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Strategy Bits – Part 1: Customer Concentration and Market Segment Analysis

Strategy Bits – Part 1

By Denise A. Harrison

Strategic Planning Expert

Strategic Planning Expert

We are posting a series of blog articles with tips for your strategic planning.  This is the first one.  These tips are taken from the article Strategy Tips first published in Compass Points in June 2004.

Customer Concentration and Market Segment Analysis
Customer concentration is key to market segment analysis, it is important to understand the number of potential customers but also what percentage of your business is made up of your top 3-5 customers. With a highly concentrated customer base your strategy is often dictated by the key customer needs and preferences. Your ability to gain or lose market share is often dictated by how fast you are able to meet the changes required by these top customers.

For example, recently Fortune discussed how Wal-Mart set standards for their suppliers to implement RFID tracking technology on all of the products provided to Wal-Mart for sale. Even large companies like P&G are scrambling to meet these Wal-Mart requirements, Wal-Mart is over 15% of P&G’s business. Implementation of this technology will be a significant investment for P&G so it is important for the team to take this into account as they develop the P&G strategy plan and ensure that resources are allocated towards this project.

Strategy Tip: As you develop your market segment analysis, be cognizant of the number of potential customers and any concentration of your company’s business in a particular customer. If you find you have high concentration, then you must make sure you understand the customer’s changing needs and preferences and be sure you take these into account as you develop your strategy. If your market does not have high concentration, you will want to identify belle weather clients so ensure you are able to spot industry trends early.

If you are interested in taking your strategic planning to the next level, please listen to our webinar:  Why Isn’t My Strategic Plan Working or contact Denise Harrison; 910-763-5194, harrison@cssp.com .

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

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