Companies don’t establish themselves in new markets overnight. All good things take time and effort. Market awareness typically evolves in three main stages as companies evolve from “Challengers” to “Established” players.
Stage 1: Stage 1 companies carry high cost of customer acquisition, long sales cycles and low sales volume as indicated in figures 1 and 2 below. In addition, stage 1 companies carry low operating profits or operating losses. Operating profit eventually will hit an inflection point as marked in figure 3 at the intersection of declining cost of customer acquisition and increasing sales volume.
Stage 2: Stage 2 companies start to enjoy the benefit of having operated in a particular customer market for a period of time. Cost of customer acquisition declines and sales volume increases. Sales cycles may or may not shorten. Sales cycles will shorten to the extent they are influenced by buyer familiarity with the vendor’s products and services. Certain companies may experience the intersection of declining cost of customer acquisition and sharp increases in sales volumes (figure 3) toward the end of stage 2.
Stage 3: Stage 3 companies will enjoy further reductions in cost of customer acquisition. Sales volumes continue to increase. Stage 3 is also marked by accelerating operating profits. Most companies will experience the intersection of declining cost of customer acquisition and accelerating sales volumes here in stage 3. It is at this intersection point that marks when companies graduate from “Challenger” status to “Established” player.