Use Data to Set Regional Sales Targets: An Illustrative Example

by   |   January 19, 2016 5:30 am   |   0 Comments

Dan Roberts, Senior Consultant, Cambashi

Dan Roberts, Senior Consultant, Cambashi

When setting regional sales goals, you need hard data to back up your position. Otherwise, you might be setting goals that are unsuitable. Market data allow you to quantify the opportunity. When you know the opportunity, you can plan revenue targets, resources, and investment at the right level to help the team deliver.

To elaborate, imagine a scenario in which a global AEC (architecture, engineering, and construction) software vendor called Imaginary Software is trying to set regional sales targets. This will involve the development of a set of visualizations to support a meeting between the CMO and the three regional heads – America (AMER); Asia Pacific (APAC); and Europe, Middle East, and Africa (EMEA).

The approach is to look at the regional market size and growth from several different points of view:

 

  • Competition. What is the performance of Imaginary Software’s competitors? What will their growth be?

 

  • Industry. What growth is forecast in the vertical market sectors served by Imaginary Software?

 

  • Employment. How many potential users of Imaginary Software’s products are based in each of the regions?

 

Competitor View

In our example, just five providers are the source of competition for Imaginary. The available product group analysis for these five providers is shown in Table 1. The 11 product groups that compete with Imaginary are shown in bold.

ProviderProduct Group
AutodeskAutoCAD LT, AutoCAD Platform, Building, Civils, Geospatial, Manufacturing,M&E Animation, M&E Systems, Other
BentleyBuilding, Civil, Geospatial, Plant
FukuiArchitrend, Bluetrend
NemetschekAllPlan, ArchiCAD, Cinema 4D
RIBiTWO, Civil, Construction

Table 1. Product Groups competitive with Imaginary Software’s business

Selection of the data for these product groups provides an immediate quantitative framework for this market, with both historic and forecast revenues for each product group in each of the three regions. For the goal of this scenario – setting sales targets – the aggregated growth numbers are critical but, of course, the revenue figures for new licenses, maintenance and subscription, and professional services all help trigger insights and understanding of the market.

Competitor Growth

One of the most important factors in goal setting is how much the market is growing (or declining). The forecast regional growths of the selected set of competitive products is shown in Figure 1.

Figure 1. Forecast regional growths of the selected competitive product groups. Click to enlarge.

Figure 1. Forecast regional growths of the selected competitive product groups. Click to enlarge.

 

Imaginary’s marketing objective is to increase market share. This means growing faster than the competition, so the EMEA team will need to beat the 3.9 percent growth of the competing products, APAC needs to better 5.4 percent, and AMER needs to top 7.3 percent growth. If you gave each region the target of growing at better than the global figure of 5.6 percent, then you’d be offering the Americas team a walk in the park, whereas the EMEA team would be facing a serious challenge. What most likely would happen is that you would lose market share in AMER while failing to meet your target in EMEA (as the goal was unattainable), leading to a loss of market share overall.

Industry View

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Remember the scenario: We are preparing data to help the CMO discuss next year’s targets for the regional heads. Their personal goals and bonuses will be based on this data, so it is important to get a second view of the growth numbers. An independent source of qualified and trusted industry sector analysis provides this second view. We have selected 13 verticals to define Imaginary’s AEC sector. The revenue figures for “technical application software EUE” include CAD / CAM / CAE / PLM / GIS / BIM etc. This is a broader scope than the 11 product lines we looked at before (the competitors). This is helpful because if there are differences in the growth pattern for this broader market, then Imaginary’s offer (along with those of its competitors) is either growing or falling in importance compared with the other technical applications software used in AEC verticals.

Even before looking at the growth, the availability of data that divides Imaginary’s AEC sector into 13 sub-sectors drives insights into market opportunity. When you look at the technical applications spend across the 13 sectors, the majority is in the service and consultancy segments, such as architecture firms or civil engineering consultants. This view can help the CMO, the regional heads and, in due course, their sales teams answer the question, “Whom should we sell to?”

Industry Growth

For the purpose of goal setting, we need to look at the forecast growth of this AEC market in relation to the group of competitors we used earlier – see Figure 2.

Figure 2. Regional growths for competitive view (red) compared to industry view (blue). Click to enlarge.

Figure 2. Regional growths for competitive view (red) compared to industry view (blue). Click to enlarge.

 

This shows up some interesting trends:

    • The selected providers are growing faster in 2015 than the AEC sector as a whole – 5.6 percent vs. 4.4 percent.

