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Granularity is a word traditionally used more by scientists than sales leaders, yet it cropped up time and again in our conversations. Companies that have capitalized on micro-markets have taken a geological hammer to all their market and customer data; they break larger markets down into much smaller units, where the opportunities – prospects, new customer segments, or micro-segments – can be assessed in detail.

Portugal Telecom has wielded this hammer in several key markets, including Brazil. Former CEO Zeinal Bava explained in 2011: “To me, there’s no such thing as an effective countrywide strategy. We break the country down into customer segments and then look at different geographies. São Paulo city is very different from São Paulo state, for example… You have to walk away from the averages and map out the markets. If you are the leader in a specific market, it might be sufficient to offer customers one month [subscription] for free. If you’re number four, you might have to give them three months. When we rolled out 3G, we started in areas where the average revenue per user and spectrum availability supported the business case and service quality underlying the investment.”5

It quickly becomes clear that a broad-brush approach will not lead to the most lucrative hot spots and could leave you wasting resources where growth is significantly below average. Leading companies are taking differentiated approaches to driving revenue growth based on this type of granular information.

In Europe, a consumer telecommunications company reexamined its 15 sales regions and split them into approximately 500 micro-markets based on a variety of characteristics such as shopper population density and store catchment areas. Sales leaders were surprised to see that when viewed at this level of detail, these markets actually varied by a factor of four in terms of shopping activity, economic growth, and wealth. Focusing the microscope on its store penetration in each micro-market and looking at the relative share of stores compared to competitors showed similarly wide variations.

It became apparent that there were deep pockets of opportunity in places with attractive populations and limited competition, but the company did not have the right store footprint or formats to access this untapped demand. There were also places where competition was intense but there were fewer unserved customers than the company had initially believed. It had treated many of these markets in similar ways due to the lack of granular, micro-level segmentation. The head of channels realized quickly that it was time for a much more differentiated approach if the company was to grow revenue profitably.

The company aggregated its 500 micro-markets into four categories. In the most underserved markets with the lowest density of retail stores (both its own and those of competitors) the company focused on developing different store formats to make store economics more attractive and establish a foothold before its competitors. Ultimately, the telecommunications company saw 5 to 10 percent more in-store visits by optimizing its store footprint. It also shaved total store costs by 5 percent by eliminating, resizing, or refocusing less profitable locations.

A broad-brush approach will not lead you to the most lucrative hot spots.

The chemicals and services company we mentioned at the start of the chapter used a four-step approach to finding pockets of growth. First, it created an opportunity map, which is the foundation of micro-market strategy. It defined the size of the micro-markets at a district level by matching administrative counties with reps’ typical 25-mile territory radius; this typically resulted in coverage of four or five counties. Then, the company determined the growth potential based on a list of 15 drivers, using industry knowledge as well as interviews with customers and reps. Drivers included cost of input, cost of capital, local demographics, etc. The company measured the impact of each driver by analyzing how it had affected growth historically. Third, the company estimated market share in each market and what lay behind market-share differences between markets, which included drivers such as rep coverage, pricing by channel and product, and marketing spend. Finally, sales leaders prioritized the growth pockets based on opportunity for growth. It realized that 60 percent of the fastest-growing counties had inadequate rep coverage, while there were slow-growth territories that were over-resourced.

The company rapidly reallocated resources between territories and focused on those with the most growth potential (Figure 2.1). The head of sales then translated the micro-market insights into specific sales leads and the results were impressive: a tenfold increase in prospects in some micro-markets and a narrowing down of realistic prospects in others. Figure 2.2 shows the scale of the variation.6 In industries I to N, for example, the company calculated that there was an enormous missed opportunity, whereas industries A to D were already close to their full potential.

Figure 2.1 Micro-market analysis reveals pockets of growth

Figure 2.2 Micro-market lens fills the pipeline with otherwise hidden opportunities