Targeting residual sales value
How to target and win easier and more secure sales often requires clarification as to where residual value is in the market.
Here we look at how to identify and target residual value so that your competition does not respond or even notice what you are doing.
How to hunt without getting hurt
Imagine you are a member of a tribe and you are a hunter. Your task is to go out and bring back meat for your tribe and your family. Down the road is another tribe. They keep cattle and don’t go hunting.
You have a choice. Go into the woods and seek out wildlife or steal cattle from the tribe down the road.
If you choose to hunt in the woods then impact on the tribe down the road is negligible – unless they lose all their cattle due to disease or whatnot, they will likely not compete or encounter you in the woods. If you decide to go for their cattle then expect a reaction.
Welcome to the concept of targeting residual value in the market.
Think of residual value as that part of a market that if taken by you, the removal of this previously available value will have little or no consequence to actual or potential competition in the short to medium term. In our analogy, that would be the rabbits, rats and aardvarks in the woods waiting patiently to be your dinner.
Residual or available value may exist in a market for a number of reasons. A few are outlined below.
Fast growing markets
In fast growing markets, residual value is available because demand is not yet being fully satisfied by supply. This means that if you take any of this value as your own then currently existing competition doesn’t care because it’s already busy coping with what it already has; or is easily picking up value it currently wants. It’s like two tribes hunting in the woods that has plenty more game than anyone could hope to eat.
However, because activity chases the money, then capacity through existing player investments or new entrants will evolve to soak up available residual value.
You are then in the hurt zone. And zero sum. If you win market value then competition will notice the hurt and respond. If competition win then you are hurt and you will respond.
Specialisms
If you are the only supplier capable of satisfying demand then you cannot hurt anyone because there isn’t another tribe to hurt or respond to the hurt. Just keep on eating the cattle you have raised and don’t bother anyone.
Brands
Effective brands go some way to protecting owned value in the market. It’s a bit like the tribe down the road having a huge electric fence around a field containing their cattle. A fence that is so powerful that it keeps you out. Rather than sucking up a bad experience through tackling that fence, it’s just easier to go hunting rabbits in the woods.
Seeking new residual value
Stalking out happy hunting grounds is likely a prerequisite to being a capable hunter. In business world and from the perspective of product marketing, this usually means one of two things.
- Evolving a product or brand through proposition to be more capable of hurting competition and defending against competitor reaction: in the tribe analogy this means taking cattle from the tribe down the road using that contraption just invented by your tribe called a gun.
- Discover or even create a new sector containing residual value then seizing it with a new or evolved product or brand. Depending on the circumstance, you would likely have to be fast and firm to gain and establish a strong foothold on the new value. Otherwise, you will be back in the hurt zone quicker than you planned.
Captive residual value
There is residual value within a market that already has your name on it and taking it does not affect competition. This is additional value already owned by you and for some businesses, it’s hidden in plain site.
Three obvious examples of captive residual value are repeat purchases, consumables to service your previously sold products and aftermarket maintenance or service. No one else needs to know or can easily discover what goes on between you and your existing customers: customers that are in essence already your property.
In the tribe analogy, this would be the cattle owning tribe undertaking a breeding program and creating additional value through the production of calves. Additional value that is not the business of any other tribe but them.
Targeting clever
So what is the take away from this?
To increase your chances of winning a decent return on your efforts then first consider the concept of residual value in your chosen marketplace.
What is out there: how easy is it to get and who if anyone are you going to hurt.
If you are going to steal cattle then make an assessment as to the likely reaction from hurt competition and have a good plan as to how you are going to deal with their attempts to get it back.
How hurt the competition will be is likely to depend on how focussed they are on the product sales or customers now missing, the lost contribution (or loss) to profit and the impact on the potential they had in mind for that product or those customers.
On a few occasions, competition might even be relieved to be rid of a product, product group, sector or even customers– but that opens up a whole new range of questions such as to why are they relieved.
Executing a residual value assessment to determine which plan to evolve and embark on will enable you to reach for easier sales and lower competitor reactions. This should mean a greater chance of stable profit and an increased chance of growth due to the reduced risk of market disruption.
If you are in a more mature market where residual value is low or non-existent then a serious look at captive residual values could provide new growth opportunities and even new revenue streams.