Beyond São Paulo and Mexico city: How Do You Segment Your Market Opportunities and Design Your Coverage Model?

André EcheverriaLA Marketing VP

The 1 Billion U$ questions:

Which markets must we concentrate on?Which are the most efficient coverage models?How do we find, develop and fit my Partners in?

How many accounts to serve?Which are those target accounts?

Where are them?

mexico

bogota

Lima

santiago buenos aires

sao paulo

brasilia

porto rico

rio janeiro

BRA

SOLA

NOLA

MEX C&CA

1 Sub-Continent, 28 Countries

500M+ people, 4 major languages

Country Profiles or Fortune 500-type Rankings…not enough

…at least… …not enough UNIQUE!

© 2010 IDC

Source: IDC Latin America IT Spending Patterns, Q4 2010

IT s

pen

din

g 2

009-

2010

Gro

wth

2010 IT spending as a % of GDP

Size of bubble = 2010 IT spending value (US$M)

ChinaRussia

India

LA Markets Maturity Level AnalysisLA Markets Maturity Level AnalysisLA Markets Maturity Level AnalysisLA Markets Maturity Level Analysis

© 2010 IDC

Latin America IT Spending by IndustryLatin America IT Spending by Industry%

Gro

wth

200

9/20

10

6.3%growth

Relative Size of IT Spending, 2010

Source: IDC Latin America Vertical Markets Spending Patterns, 1H 2009

Free trade between LA countriesLocal investment to equalize Asian product levels

Commodities exporters leading the recoveryConsumption reactivationRetail growth / New retails entering

Tourism reactivationOutsourcing growth in the local and off-shore

markets

© 2010 IDC

Latin America Product Segments MaturityLatin America Product Segments Maturity

Building your Racing Plan:Segmenting Market Opportunities

o Available market where your portfolio of products and services offer concrete potential, not likelihood, to address customers needs

o What would your business value be if you had 100% market share in all areas where your products/services provide a solution?

o Key to Accounts Segmentation and SOW (Account Share of Wallet) calculations

o Standardized on IDC data: BlackBook Taxonomy (industry definitions) and WW Vertical Market definitions (product segments)

o But... You have to make your own assumptions

A key concept: the Addressable Market definition

Input: IDC IT Data Input:2001 <- Year IT Market Addressable 1-Year

Brazil <- Market (No DataCom) Market Growth Brazil Mexico Argentin Chile Colombia Venezuel PuertoR13780 <- Total IT Market Value (U$ M) 12567 Assumption % $ %

Services4.4% IT Consulting 4.8% 15% 0.7% 90.9 15.7% 30% 20% 50% 25% 0% 0% 0%9.6% Operations Management 10.5% 14.3% 0% 0%2.8% Training and Education 3.1% 15% 0.5% 57.9 13.1% 20% 10% 40% 30% 40% 20% 20%9.3% Support Services 10.2% 8% 0.8% 102.5 10.7% 15% 15% 10% 10% 40% 20% 20%9.9% Implementation 10.9% 5% 0.5% 68.2 13.9% 10% 5% 10% 0% 0% 0%

36.0% Services Total 39.5% 2.5% 319.6 13.4%6% 12% 9% 9% 10% 9% 8% 11%

Packaged Software3.3% System Infrastructure 3.6% 10% 0.4% 45.5 11.5% 20% 10% 20% 25% 20% 20% 20%5.7% Application Tools 6.3% 5% 0.3% 39.3 8.7% 10% 10% 5% 10% 10% 10%4.2% Application Solutions 4.6% 16.9%

13.2% Packaged Software Total 14.5% 0.7% 84.7 12.4%5% 9% 4% 10% 6% 9% 11% 11%

HardwareSystems

2.2% High-End Servers 2.4% 75% 1.8% 227.4 -1.6% 100% 100% 100% 100% 100% 100% 100%1.9% Mid-Range Servers 2.1% 100% 2.1% 261.8 2.9% 100% 100% 100% 100% 100% 100% 100%1.2% Low-End Non-Intel Servers 1.3% 40% 0.5% 66.1 5.4% 100% 50% 100% 100% 100% 100% 100%1.8% Low-End Intel Servers 2.0% 10% 0.2% 10.5% 20% 20% 20% 30% 20% 10%

24.4% Personal Computers 26.8% 11.4% 1%0.7% Traditional Workstations 0.8% 60% 0.5% 57.9 1.8% 100% 100% 100% 100% 100% 100% 100%

32.2% Systems Total 35.3% 5.1% 613.2 9.9%

Peripherals and Add-Ons4.0% Add-On Storage Devices 4.4% 60% 2.6% 330.7 16.8% 100% 80% 100% 100% 100% 100%4.0% Desktop Printers 4.4% 5.4%0.8% Other Printers 0.9% 5.2%1.0% Other Add-Nos 1.1% 8.0% 100%9.8% Peripherals Total 10.7% 2.6% 330.7 9.1%

17% 25% 16% 15% 15% 24% 17% 12%

8.8% Data Communications 0.0% 24.6%

50.8% Hardware Total 46.1% 7.7% 943.9 12.1%13.2% Package Software Total 14.5% 0.7% 84.7 12.4%36.0% Services Total 39.5% 2.5% 319.6 13.4%

10.9% 1348.2 13.2%Address U$ M %

Addressable Market Original Estimates

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2007

Market Evolution

Addressable Market Calculator (TM)

