Guest Post by Raz Chorez
In over a decade of consulting, I’ve learned to take nothing for granted. I don’t assume as much as I used to, and I try my best to listen to every new client as if they are my first, and I know nothing about their company, industry or market. However, time and time again, experience has shown me that almost everyone I talk to is an Industry player. I don’t assume it – they actually tell me. Some in plainer words than others.
What’s an Industry Player?
Imagine – you’re a diesel fitter / a medical doctor / a civil engineer / a lawyer or a mechanic. You have earned your certification/degree(s) and decided to start, or stumbled upon a business opportunity. You’ve set up an equipment hire business / medical practice / an earth-moving business/ a law firm or workshop. For 25 years, you’ve grown the business to a multimillion-dollar business. You clearly know your stuff, don’t you?
In fact – you’re so good, you win industry awards, your peers recognise you for the great work that you do, and even invite you to serve on industry boards. That’s how good and well respected you are. Doesn’t it feel great? I’m sure it does. You are the ultimate Industry player.
There’s just this little problem. The industry isn’t what it used to be. New alternatives are coming into the market every year; Technological solutions reduce the need for your grass-roots expertise, and you’re wondering if things will keep going the way they’ve been, for the next 5-10 years. It’s a niggly little thought that pops up sometimes, but not too often to lose sleep over it, isn’t it? Not yet, anyway…
The good news? You’re not alone. Many of your peers (i.e. other business owners) are in the same boat. I’d like to explore with you a little nuance which in my honest opinion, gets neglected quite often – the difference between Industry and Market.
The Difference Between Industry and Market
It’s great to know your industry sector and understand the profession that your business specialises in, but it’s just as important (if not more so!) to understand the market you’re selling into, and operating in. Let’s take a deeper look into what the differences between industry and market and why it’s important to be able to make a distinction between the two.
No matter your business, you’re likely going to be very familiar with the concept of the industry you work in. Industries are categorized by businesses or corporations of similar trades so it’s easy to identify the main players and the products or services that the industry offers directly. If you’re in the equipment hire business, you know the main two-to-four main competitors in your market. You also know about all the new and improved forklifts, scissor lifts, road barriers technology or high-vis and safety equipment, right?
Other businesses that work in your industry are focused on offering only one type of goods and are concerned with what they perceive as their direct competitors. Companies within an industry are focused on the competition between the existing businesses to try and gain and maintain as much customer loyalty as they can.
The market is what a lot of businesses tend to ignore. There are two types of Markets we should consider:
The market of a company focuses on who their buyers are and what motivates them to purchase their products. The Market is a place where services are bought and sold between buyers and sellers.
If there is consumer demand for a product, there’s a market – it works on the familiar basis of Supply and Demand. Therefore, the businesses within the market are more concerned about the customers that are purchasing their products.
The Wider Market
As humans, we tend to stick to what we know. But the world doesn’t stop changing and improving (debatable, I know…). That quote from Henry Ford shows that mindset quite well… As business Owners, when we focus on just “our” market, we tend to miss many more opportunities. Just remember what happened to the Blacksmiths and Farriers when Henry Ford was working on his car’s production line?
Although that example might resonate with you quickly, because it’s old and familiar, it’s time you apply it to your own business too – if you supply goods and services (like forklifts and scissor lifts, and ignored the meteoric rise (and subsequent acquisition by Amazon) of Kiva Robots (an autonomous warehousing system which eliminates people and equipment from the warehouse or logistics center), well – you shouldn’t.
The wider Market does, or will come up with alternatives, for your products, your services, and sometimes your entire industry, sooner than you think.
What’s The Difference?
I hope you can answer that by now – An industry is made up of a group of businesses which focus on the same type of services or goods production. Very seldom you see Industries dramatically change. Quite often, they just disappear…
On the other hand, a market is created by the demand of consumers and acts like an exchange system that allows buyers and sellers to come together to enter into transactions which result in the expected outcome.
Let me explain that: When you go to your local hardware store, looking for an 8mm drill bit, you’re not really interested in the drill bit. What you’re interested in, is a hole in the wall, to hang your 65” 4K TV on. Right?
