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How To Calculate Your Customer Education Market Opportunity.

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.

Sweet! But what IS your market opportunity -- or, for that matter, your market share? And, why does being able to measure it matter?

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.

So how do you measure market opportunity and share? Try this for size.

A. Concentrate On Your Served Market.

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.

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.

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).

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.

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%.

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.

B. Factor In Your Software License Growth Curve.

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.

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.

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.

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.

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?

We'll deal with how to grow your education business in an adverse software environment in future E-Visories.

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