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One “small data” about our clients that we need to know … and rarely have!

Management Consulting, Training, and Coaching

One “small data” about our clients that we need to know … and rarely have!

A few months ago, I had published on LinkedIn (in Italian) a short article on the usefulness of the so-called small data vs. the increasingly “fashionable” big data (https://www.linkedin.com/pulse/big-small-data-giorgio-gandellini/): the latter are obviously useful and relevant in many industry sectors, but the problem is that most companies, especially the smallest ones, do not even have all the basic data about their clients that it would be important to have, and that could greatly enlighten their clients’ profiles (photo Eva Gandellini Viazzoli).

Too bad that SMEs represent the large majority of companies worldwide!

I am referring, in particular, to:

  • companies in B2B industries that have (or could have) direct contact with the users of their products or services
  • industries in which clients purchase multiple units of a given product or service during a given period (normally, a year), for which it makes sense to estimate the degree of penetration of the suppliers on a given client (i.e. the extent to which the suppliers satisfy the overall client’s needs during the period).

Similar considerations, in principle, could be applied to companies that use intermediaries such as distributors or retailers, in any industry sector, but in this case, the meaningfulness of the data I am going to talk about would be significantly lower.

I guess you already found out that I am talking about an estimate of the client’s potential.

Assuming that we have a sufficiently clear idea of the specific client’s need that our product or service is able to satisfy:

  • how many units of similar products or services does our client need to use during a given period?
  • are we entirely satisfying his or her needs (penetration of 100%), or our sales only partially cover these needs, since other suppliers are contributing to this objective?
  • what has been the trend of our penetration in the past, and what do we expect it to be in the future?
  • what could or should we do to maintain or improve this trend?

Obviously, it’s practically impossible, in most cases, to be precise, but who cares? The important thing is to have an idea of the relative potential of our clients and classify them based “also” on this important variable.

Ideally, we should attempt to do the same also with prospects, trying to infer their relative potential from the observation of other variables (for example, through the analysis of their web site), such as specific industry sector and type of target clients, size, seniority in business, degree of similarity with our current clients, etc.

These assessments could be even more difficult and complex in the case of durable goods (for example, tables or chairs for restaurants), in which we need to estimate the potential in terms of “installed base” of products and their degree of technical or commercial obsolescence, knowing that future sales could come from the acquisition of entirely new users, additions to the current installed bases, replacements of obsolete products, or a combination of multiple sources with the same client.

However, the availability of this type of data is largely worth the effort of estimating it: combined with the estimate of the number of clients we are able to reach in a given period of time, we will have a much better idea of our “actual” and reachable market, our coverage and penetration, and, therefore, a realistic and meaningful assessment of our market share and its trend.

Some so-called marketing experts say that market share is not any more “fashionable”, as I pointed out on other occasions, and that the only important thing is profitability. This is pure bullshit!

Market share (i.e. to which extent are we able to satisfy the market in any given product/market combination?) is one of the major prerequisites for correctly reaching, managing, and maintaining profitability, and this indicator is therefore important also for SMEs, provided that they focus their attention on the “pertinent market”, i.e. the market that, given their resources and sales organization, they are able to get in touch with.

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