In the previous warehousing example, the warehouse manager/owner is not interested in the forklift. In fact, if there’s a way he can avoid using forklifts and forklift drivers (and their unions), which will give him a more risk-free, and accurate outcome, they’ll at least consider it. If they decide to update their warehouse with an automated system, their 5 forklifts, 2 scissor lifts and safety equipment supplier will be dumped, and their 15 shift workers/drivers, will be out of a job. It’s that simple. That’s the difference.
It’s fairly easy for you as a business owner/manager to get to know the industry that they work within, as the company is going to be familiar with the products or services that they are offering. This allows you to identify the main competitors that are offering similar products or services.
However, a lot of business owners make the mistake of believing that the industry and the market are interchangeable. Many fail to stop and think of the wider marketplace, and identify indirect threats (or potential opportunities, depending on how you look at it). Recent statistics have shown that only 45% of B2B companies have outlined official marketing plans. You need to have a good understanding of who makes up your company’s market to get a much clearer idea of the buying and decision-making processes. If you don’t know your market, you’re not going to be able to get a good idea of what type of customers make up your consumer base, and what they are really interested in – an 8mm drill bit or a hole?
How to get to know your market?
Businesses are like sharks – if they stop moving forward, they die.
Market analysis, like the market itself, is always evolving and changing. It’s not a one-off project. Understanding the market, in addition to understanding the industry, is a strategic initiative, which should
constantly be on the agenda. We highly recommend conducting a thorough market analysis at least once every couple of years. Having a finger on the pulse of your market is crucial to the longevity and sustainability of your business.
The market isn’t only made up of existing and potential customers that your business is targeting, but has other sellers targeting those same existing and potential customers. The best way to start is to pinpoint who you’re trying to sell to.
Who is my customer?
To have a general idea of who you want to buy from you, you need to explore the demographics of your potential consumers. Demographics are made up of details such as age and gender which allow you to get to know your consumer base on a more personal level. When you know your customers well, it’s a lot easier to implement a business strategy that’s going to capture their attention. It’s also a good idea to explore the psychographics of your market – what type of lifestyles do they lead? What are their hobbies? Knowing your consumers’ behavior gives you a better overview of how to reach them.
Why do they buy?
Following this general understanding of your existing and potential customers (who they are), the next step is to understand their motivation to buy – what is the outcome they are looking for. Are you providing the best solution for their challenge (or aspiration)?
Who else is selling?
This the Industry part we’ve discussed before – you should have a rough idea who your largest direct competitors are. You hear about them, you come across them, and you lose business to them sometimes. But they aren’t the only ones – the fact you haven’t heard about a competitor doesn’t mean they don’t exist.
I was recently involved in a sale of a business. For over 20 years, the owner of The business was also the founder and active manager. The owner had a reputation for being an industry expert, and go-to man for his clients, for solving real business issues (with the products he was providing).
When we sat down to put together a list of potential buyers (competitors and other suppliers to their market), the ones we marked down have been the ones he came across in his state, and a couple from another state.
Doing a bit of market research, after that initial meeting, we’ve discovered an overseas conglomerate who was buying similar-sized businesses around the country for the past few years. Within 2 hours of research, we had completely changed our business-sale focus.
Sometimes the competition isn’t what you think it is. The market isn’t always what you perceive it to be. If you still have those niggly thoughts about the near (and beyond) future, please keep that in mind. Look beyond what you know from your experience. Read about your market, not just about your industry. Understand your customers intimately, and figure out how to always improve the way you service them. It’s a constant effort, which will certainly increase the likelihood of you staying in business for many more years to come.
Raz’s career started with a Business Administration degree and a marketing major, in the last century. Raz has held both Sales & Marketing management positions in the past two decades. Being naturally curious, Raz has been experimenting with web technologies for over 15 years and was an early adopter of Social Media, mobile and digital communications. With his strategic vision and strong business acumen, Raz worked with both national and international brands, including QBE, Mortgage Choice & Citi Group, helping with understanding and implementations of digital and social media, bringing frameworks and processes to drive business results.
Raz brings international experience predominantly with professional services, and applies learning from various industries to his clients. He has worked with NGO’s, Academia, Government agencies, advertising agencies and advisory firms. Raz is a master negotiator, having been married and a father to three boys. For leisure, he rides a motorcycle, and when time permits, catch up on an ever-growing pile of books on his bedside table.
Photo by Ricardo Gomez Angel on Unsplash