bergey President

In a recent article, I discussed how to better understand what your data is telling you, which leads in to the important topic of market selection.

Do you currently have a process and criteria that you use to segment markets to inform you and your team as you develop a marketing plan (i.e. Core, Opportunity and Expansion market segmentation)? If so, have you established a strategy for each market segment as it relates to advertising investment?

Why is this so important? Let’s keep going.

We’ve all participated in meetings where the sales and marketing teams tell each other where they think they should invest the brand’s advertising dollars – the proverbial, “I think we really need to hit Charlotte because we have big opportunities there” or “I think we’re wasting money if we feel like we could pick up more market share in Houston.” As often as not, these statements are simply based on strong opinions, impressions, or previous campaigns. But, are they true?

Charlotte may offer some big opportunities for the brand and we may have reached a saturation point in Houston, but these statements (not the individual) should be vetted through a pragmatic look into the data. Based on the data, where would Charlotte and Houston fit into your market segmentation — and why? Choosing to let the data do the “thinking” removes the inherent (and very real) pressure to develop a plan based on the title, last name, or years of experience of the person who thinks one way or another. This is more easily said than done, but it is extremely important for developing a plan that is created, calibrated and executed for success.

One of the first steps of a market segmentation strategy has to be opportunity based on dollars (most execs at the end of the year are not calculating success on velocity, it always comes back to the dollars). This is easily done by noting the total category sales in a market, calculating how much each percent of growth would be worth, and determining what percentage your brand has of the total sales.

Why is this important? Total sales in a category by market tells you what the consumer thinks about the category and the products or brands in the category. Many CPG categories, if not all, are deeply affected by over half of their consumers switching back and forth between multiple brands. Evaluating how you will maintain those you currently have or how you can pick up 3-5% in a market is vital. Consumers in Houston may vote very differently with their dollars than consumers in Charlotte in the same product category – total category sales can give you that level of insight.

Understanding how much each percentage of growth is worth (and what you predict that you will need to spend to gain a percent of growth) can really tell you if there are big opportunities in Charlotte – if one percent of growth in Charlotte is worth $37,000 or $370,000. This should speak volumes to the team. Forecasting a 5% growth for your brand could mean as little as $185,000 (5 x $37,00) or as much as $1,850,000 (5 x $370,000).

In Houston, the percentage of the category that your brand has, tells you if you are wasting your dollars in Houston. If you are 20% of the dollar sales in a well-established category, and the brands against you are firm in their share of the market, it may be very costly to pick up one percent of growth – and factoring in what that one point of growth is worth, would be the kicker in making a final assessment.

Now we are just getting started (by no means is total category sales the whole story) on how just a few points of data can really speak volumes to your market selection strategy. Here are a few quick questions to consider:

  1. What process do you have in place to validate “I think” when working through a market selection strategy?
  2. What data are you using to help inform you and your team?
  3. What qualifies a market as a core market, how do you define an opportunity market and where do expansion markets fit into your mix?
  4. Is your market selection strategy being driven by the sales team, marketing team, or both?

I’ll end with a great quote, “measure twice, cut once” — numbers don’t lie. Taking the time to verify and validate the data that you have before you execute is very important and can be the deciding factor in the success of your marketing plan.

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