Voice of the Customer research helps PE firms evaluate the strength of a company’s existing customer relationships to identify strategies for retention and growth. It’s a useful part of investment discussions, but by its design, it is unable to address many critical questions pertaining to growth and a company’s true market position.
That’s because VOC was designed to uncover sentiments from current customers, not the total addressable market. It’s ideal for understanding operational issues, but when you’re trying to evaluate an investment thesis for new products, sales channels, market share or geographies—or the propensity to switch—VOC alone won’t suffice … (and neither will just 20 interviews).
So how can you help your deal teams get the data they need to make the right moves in a slower and more competitive deal market? How can you help your portfolio companies develop winning strategies and go-to-market approaches?
By taking advantage of new research and recruitment methodologies to canvas not just current customers but the entire market.
Get a Holistic, Accurate View of the Market
At Azurite, we call this getting the “Voice of the Total Addressable Market.” The goal is to obtain a statistically significant view that covers all relevant decision makers, not just the ones who already buy from your target or portfolio company.
The process starts early in the research objective and design phase, by conceptually splitting the market into different segments that encompass all potential customer types. This is followed by the sizing and analyzing each of their perspectives during respondent recruitment and analysis. Expert networks can’t deliver the number of respondents or reach the personas you’ll need to field this type of study in the B2B space—much less in proportions that match the true shape of the market. More sophisticated providers, however, can help you source market-shaped intelligence to highly targeted specifications. As examples, you’ll need to hear from companies that use competitors’ solutions. You’ll need to understand how many potential customers don’t realize there’s a solution to the problems and pain points they’ve been having—and what might motivate them to take action. To gain a holistic market view, you’ll need to meet these people where they are, rather than asking current customers to talk or speculate on other’s behalf, and you’ll need to do this for every important segment in the TAM.
Current customers have great ideas, but they cannot surface the full suite of drivers of potential new business, new products, or pain points. That’s because they can’t reveal what they don’t know about the market. Your customers might not know whether competitor solutions could address their needs. They might not know how their needs differ from those of competitive customers. If you’re trying to help a CRM vendor expand its business, for example, you’ll need to hear from companies that are using Excel, companies that use specialized industry solutions, companies that are larger and smaller than the current sweet spot, and many additional segments to paint a full picture of the market ‘map.’
By utilizing the Voice of the Total Addressable Market, the research delivers stronger validation for (or against) your investment thesis, enabling you to get unprecedented detail about different buyer segments and answer questions like:
What’s your target company’s sweet spot and does it vary by industry? How does propensity to buy change by segment?
How do needs and pain points change as companies grow?
What might prompt companies that opted for competitor or homebuilt solutions to switch?
The “Voice of the Total Addressable Market” in Action
What does this type of research look like in practice? Let’s review an example from one of Azurite’s PE clients. The firm engaged us to assess value creation strategies for one of its portfolio companies, a food ingredients supplier. For two years, the company had conducted VOC studies in an attempt to address sliding NPS and financial performance. Internal service initiatives were underway, but had failed to make a significant impact.
When we helped the company look beyond current customers, however, the picture began to grow clearer. Thanks to detailed and statistically significant studies of three distinct cohorts—current customers, competitive customers, and churned customers—we discovered that, relative to other providers, the company’s value-add services were weak. Product selection was limited and order sizes were inflexible. Gathering insights from all three groups helped the company set a clearer strategic direction, enabled them to focus on making truly meaningful improvements to the business and to both engage new customers while also bringing back those who had left.
Another Azurite client wanted to investigate how a Diligence Target—a small but successful central European hospitality vendor—could disrupt the American market and expand its reach in the EU. VOC research suggested that the Target had no directly competitive U.S. counterparts, but our analysis revealed that most prospective customers actually used a solution that was already built into a larger software suite. Capturing the market would require the company to take on the incumbent with the Target’s best solution, but revenue potential was high. In Europe, by contrast, the competitive landscape was small and fragmented, and therefore easier to capture. Albeit, revenue potential was limited by the fact that pricing, rather than features, drove most purchasing decisions.
Armed with powerful insights and trustworthy data, the firm was able to confidently price their deal and successfully complete the acquisition. They took ownership with both a holistic view of the market and a clear strategic plan for growth.
A Powerful Tool Across the Entire Investment Value Chain
Regardless of where you are in the investment value chain, if you’re looking to expand a product or service beyond its current or maintain share, you’ll need to look beyond its customers’ opinions. That means understanding all perspectives on the market—and getting a more sophisticated view of everything from competitive dynamics to adoption, segments, propensity to purchase, likelihood to switch and more. It’s something that, by its very nature, Voice of the Customer can’t deliver, but more sophisticated research partners like Azurite can now address.
By capturing market-shaped intelligence, Voice of the Total Addressable Market delivers more detailed and reliable information about how to broaden adoption, build better products and services, and craft hard-hitting, data-backed strategies for growth and success.