Too often, innovation is attached to actual product development or new business models. Usually these approaches involve a high degree of uncertainty: They can diversify your business and create significant competitive advantages, or they might die in the market quickly because you have just created a product no one actually needs. (In reality, the latter scenario is the more common case.)
Now don’t get me wrong. We always need to have this kind of thinking, and we must be agile to test new things in a lean start-up context. Because doing nothing is the worst thing to do. Testing products in the market and getting feedback from the customers is crucial for your long-term success.
However, market development — that is, using your existing products for new customer segments — is the growth strategy you should most likely emphasise when you operate with well-established brands and proven products.
Why? Because market development is the strategy that enables you to monetise the low-hanging fruit in the market. It is, therefore, often the easiest way to create new revenue.
In practice, you can easily test your new business potential for market development with a few basic questions based on your offering and sales and market data:
- Is our product portfolio suitable for all companies, big and small?
- Is our product portfolio suitable for all industries?
- Is our product portfolio suitable for companies advertising in different geographical locations, nation-wide and/or local?
If your answer to all above questions is yes, then you should move on to assess your market share in each of your customer segments. You will most probably find segments where you can improve your penetration.
At Sanoma, we conducted this analysis 18 months ago with the following findings:
- Our news print ad products are suitable both for local flower shops as well as national retail chains.
- Our strength lies especially in the Helsinki region, where our reach is the highest.
- However, we suck at the SME segment, where our market share is very low compared to the largest customers.
After concluding we should do much better in the SME segment, we were able to draw up action plans for improvement. And yes, even though our current product portfolio was basically suitable for SMEs as well, we decided to improve our offering for this particular segment.
However, the product development was not in the core of our growth strategy. Instead, the key thing was to reorganise our SME sales functions and bring focus to this potential segment. Now, SME is our strongest performing segment in newspaper ad sales, thanks to market development initiatives.
I encourage you to do a similar assessment within your sales organisation. Innovation does not always mean having fancy new products, but often it is about putting more focus on segments where you have potential to grow. I used the example based on our sales segments within Sanoma, but your segmentation might be totally different (for example, industry-based). Also, creating more accurate sales arguments within different segments might be more effective than launching new products every quarter.
All this sounds rather simple because basically it is. In case you are feeling frustrated and pressured to come up with new innovations for new revenue, take a step back and first assess if there are ways to widen your customer base instead.