Specific Target Market

Inovaio will be focusing on specific customer archetypes that require innovative ways
of generating revenue (either through new products or services, or bolstering existing
service/product offerings). Limited information exists on the exact segmentation of
businesses in South Africa. At present, there are approximately 13560 Medium sized
companies with turnover in excess of $10 000 000 per annum and roughly 3200
Large companies with turnover in excess of $25 000 000 per annum. The annual
number of businesses grows by approximately 1.6% per annum. (Stats SA)
Internationally, in the marketing consulting industry in the US, the industry is
anticipated to grow at a rate of 2.5% annually with current expenditure in the industry
around $39.4 Billion (McKitterick, 2015). According to the Economist, 53% of project
spending on consultants in 2011 was focused on growth plans. The rise in
broadband connections increased at an average annual rate of 13.8% in the USA
and 9.7% in South Africa over the last five years (First Research, 2016). So as
markets are growing, the need for experienced and skilled marketing consultants’
services are necessary. Demand for consultants is therefore inextricably linked to the
growth of companies. The dependence on economic growth influences the revenue
of the industry.
Inovaio is targeting medium to large businesses in fast growing sectors of the
economy with high competition. The reasons for this are twofold: For the client’s
business to have a competitive advantage in a fast-growing competitive landscape
and for Inovaio to realize above average returns.
At present, we are looking to launch in South Africa with the intent of expanding to
the United States of America.

Specific Customers
In South Africa, the fastest growing industries and segment are in Manufacturing,
travel, Wholesale trade and Education. Inovaio is currently playing in the motor,
travel and wholesale trade industry at present. Focus in the future will be shifted to
the manufacturing and wholesale industries once Inovaio has crossed the chasm
into large business. Thus, Medium to large companies in highly competitive sectors
will be Inovaio's focus. These companies will be calling on Inovaio to help them gain
an outsider's perspective on their current activities and guide them on a path to
growth.
In the USA, the growing demand for marketing technologies, a $13.6 Billion-dollar
industry, (Barnes and Co., 2015) within organizations has increased the need for
specialized marketing consultants. Customized application and development
services accounts for 0.5% of products and services within the marketing consulting
industry in the US. As markets in the US expanded after 2009, companies are more
willing to pay for advice on how to tap into various consumer groups.
What is the state of the current market for your solution? (Is it highly
fragmented?
For marketing/innovation consulting, market share concentration is low. It's a highly-
fragmented market that consists of small firms that don’t employ many people.
These firms generally service niche markets as well. The large industry players such
as Accenture, Publicis, WPP and McKinsey & Company, account for 13.4% of the
total revenue in 2015 (First Research, 2016). In software, many startups have
entered the market and been acquired by larger companies for their innovative
products or patent portfolios. Acquisitions in this space include Oracle and Sun
Microsystems in 2010 for approximately $7.4 billion (Oracle, 2009). Other than
Microsoft, there are no companies that dominate the software publishing space.
Other players in the industry focus on one or two segments where they position
themselves. The market is primarily driven by corporate spending and profitability
depends largely on the level of technical expertise and effective marketing (Hoovers,
2016).
The major competition to the big firms, such as Accenture, was the growth of niche
firms albeit that there are no major players in this industry. Competition on this front
is not affecting demand, as demand has shown a steady annual growth increase of
3.2% for the past 5 years. The anticipated growth for the next five years, 2015-2020
is expected to decrease by 0.7% (Stivaros, 2016) Industry consolidation has also
been taking place whereby small and midsized consulting firms face greater
competition from bigger firms that can offer a variety of services, a type of one stop
shop. These bigger firms are adding to their human resource pools by acquiring
knowledge through mergers and acquisitions. US companies are also gearing
towards leaner and meaner business models. This has, once again, created the
need for consultants as many corporations struggle to keep pace with rapidly
evolving industries.
Drivers of growth are linked to corporate profits, total advertising expenditure in the
market, the number of businesses and the number of broadband/internet
connections. In the US, corporate profits have seen a slight increase of 5% from
2015-2016, but will show moderate increases of around 1-1.5% over the next five
years. Demand from Health Care and Government provide an opportunity for
consulting firms. The rapid growth of the health care sector and medical processes
has created a demand for experts to provide advice. This industry alone will benefit
from US healthcare spending which is expected to rise to 20% of GDP by 2021 from
18% in 011 (Hoovers, 2016). Sector specific firms that focus on healthcare will thrive.
There are some warning signs and critical issues such as the dependence of the
industry on economic growth.

What does the market do now to address your problem?

At present, the market makes use of niche marketing consultants to fill their
marketing incompetencies. There is a feeling amongst South African companies that
consultants are very expensive and always send junior people to their offices whilst
senior management rake in the profits. As a result, they try and avoid them at all
costs. For larger companies the story is different. Larger companies need to answer
to shareholders as well as other important stakeholders. In so doing, many are
forced to engage with consulting companies to boost their image, help them with
marketing inefficiencies and bring the necessary skills and expertise to the
organization. Consequently, the consultants in many respects are seen as the scape
goats when projected revenues are not met.
The average medium sized companies spent approximately 6% of their turnover on
marketing consultants during 2015 (sample of 20 businesses in South Africa). In the
United States, $43.3 billion was spent on 197000 marketing consulting businesses
during 2016. (Stivaros, 2016)

Do you perceive your target customers as having sufficient budget/power to

actually be able to purchase your product?
Inovaio has segmented its potential client base to companies that have high growth
potential based on the industries they participate in. These companies typically have
revenues in excess of $15 million. Inovaio’s pricing model will incorporate a ‘small’
monthly fee which is more than affordable (somewhat derisory) by these client’s
standards. On top of this, Inovaio will charge a performance based commission
based on a client's increase in turnover. Several clients have agreed to this model
and we do not foresee any problems going forward.

Bibliography
Barnes and Co. (2015). Marketing Consulting Services Industry: 2015 US Industry & Market
Outlook. Barnes Reports.
First Research. (2016). Business Intelligence Software. Hoovers.
Hoovers. (2016). Consulting Services. Hoovers.
McKitterick, W. (2015). Marketing Consultants in the US. IBISWORLD.
Oracle. (2009, April 20). Oracle Buys Sun. Retrieved from Oracle:
http://www.oracle.com/us/corporate/press/018363
Statistics South Africa 2016
Stivaros, C. (2016). Marketing Consultants in the US. IBISWORLD.