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<title>How To Calculate Your Customer Education Market Opportunity.</title>
<meta name="description" content="Don't think you can figure out how much customer education you should be selling by taking a simple percentage of software revenue. And watch out for raw IDC industry data that suggests your opportunity is way bigger than it really is. Here's how to arrive at your true customer education opportunity in a way nobody can argue with.">
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<td><span class="default"><b>How To Calculate Your Customer Education
Market Opportunity.</b></span>
<p>
<p><span class="default">Once upon a time, customer education
GMs were cost center wonks who worried about classroom utilization
and student evaluations. Today, they're hot shot LOB managers
responsible for extracting everything the market has to offer.</span></p>
<p><span class="default">Sweet! But what IS your market opportunity
-- or, for that matter, your market share? And, why does being
able to measure it matter?</span></p>
<p><span class="default">Well, suppose you think you're looking
at tremendous untapped market potential. If you can't prove
it to the powers that be, you're never going to get the additional
sales and marketing resources you need. On the flip side,
if you think the opportunity is unlimited and it's not, you
could get stuck with an unachievable budget. Or wind up campaigning
for selling resources when you should be looking to add more
products and concentrate on developing new markets or market
niches.</span></p>
<p><span class="default">So how do you measure market opportunity
and share? Try this for size.</span></p>
<p><span class="default">A. Concentrate On Your Served Market.</span></p>
<p><span class="default">Too many customer education execs have
grandiose illusions. They think their market opportunity is
$7.6 billion or $17.6 billion or whatever figure they pull
out of Training magazine or the latest IDC IT training industry
report. Don't make this mistake. If you're selling software
training, your served market is limited to customers who have
actually purchased or licensed your software.</span></p>
<p><span class="default">If you sell licenses by the seat, then
each license equates to a potential trainee. Multiply by the
cost of 2.5 courses (or whatever makes sense) and there's
your gross market opportunity. If you sell your software by
the server, or by the number of concurrent users or some other
scheme, you'll need to build a formula for calculating your
gross potential trainee population. Give it your best shot.
Chances are you'll be close enough.</span></p>
<p><span class="default">Keep in mind, this is a gross market
assessment. There's no way in Sam Hill you're going to get
any more than 10% or 20% of your total audience to show up
in a given year -- much less to take an average of 2.5 courses.
And how many people show up is as much a function of your
software adoption curve as it is of your education selling
and marketing efforts (see section B).</span></p>
<p><span class="default">So don't go public with your gross
market opportunity number. (Unless you want your budget doubled!)
Better to use, say, 20% and assume 2.0 courses. Chances are
this is still well above what you are doing now.</span></p>
<p><span class="default">And how do you assess your market share?
Well, simply total up how many public course sessions are
being advertised by you, your delivery partners (if you have
any) and your aftermarket competition. If the total is 50,000
sessions in a given year and you account for 30,000 sessions,
then your market share is 60%.</span></p>
<p><span class="default">Don't worry about factoring in course
prices, course cancellations or the impact of session size.
This will all even out. If you have a lot of small competitors
who don't advertise their schedules, then add 20% to the total
pie. If you're concerned that TBT is disproportionately represented
in your numbers -- or your competitors' numbers, crank in
an appropriate fudge factor to reflect this.</span></p>
<p><span class="default">B. Factor In Your Software License
Growth Curve.</span></p>
<p><span class="default">Watch out -- when software license
revenues flatten out after a steep growth curve, the market
opportunity for customer education actually goes down! That's
because a primary incentive for training is the intense FUD
(fear, uncertainty and doubt) that accompanies a new software
adoption.</span></p>
<p><span class="default">It's not uncommon for an account to
offer 5x the education potential in Year One than it does
just two years later -- whereas technical support revenues,
for example, remain relatively steady. So, with fewer new
adoptions, you have to work a lot harder and smarter than
your support services colleague just to stay even.</span></p>
<p><span class="default">If you can accurately track new vs.
renewal software license sales, you may want to try calculating
market opportunity by multiplying the gross education opportunity
(per section A, above) by the ratio of new software licenses
to total licenses.</span></p>
<p><span class="default">By the way, this is also why it's dangerous
to assess the efforts of your various customer education geographies
based on education revenue as a percent to software product
revenue. Because a high license growth geography will typically
enjoy a much higher education "penetration ratio" than a no
growth geography.</span></p>
<p><span class="default">OK, so what do you do if you calculate
your customer education market opportunity and it's headed
South? Try to more deeply penetrate whatever opportunity remains?
Muscle in on somebody else's market? Rent out your excess
classrooms for cold storage? Update your resume?</span></p>
<p><span class="default">We'll deal with how to grow your education
business in an adverse software environment in future E-Visories.</span></p>
<p><a href="evisory.html">Return to back-issue index</a></p>
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