In this podcast episode, hear from Dave Eddleman, principal at Alexander Group, on how to determine your total addressable market by using opportunity modeling to increase market share.
[00:00:05] Hey everybody. Welcome back and welcome to video number two, sizing the prize opportunity modeling. Dave Eddleman with the Alexander Group and I co-lead the business services vertical along with Mike Burnett.
[00:00:17] Mike and I were talking in the last video about some of the go-to-market trends and mandates that we see in business services, so we thought we’d offer up a little bit more content, a little double click down at some of the sort of prevalent themes that we’re seeing, not all-inclusive of all the work that we do in business services, but certainly prevalent in our project work. So the first one we’re looking at is sizing the prize. That is today’s topic. And then the future two videos, one will be on sales coverage and the other one will be on sales compensation.
[00:00:48] So let’s just dive right into opportunity modeling. I wanted to share our revenue growth model as a context. This is our central framework that we use at the Alexander Group. Really, three areas strategy, structure and management, and the opportunity modeling and the revenue segments is up first. That really gets to how big is the market and to whom we sell. And really a lot of times, why the heck we’re in business? But what’s often lost in translation is the tactical targeting and tactical assignments of accounts and really giving the sales reps great navigational tools and showing them how to attack their markets in terms of prioritize accounts. So that’s what we’re sort of covering today. There’s lots of connections here. You can see a couple of things that we’ve highlighted and that’s again, why we are using these other videos to talk about roles and comp and quotas, because there’s a lot of connections. But this topic has got more than that, especially in terms of sizing and deployment. So once I get all of the accounts assigned, I can sort of figure out how many accounts a rep can take on in terms of a workload model and sizing and deployment, which territories they should be in and so forth. So lots of connections here. But we’re going to start with opportunity modeling and revenue segments.
[00:02:09] So I’ll move on to the first definition that is the TAM, or Total Addressable Market, and we sort of start with that total market “big M” Marketing. Again, sizing of the marketplace. And then the next thing we look at is there’s typically some kind of lockout, some kind of portion of the market that’s not available because competitors own it or there’s some kind of regulatory piece involved or there’s channel conflict or whatever. Then we go to Total Addressable Market or TAM. And this is the part that we care about. And usually we have some salesforce capability that’s got an ability to cover some of that, but hopefully there’s still a lot of room for growth. And then lastly, is current share. So if you look at the total addressable less the current share and most of our clients have been in business for a while, not always. But there’s again, a piece that we own. That delta between TAM and current share is the unrealized opportunity. And that’s what we’re going to be talking about today on how we can sort of attack that unrealized opportunity.
[00:03:10] So how do we do that? There’s lots of pieces to this, lots of data and analytics, but I’m just going to cover it in general, how we look at this world. Internal data, that’s going to be a lot of the historical data and regression analysis on what is the typical profile of an attractive buyer and how we look at that and lots of different ways. I’ll show you in a second and then third-party data. We want to make sure that we buy data. You have the data, we have some data and make sure that we really got that TAM calculated properly. The qualitative insights is usually a mix of looking at historical and again regression analysis versus what we want to be in the future. So usually there’s some adjustments there with our clients and usually in an assignment like this, we’ll have three or four two-hour sessions and say, look, this is the way we see the factors. This is the way we see the elements and we go through this iteration process to make sure we get it right and we also calibrate it. And the analytics part of this is the way we do the stack ranking and the prioritization. I’ll show you that in just the next slide. And then lo and behold, the last thing we come out with is the opportunity estimation. Again, what are the 70 accounts that we can assign to a particular rep? And what is the core tiling or what is the prioritization? Sometimes we use quartiles that size, which doesn’t really matter. But nonetheless, here’s what we have a data-centric way to enable these reps with lists of accounts and reps typically love this because so many of them and the reason we do this work don’t really have that sort of indigenous navigation that they need and want. And as I think I said in the first video, there’s lots of great companies out there really successful, but still don’t have some of the basics behind this opportunity modeling and account prioritization.
[00:05:01] So let’s just look at one of the first things up in analytics, it’s kind of a simple model here, but if you look to the left, you see sort of the universe of potential customers and there’s a whole host of criteria. This is typically something like historical revenue, number of employees, the vertical nature, maybe the products they bought before. There’s usually four or five and we typically try to contain it to four or five criteria that are important that we can regress on and or iterate on. Over here on the right side, you can see that the 0.5 the 0.025, those boxes, those colored boxes to the right, those are the weights that we get to assign against these criteria. And herein with this is where the fun begins because we need to get to decide what criteria are important and what weightings do we put up against those criteria? And then what we come out with is a score. And this is sort of a stack rank score and then we can look at all accounts across this. And again, there’s lots of iterations on this. We do some calibrations and say, Look, we’re not sending a person to the moon here. However, we’ve got a really good data-centric model that’s going to help our reps decide on where to go. And that doesn’t mean reps follow it like a very strict blueprint, but again, it gives them great information and a lot of cases they don’t have.
[00:06:24] So lo and behold, what we come out with is this prioritized list, and in this case, this is from client data. We had 3500 accounts, and I think this is maybe a mid-market segment. It could be any segment could be down market, S&B, whatever, and we’ve chopped it up into quartiles and you can see a total net sales and opportunity. This has got median opportunity and wallet share as well, but there’s lots of, you know, there’s lots of different ways we could take a look at this, but this is what we’re looking for, right? So in this case, where you had 50 reps, 70 accounts per rep, it comes up with about 3500 again, seemingly sophomoric. But getting to this point was was pretty darn important. And that’s where we really want to be. We want to be with this or sort of produced this list and everybody feels good about it. We’ve gained consensus with the design team and this is what we’re going to share with reps to help them sell more.
[00:07:27] So we’ve covered a lot, and there’s a lot of detail behind this level of analytics, but hopefully we have offered up some insight on what you have or what you might want to have in terms of opportunity modeling and account privatization. Just some key takeaways here ensure that reps are enabled with this kind of data and also update the opportunity model in this process at least once or twice a year. It’s not a stagnant model when we build these for clients. And probably the likely next steps or connections that we have with this kind of exercises in the area of salesforce sizing and deployment, trying to understand the number of accounts once we’ve done this exercise sort of fits with the appropriate workload model and also how to assign these into territories and how to deploy sales reps.
[00:08:15] So I hope you have gained some insight and please join us for the next video, which is going to be on sales coverage and job roles.
[00:08:24] If there are any other questions, please reach out to us or go to Alexander Group. And thanks again for joining.
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