Acquiring Target Market Intelligence for Small Businesses

Having access to market intelligence is essential for any small business that wants to grow sustainably and stay ahead of the competition. There are several indicators at different levels that can be used by businesses to sense the direction of their target market. At a national and state level, we have a few indicators including Purchasing Managers Index (PMI), GDP, Credit, employment growth among others. 

At an industry level, we have some indicators that are generally tracked by associations or other data sources. More importantly, small businesses should leverage intelligence on prospects/current customers and competition to tweak their go-to-market and sales strategies. Understanding the market trends with intelligence, small businesses can make informed decisions about their product and service offerings, pricing strategies, and their target markets.

Macro Level
Let us look at one of the macro indicators and their current status. PMI is reported on a monthly basis, and provides an advance signal in the private sector economy covering output, new orders, employment and prices. In general this is split across Manufacturing, Services and Construction. In India, PMI is reported only for manufacturing and services, along with a composite score. The good thing about PMI is, it is not perception driven, and it comes usually before official GDP figures and closely tracks it historically.

Let us closely look at the recent trends of India Services PMI. It declined from the Dec 2022 high of 58.5 to 57.2 in Jan 2022, but well above the long run average of 53.5. Among both Asia peers and globally, India is ranking highest as of now, giving more support for us being potentially insulated if recession fears worsen.

"December, the latest figure remained above its long-run average (53.5) and indicated a sharp rate of growth, amid favourable economic conditions, accommodative demand and marketing efforts supported sales. However, the rise in new orders was centred on the domestic market, as international orders declined. Meanwhile, the pace of job creation was little-changed, and the joint-weakest in the current eight-month sequence of expansion, with backlogs of work increasing further. On the pricing front, input cost inflation eased to a two-year low, while output cost inflation slowed to a ten-month low and below average seen since the survey started in December 2005. Looking ahead, business sentiment deteriorated to a six-month low amid forecasts no change in activity from current levels." Source: Markit Economics

PMI is not the only indicator though, businesses can track other macro indicators like credit growth, capital formation, and other state level economic and social indicators that are publicly available.

Industry Level
Now let us go down a level to see where intelligence can be gotten at an industry level. Our favorite example remains vehicle registrations, where we periodically track registrations across all RTOs of the country from the Vahan database.

For this post we just tracked heavy goods vehicle registration in Maharashtra as an illustration. Heavy goods vehicle registrations in 2022 (35371) has surpassed the 2019 figure (32819), but not the 2018 figure (39991). There was a huge slump in heavy vehicles demand both in 2020 and 2021, but now that demand has revived almost fully, in 2022 and projected from the first 2 months data of 2023. You can do the analysis to see if consumer demand for light motor vehicles or two wheelers to understand spending power at a granular geographic level.

Such indicators were popularized by Li Keqiang, who looked at cargo volume, electricity consumption, and loans disbursed in China as a proxy and leading indicator to official GDP figures. These are also available at a country/state level to get an intuition about potential growth.

Businesses usually have an identified set of available indicators or mostly other proxies that show the industry level trends. It is important to identify the source of data and their stability, measurement criteria and base business decisions (like capex or SG&A) accordingly.

Customer and Competition Level
Closer to your business, it is a wholly different intelligence that you will need. Particularly concerning competition and (potential) customers. Here public datasets are unlikely to be available or useful. Therefore, small businesses need to be purposeful in acquiring such intelligence to track and make sense of trends earlier.

Let us look at a basic services example. If your business is looking to add a new services customer, where demand is driven by the number of people in the organization (for example businesses like a HR SaaS, Catering, maintenance services or corporate gifting companies). It would be appropriate to rely on EPFO employment numbers at company level to understand if the potential customer is growing and you also have a chance and potential to grow along.

If you are interested in tracking expense line items that are more relevant to your service, it is necessary to acquire intelligence. These are available for listed companies in public domain, but if your target market is private companies, such data is not so forthcoming. This is also the case when you are trying to track performance of competition in the same industry, especially the private unlisted players.

You have to rely on specialized providers of such intelligence, so that sales and marketing teams can drill down into company expenses (as a proxy to the customer's spending power) and target the market accordingly. Beyond this it is a matter of process to be able to reach and engage the procurement decision makers, pitching your service appropriately and winning against competitors.

Given how India still remains a demand driven, yet a supply constrained market, relying on demand indicators at different levels will help small businesses grow. Narrowing down to target markets with growth prospects, requires small businesses to access intelligence and figure effective ways to cater to that demand.

This article is attributed to Ashwin Jayashankar, Head of Business Development at PrivateCircle.