To diversify your revenue base, increase sales in new photonics markets
As the bull market continues and proposed defense budgets are growing, most optics and photonics companies are reporting strong sales and a general sense of optimism. With that comes a new challenge, though: when your revenue base becomes too concentrated on a single industry or customer, your risk of market pull-back or decreased demand increases.
One of the “godfathers” of optics has a guiding principle that has helped him build his company, year over year: No more than 20% of their revenue can come from any one customer.
Another optics company has seen growing demand from one customer, which is requiring and enabling them to expand. This added capacity is both an opportunity and a challenge, as now they’re looking to build the pipeline in other industries for when that customer’s contract ends. Given a 12-month contract and long sales cycle times, the time to start filling that capacity is right now.
Every market has its own entry points, barriers, requirements, and drivers. The decision maker in the automotive industry has very different concerns than the typical buyer in medical devices. It’s critical to identify a hypothesis and test it early and often before investing in a product launch in a new market.
If you’re looking to diversify into an established market or application, we have written quite a bit on market research and positioning. It’s critical to understand market sizing, market requirements, and your target customer persona, and to develop a clear and compelling value proposition in the customers’ language.
But what if the market doesn’t know its requirements yet either?
In emerging markets, much is still unknown about:
· Regulatory environment
· Product adoption curve
· Price points
· Performance requirements
· Distribution channels & buying behaviors
Contract manufacturers who seek early entry into these markets must decide:
· Go all in with a single approach or put multiple irons in the fire?
· How soon is too soon?
· Is it scalable and profitable?
Here are 10 considerations that can help optics and photonics companies achieve early sales in a new market:
1. Set an innovation budget — Set aside a portion of both your development and marketing budgets for emerging markets, to balance long-term and short-term growth. For example, if R&D is 10% of revenues, maybe budget 3% toward the UAV market or another developing industry. If marketing represents 5% of revenue, 1% is a suitable budget to promote innovation.
2. Sell the big picture — Dedicate your marketing budget to activities that advocate for your idea, not a product.
3. Join the conversation — Earn your seat at the table with your ideal customers by participating in technology discussions early.
4. Make time for learning — At technical conferences, participate in roundtable discussions, and ask smart questions. Walk the floor, explore alternate technologies, form an opinion.
5. Continue the discussion online — Join LinkedIn private groups, and make connections.
6. Test and evaluate — Determine how you’ll get publishable data to prove reliability and performance. University lab? In-house simulation? Pilot test with beta customer?
7. Form an opinion — Support your view with a technical white paper. If it’s too early for data, or you have multiple technologies you’re developing, publish “considerations” for selection or design.
8. Understand the patent landscape — Remember that any conference or trade show may be a disclosure event; consider a preliminary patent application.
9. Pounce on PR opportunities — If you’re exhibiting, look for every panel, product demo, and product announcement opportunity available, even if you’re showing a technology or capability and not a product.
10. Don’t forget multimedia — If you’re pre-prototype, use animation to explain your approach.
