How to Use the AIA Market Study to Maximize Sales – a Primer

By Paul Kellett, AIA Director – Market Analysis

In the article, “How to Use Market Intelligence in Sales Decisions”, I discussed generic ways in which successful companies utilize market intelligence to maximize sales. I also noted that, without market intelligence, companies could fall victim to market uncertainty and end up squandering their limited sales resources. My operative assumption has been that collecting and analyzing market intelligence should not be an academic exercise but instead must prove its worth by helping companies sell their products. To achieve that purpose, market intelligence must be “actionable”, that is capable of driving decisions and guiding actions. “Actionability”, in turn, requires depth and comprehensiveness in market intelligence, as it otherwise would be too general, vague or limited to provide specific direction. Given the diversity of machine vision product markets, and the attendant, wide ranging needs for market intelligence, this can be challenging, but I work hard each year with the resources available to produce a useful study.

In this article, my purpose is to explain more specifically how MV companies can use the AIA market study to maximize their sales. I provide an overview of the specific types of market intelligence that can be found in the study, the questions that it can answer and the type of decisions it can drive. The following areas are specifically addressed in the AIA market study.

Market Players
The AIA market study identifies the major companies vying for sales in specific product markets. By definition, these are the competitors that you must face when selling your products. Their products are the competitive substitutes that a potential customer will compare to your products. Knowing their identities gives you a better idea of what you’re up against when you attempt to influence the purchase decision of potential customers. Additionally, knowing the number and relative size of other market players, provides insights into the degree of market rivalry and the degree of resources that must be expended to achieve sales success in that market. This information thus can serve as a starting point for the competitive analysis conducted by a company. (Note: AIA itself does not perform competitive analysis, since the AIA Non Disclosure Agreement bars the release of company-specific information.)

The uses for this specific information are therefore:

• Identification of competitors as a starting point for competitive analysis
• Determining the extent of market rivalry
• Assessing the extent of resources needed for gaining/retaining customers
• Assessing the costs/risks of market entry in markets where your company is not yet a participant
• Assessing the cost avoidance of market exit, where your company is a participant

The questions this information can help answer are:

• Who are my competitors in this market?
• Is there significant competition in this market?
• Will I require a lot of resources to achieve sales in this market?
• Is it worth entering or staying in this market?

The decisions this information will influence are:

• Amount of sales resources worth expending in the market
• Market entry or exit

Market Size
The AIA market study also sizes individual product markets. This involves quantifying the aggregate sales in the market during a specific time period, an important market descriptor. With this information, you can assess the overall sales opportunity represented by the market. You can also compare market size over time to assess relative market health. Additionally, the size of different product markets can be compared to determine the relative sales opportunity associated with different product categories. A comparison of total market size to your company sales (where the latter is the numerator and the former the denominator in a ratio calculation) will tell you your company’s market share (assuming the same point in time and the same types of products). This can tell you whether you’re a market leader or follower and thus whether you have market power to dictate prices for the market. By looking at market share over time, you can also judge the effectiveness of your sales campaigns over time. Should you find that your company has lost share, then you’ll know to take corrective action before your share further erodes. (As this illustrates, data on market size by itself does not provide specific, tactical guidance on how to sell products, but combined with other types of market information, it provides an overall understanding of the market, which supports a successful sales plan.)

The uses for this specific information are therefore:

• Determining overall sales opportunity
• Comparing the sales opportunities associated with different product categories
• Assessing relative market health, when comparisons are made over time
• Assessing your company’s relative market power based on market share
• Judging the effectiveness of sales efforts over time and whether changes are needed

The questions this information can help answer are:

• How large is the overall sales opportunity of the market?
• How does the sales opportunity of the market compare with that of other markets?
• How healthy is the market?
• How much market power does our company have?
• Have your sales efforts been successful or should they be changed?

The decisions this information will influence are:

• Adequacy of the sales opportunity in the market
• Whether to enter, exit or stay in the market
• Acting as the price leader or setting company prices based on other companies’ prices
• Changing or keeping current sales strategies and tactics

Market Growth
In the AIA market study, market growth is calculated by comparing market size at two points in time. (Market size for one year is simply divided by market size for the preceding year and expressed as a percentage. This is done for both units sold and revenue.) You can use market growth data as a means of assessing the health of the market as well as an additional benchmark for assessing your company’s performance.

The uses for this specific information are therefore:

• Assessing market health and performance
• Comparing overall market growth to a company’s growth to determine whether the company has over or under-performed the market

The questions this information can help answer are:

• Is the market growing, contracting or staying flat? (Is the market healthy or weak?)
• Is this a good market to be in (in terms of expected sales volumes) going forward?

The decisions this information will influence are:

• Entering, exiting or staying in the market
• Changing or maintaining sales strategies and tactics

Market Direction
“Market direction” refers to the direction in which the market is evolving. It is determined by trend analysis; that is, an ascertainment of dominant marketing or technological trends that are shaping the market. These trends can pertain to a wide range of developments, such as pricing trends, the emergence of new products, technologies and applications, growing demand for products with certain features, changing customer preferences, etc. Companies monitor market direction to keep pace with the market and prevent product obsolescence.

The uses for this specific information are therefore:

• Avoiding product obsolescence
• Inferring/predicting changing customer preferences
• Aligning the company with changes in market direction

The questions this information can help answer are:

• Are our products becoming obsolete?
• Is our product development, and are our sales strategies and tactics, aligned to the direction of the market?

The decisions this information will influence are:

• Product development decisions
• Revising or maintaining current sales strategies and tactics

Market Opportunities
The AIA market study focuses on market opportunities primarily in terms of extending MV technology to new industries and targeting new geographic markets with current types of MV products. In the first instance, where technology extension is the focus, the study has examined the market opportunities associated.