Deadly Sins: Failing to Sidestep Into Related Markets

Neil Mahoney


By Neil Mahoney

In last month’s article (, we talked about market segmentation and how a company often can sidestep into related markets where the strengths of their products or services will let them compete very effectively—and do it for relatively little extra effort or expense. The example we used was hand tools and how contractor professionals are a minuscule segment of the entire U.S. market—only 5 percent of the 80 to 90 million people who buy hand tools each year. Yet this tiny segment accounts for about half of all the dollar purchases each year.

Commercial Buildings & Tenants: The Elephant in the Room

Another huge market segment that’s often overlooked is commercial buildings. In the U.S., commercial buildings had about a total of 87 billion square feet as of the year 2000 —almost as large as the U.S. residential market in terms of square footage. What’s more, 65 percent of it—apartments, condos, offices—is very similar to the residential market in terms of the wants and needs of the tenants, yet a surprising number of companies that are interested in—and successfully serve—residential customers overlook this golden opportunity. Examples of such providers of products and services are electricians, plumbers, and firms that provide materials such as paint, carpets, etc.

Once a company establishes itself in the commercial building market, its sales and marketing costs often are reduced substantially. However, this market usually involves a greater sales and marketing effort to begin with, and volume discounts can reduce selling prices to a slight degree. To enter this market, companies first should establish relationships with the facilities management and maintenance staffs. This will gain them access to the tenants, who most often are the end-users and specifiers. However, the building owners and managers, themselves, are often the end-users, so they’re good prospects, too.

Don’t Forget the Really Big Elephant Upstairs

A not-so-well-known manufacturer of top-quality air-conditioning systems was specified and approved by all the usual important buying influences—the mechanical contractor, the maintenance department, and the facilities manager. This was for a new building that was to be constructed in Texas. The A/C manufacturer was also low bidder on the contract to the tune of $20,000.

They had everything going for them except one thing. The one thing was the building’s owner who was up in Chicago. The reason the low bidder lost was because the owner wasn’t familiar with the A/C manufacturer and its brand. He didn’t want an “unknown” A/C system in his building. It all came down to wanting to project an image of top quality for this “Class A” property, which was to be marketed for top rental fees. As it turned out, the A/C manufacturer hadn’t covered all the bases in the approval process and learned the lesson the hard way.

The Building-Rentals Sidestep

Here’s a real-world example of how opportunities were almost lost by failing to take advantage of another often-overlooked segment. A magazine that published news and information on commercial building activities in Charlotte, NC, did an outstanding job convincing building owners and managers that they could promote the availability of rental space by advertising to prospective building tenants who might want to relocate. The ad revenue from that segment was substantial, but it had peaked, and wasn’t enough to keep the magazine sufficiently profitable.

Analyzing the market, we found a related segment that was ready and waiting—one that promised more potential advertisers and advertising revenue than could be gotten from the building owners themselves. This related market opportunity was the demand for products and services that’s created when businesses relocate—moving furniture and equipment, buying new office furniture and equipment, setting up new computer networks, redecoration, carpeting, paint, etc. The list of prospective advertisers was long and promising. By convincing the companies that supplied these products and services to advertise, the magazine would generate enough revenue to make it quite profitable.

As these examples show, it’s vital that you:

  1. Identify all the prospects in the markets and segments that you want to serve
  2. Know whether they’re frequent, heavy users; or sometime, moderate users; or hardly buy at all
  3. Know their wants and needs
  4. Know where they buy, and for what reasons
  5. Know the wants and needs of the outlets they buy from

Next month’s article will discuss how best to determine the wants and needs of the elements of the supply chain that serves various types of end-users.

Neil Mahoney is the founder of Mahoney/Marketing and has 30 years of experience at all levels of sales and marketing, including stints at General Electric, ITC Inc., Bausch & Lomb, and ABC Broadcasting. Visit for more information.