 

    • This difference isn’t uniform around the world – in EMEA, the difference is negligible, but in the Americas it’s 1.2 percent and in APAC it’s 1.7 percent.

 

For the meeting with the regional heads, this helps put the growth figures in context. Depending on which way they want to argue, they may regard the selected product lines as unrepresentative of their market opportunity because it’s too narrow (different technology, different sales cycle, different decision makers in user organizations). And they may regard the growth of the broader “technical applications” as similarly unrepresentative because it’s too broad. So it may be that the CMO will choose to use these two views as upper and lower bounds of what to expect if Imaginary simply follows the market.

This figure also may prompt an interesting discussion: “What’s going on in EMEA? Why is it that 11 product lines from five providers are achieving better than overall AEC segment growth in APAC and the Americas but are only just about level with AEC in EMEA?” That’s a discussion for another day, but I think I’d expect questions about the 11 product lines. So if this were a real meeting, I think I would create some backup slides – 11 versions of Figure 2 to show each of the 11 product lines separately instead of this single aggregated view certainly would stimulate discussion about successful strategies around the world.

Employment View

The third view of the market is looking at the employment distribution. We can pick the same set of 13 industry sectors as for the Industry Observatory to look at the same AEC market. There are 208 million people employed across the world in these sectors. The majority of these people are in trade, or non-technical, occupations. Imaginary is focused on the 8 million professional engineers in this group of 208 million employed people.

These 8 million are distributed among 16 different detailed engineering occupations (see Figure 3).

Figure 3. Employment in engineering occupations in AEC industry sectors. Click to enlarge.

Figure 3. Employment in engineering occupations in AEC industry sectors. Click to enlarge.

 

This range of professional engineer types might trigger questions that the CMO wants to think about: In what way does Imaginary Software’s offer address the needs of each of these groups? If the existing user base has a different shape, why is that? Which job categories do we truly believe can use the products? Do Imaginary’s marketing materials articulate the offer in terms that will resonate with each of them? Could Imaginary achieve competitive advantage by doing something special for one of these categories?

Imaginary believes that, very often, the person in an account who tends to be the key influencer has an Architect job title. So the distribution of the (approximately) 1.3 million people classified as Engineers, Architects could be interesting. This breakdown is shown in Figure 4.

Figure 4: Distribution of architects in AEC industries by country. Click to enlarge.

Figure 4: Distribution of architects in AEC industries by country. Click to enlarge.

 

It’s interesting that Japan has more than the United States; (potentially understandable – not much land area plus earthquakes probably means more work for architects). But Russia has even more – which may say something about the industry structure in Russia, or possibly the way occupations are classified there.

A headcount is no substitute for revenue numbers. But the point is that if you are seeking some view of total available market and how much more opportunity there is for your software in the world, employment figures give you a handle. You have to be careful, of course – new technology can affect employment patterns, so not all these people will be there as technology automates their jobs. And each country is probably at a different phase of the cycle of take-up of your technology. But one way of searching for unusual things that are going on in the business is to group “similar” countries together – Northern Europe, Southern Europe, Oil States, and so on, adjust for the sales effort you are putting in, then do a calculation of revenue you are achieving per employee in your target sectors. You will get a bit of a range of numbers, but it is definitely worth looking at the best “outlier” countries for a factor that is making them into outliers – then replicate best practices.

Market datasets provide a quantitative framework for business decision making. In this scenario, we have looked at revenue growths. The regional heads know that Imaginary wants to gain share. I think the CMO will be able to convince them that beating the market means different growth targets in each region. Comparing figures based on different perspectives improves confidence in the figures. Here, looking at the performance of competitor product groups as well as vertical industry software spend helps give a feel for the accuracy of these figures. Also, given the context of other products and the detailed vertical sectors, it provides some insight into the hotspots in the market.

Overall, this illustration shows how some well-sourced data sets and a knowledgeable marketing intelligence person can support successful goal setting.

Dan Roberts is Senior Consultant for the research analyst and consulting group Cambashi and is their Industry Segmentation expert.

 Dan has developed several of Cambashi’s robust data analysis reports call the Observatories. He works with IT vendors to ensure that Industry and Employment Observatory data are tailored to each vendor’s specific needs, providing them with insights to improve their strategic marketing decisions. He also helps Cambashi to maintain the associated online industry training courses. 

Apart from tracking the leading enterprise application vendors, he also has a particular interest in e-business and CRM technologies. 

Dan is a member of the chartered Institute of Marketing and holds an MA in Natural Sciences from Cambridge University and an MPhil in Organic Chemistry from the University of East Anglia.


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