Published in Business Franchise Australia and New Zealand
Many businesses we deal with are structured at marketing to other businesses (Business to Business - B2B), and therefore the logic of how to establish a territory that is normally used when you sell to consumers (Business to Consumer - B2C) goes out the window.
Many B2B businesses sell a product, the likes of printing companies such as SNAP and KwikKopy, and many sell a service. The service may be couriers such as Fastway, changing office light bulbs, or providing business loans or business insurance. Both products-based and serviced-based franchises normally need to give a territory, especially if there is central ordering, and jobs are allocated to franchisees. You want to be sure you receive all the jobs you are entitled to!
The core thinking in this type of business is we want to know where the customers – other businesses are, rather than where people live.
The main source of information we can look at is the Australian Bureau of Statistics Business count information. This was last released for 30th June 2009, as a usable electronic version at SLA (Statistical Local Area) level, and in January 2012 a State level ‘summary’ was released which represents the business numbers as of the 30th June 2011. We are awaiting that to come out at SLA level soon.
Other sources we are able to use are business lists, but these do not fully match with the ABS data, as they are compiled more on a continual basis by 3rd party companies. These business lists become more valuable after the Territory Planning is completed, more as a Local Area Marketing tool.
Units of Demand
Like a ‘Widget’, a Unit of Demand is a theoretical measurement that we use to compare one area to another. In terms of $ revenue, this should be considered as a measure of ratios. Therefore if one postcode or suburb has double the Units of Demand as another, then we would expect it to generate around double the revenue as well.
To start the process of seeing how many Units of Demand an area has, we have to establish some rules, basically unique to the client. A consultant does not know fully about your business (as well as you should), so we work with clients to have their input as to what type and size of business best suits what service or sale is being made on a B2B basis.
This is made to line up with the information we have from the ABS telling us at postcode level how many businesses there are by size and type.
Type of Business
The type of business definitions they give us are the ANZSIC categories (Australia New Zealand Standard Industrial Classification), or the business descriptions they use in defining what type of business you are in.
What we look to do is rank the business type you feel best suits your sales as a 10, and then think of each other type on the list and rank from 10 down to zero – never sell to that type of business – ever!
Obviously you may not have a zero, but the lowest may be a two or a three. An existing business may choose to look at their last 12 months sales by their clients, and create a matrix that effectively compares average revenue per customer by type of client classification as the data, and then assign 10 to the highest, and proportions of
that to each other classification. Example of Demand Estimate matrix (maybe for a courier business):
Some very new or start-up businesses may say they cannot determine any difference in Type of Business and that is quite okay, as we shall just value each type of business as of equal potential to you. However with a
bit of assessment, most companies can see business types that are favourable.
Size of Business
If we consider a business of 1 - 4 employees worth 1 point, then what is a business of 5 – 19 employees by comparison in terms of opportunity to you? You may say the 5 – 19 employee business potentially offers 4 times
opportunity (4 times the $ revenue) for what you sell than a 1 – 4 employee business.
The size criteria they use are:
An example may look like:
So this says for example a business with 20 – 49 employees offers 5 times the potential of a business with 1 – 4 employees.
In some cases it actually drops after a certain point, for example in a book keeping franchise we have been working with, once a business has more than 100 employees, they most likely will do everything internally.
We can then construct a matrix with the client to consider how much opportunity comes from each CATEGORY of business, and which SIZE of business they see as best suits what they are selling. Once we have this information, we can then create the Units of Demand for every postcode or suburb in the market we are creating territories for, and if we have already agreed on how many territories are to be cut, we divide the Total Units of Demand by the number of territories, and that gives us the basis to identify how many Units of Demand will be in each territory. Up to around 150 territories Australia wide, we recommend using postcodes. By the time we reach 200 territories, we must come down to suburbs, as the size of the individual postcodes becomes too large, and need to be cut to give us small enough blocks to work with.
Some clients actually like to go to Census Collection Districts (CCD”s) as these can be given to the likes of Telstra who can then use the CCD number to allocate phone calls to certain shops. CCD’s normally fit within postcodes and suburbs so try and use the largest common area unit (postcode or suburb) that your numbers allow. The reasons we aim to use Australia Post postcodes wherever possible are;
Some businesses may say to us they are 70 per cent B2B and 30 per cent B2C, or some similar proportions. This is not a problem, as we use our normal B2C methods (using Census data), combined with the B2B methods described above, and then allocate each postcode or suburb a Unit of Demand score based on a combination of both ways, and weighted to the client’s needs.
Territory Planning for B2B businesses is quite different to B2C businesses as the Census data becomes irrelevant, and the Business Count data becomes the main information.
If the business is predominantly B2B, make sure the appropriate type of territory planning is used.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.