Chasing the Market
Nov 15, 1993
We constantly get asked by principals in A/E and environmental consulting firms about what or where the next “hot markets” will be.
It seems that these people have read about market life cycles in the textbooks, and seen the hype about a hot new service or client-type in the magazine and newsletter articles, and have heard the “crystal ball” people talk about tomorrow’s hot markets at their professional association meetings, and finally have bought into the concept that good marketing requires that you start by doing some research to find out where these hot markets are.
For example, we received an RFP recently from a mid-sized environmental consulting and consulting engineering firm asking for a proposal to help them with strategic planning. They wanted us to address the many issues and questions their management was grappling with. One of the questions was: “What is the future of our hazardous waste, environmental engineering, and transportation businesses?”
We’re good here, but not that good. My response was that no one could give them the answer to that question, and if they did, I’d be suspect of it. That ranks right up there in difficulty with trying to predict when and where the second coming of the Messiah will happen.
It all sounds great in theory— why not go where the margins are high and the pickins’ are easy? It can’t be that hard to figure out where the market is, right?
Our experience is that most firms would be better off to think about how they can get a bigger piece of their existing market before chasing off in pursuit of the next “hot” one. There are several reasons for this:
Convincing people they need you (rather than your competitor) when they know they have a need is one thing— convincing people that they even have a need can be much harder. The most difficult task facing any market “pioneer” is to convince potential buyers that this new service is needed. Markets are created by the discovery of the need. For example, firms that are out trying to sell lead paint consulting services in states that do not yet have lead paint laws may have a hard sell in front of them, because the buyers don’t know they need it yet.
Firms who reach hot markets first are the toughest competitors. Maybe this statement appears to justify devoting the resources to finding out where this next hot market will be. But in reality, if you ask most hot market pioneers how they ended up there, they’ll usually admit it was luck or being in the right place at the right time— not planning. Firms who come later (usually led there by a strategic plan that dictated they imitate the pioneers’ success) may find their way blocked by formidable competitors who know their market intimately and are already planning for the next stage.
By the time you find the next hot market, it won’t be hot anymore. This is probably the best reason to stop worrying about hot markets. When a market is hot, the demand for services exceeds the supply available. That’s why fees are good and it’s easy to get work. As other firms find out about the great market, maturity sets in. More and more firms enter the market until the point that supply exceeds demand. Then prices plummet. The asbestos abatement market is a perfect example. I can remember in the early 1980s being able to get fees of 6.0 times raw labor. A couple of years ago, after the market had matured, some firms were working for multipliers as low as 2.0 times raw labor! Hot markets don’t last forever.
Just about any firm can get more mileage out of its existing geographical market, client market sector, or clients. I can’t tell you how rare it is that any company we work with has really made a serious attempt to gather up all of its potential clients and everyone in those organizations in one place. You can’t sell something to someone unless you know who you are trying to sell to! It’s fundamental.
Firms that specialize in municipal work don’t have one list of municipalities, with the mayors of each, the city managers, the public works directors, and so on, within a reasonable geographical proximity that they feel they can service. Firms that specialize in serving mall clients across the country don’t have a list of every buyer and potential buyer of their services. Firms that do health care work in one city don’t have every single hospital and related institution, along with everyone in those organizations who could make or influence the decision to purchase their services.
And just getting the list together is not good enough. You have to make sure that every single person on that list hears about your firm 12 or 18 times a year. That may seem like a lot, but if you use all of the channels available to you— conference attendance, public speaking, publicity, public relations, newsletters, technical bulletins, brochures, announcements, trade shows, personal contacts, and so on, it really isn’t that hard to make those 12 or 18 contacts per year. Follow this strategy for each and every market that you now operate in. Don’t pull the plug on it after six months. Give it a year or two to work.
If more firms would fully penetrate their existing markets, instead of going after every new market like the proverbial “dog chasing its tail,” there wouldn’t be nearly as much poor-mouthing in the design and environmental consulting business as we hear today.
Originally published 11/15/1993
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.