Account INDUSTRIARevenue (US$ M)

%IT/Rev IT InvestAddr. Market – 10.9% 2003

Cum. Addr. Market 2003

PETROLEO BRASILEIRO S.A. Quimica e Petroquimica $49,008.90 2.50% $1,225.22 $133.55 $133.55BANCO BRADESCO S.A. Financeiro - Multiplo $10,956.10 6.00% $657.37 $71.65 $205.20TELEFONICA Telecomunicação $9,780.30 4.50% $431.79 $47.06 $252.27TELEMAR Telecomunicação $6,956.30 4.50% $313.03 $34.12 $286.39BANCO ITAU S/A Financeiro - Multiplo $5,151.10 6.00% $309.07 $33.69 $320.08BANCO DO BRASIL SA Financeiro - Comercial $4,583.30 6.00% $265.23 $28.91 $348.99BANCO SANTANDER BRASIL S/A Financeiro - Multiplo $3,836.40 6.00% $230.18 $25.09 $374.08UNIBANCO-UNIAO DE BANCOS BRASILEIROS S.A. Financeiro - Multiplo $3,236.60 6.00% $194.20 $21.17 $395.24BRASIL TELECOM S/A Telecomunicação $3,913.60 4.50% $176.11 $19.20 $414.44BANCO ABN AMRO REAL S.A. Financeiro - Multiplo $2,540.50 6.00% $152.43 $16.61 $431.06EMPRESA BRASILEIRA DE TELECOMUNICACOES S A EMBRATETelecomunicação $3,167.60 4.50% $142.54 $15.54 $446.59CAIXA ECONOMICA FEDERAL Financeiro - Comercial $1,906.20 6.00% $114.37 $12.47 $459.06ELETROPAULO METROPOLITANA ELETRICIDADE DE SAO PAULServ. Publicos $3,056.50 3.50% $106.98 $11.66 $470.72VOLKSWAGEN DO BRASIL LTDA Automotivo $4,952.60 2.00% $105.49 $11.50 $482.22COMPANHIA ENERGETICA DE MINAS GERAIS ¿ CEMIG Serv. Publicos $2,649.00 3.50% $92.72 $10.11 $492.32ELETROBRAS Serv. Publicos $2,465.50 3.50% $86.29 $9.41 $501.73BRASKEM S.A. Quimica e Petroquimica $3,345.20 2.50% $83.63 $9.12 $510.85GENERAL MOTORS DO BRASIL LTDA Automotivo $4,131.50 2.00% $82.63 $9.01 $519.85COMPANHIA DE BEBIDAS DAS AMERICAS ¿ AMBEV Bebidas $5,344.10 1.50% $80.16 $8.74 $528.59IPIRANGA PETROQUIMICA SA Atacado e Com. Ext $5,229.60 1.50% $80.14 $8.74 $537.32AGIP DO BRASIL S.A. Serv. Publicos $2,108.40 3.50% $73.79 $8.04 $545.37EMPRESA BRASILEIRA DE CORREIOS E TELEGRAFOS Serv. Publicos $2,074.50 3.50% $72.61 $7.91 $553.28SHELL BRASIL LTDA Atacado e Com. Ext $4,774.30 1.50% $71.61 $7.81 $561.09LIGHT SERVICOS DE ELETRICIDADE S A Serv. Publicos $1,934.00 3.50% $67.69 $7.38 $568.47BANCO SAFRA S A Financeiro - Multiplo $1,117.60 6.00% $67.06 $7.31 $575.78FURNAS CENTRAIS ELETRICAS S A Serv. Publicos $1,757.70 3.50% $61.52 $6.71 $582.48COPEL DISTRIBUICAO S.A. Serv. Publicos $1,734.80 3.50% $60.72 $6.62 $589.10BUNGE ALIMENTOS S/A Alimentos $5,591.30 1.50% $57.99 $6.32 $595.42COMPANHIA BRASILEIRA DE DISTRIBUICAO (PAO DE ACUCACom. Varejista $3,858.70 1.50% $57.88 $6.31 $601.73

Apply with the Vertical Industries effect on IT investments

Refining your Model: Customer Loyalty does make a difference

How should we compare Key Accounts opportunity levels?On a mid to long term strategy!

• Revenue historical series (weighted)• Future contract values• Share of Wallet x competition analysis• Services Attach rates• Customer Satisfaction index• Opt-in Programs members• Number of reference Executives• Customer Lifetime Value TM

• …and avoid the “Mermaid” Accounts

What if we concentrate our coverage resources?

Customer Lifetime Value TM model, Dr. Peter Wilton

ProspectCustomer

Client

BehaviouralLoyalty

AttitudinalLoyalty

Business Partner

Analyze your Customer Loyalty levels

Customer LOYALTY LEVEL CONTRACT VALUES QUOTA 06th FY POND 01~05th FY1 PETROBRAS 4 19.0% 19.0% 23.0%

2 EMBRATEL 3 13.8% 10.5% 5.9%

3 GRUPO TELEFONICA 2 9.9% 13.5% 10.7%

4 BANCO DO BRASIL 4 5.7% 8.4% 7.5%

5 CEF 4 6.2% 5.2% 7.3%

6 TIM 2 3.9% 5.2% 7.1%

7 TELEMAR 2 4.1% 4.6% 7.4%

8 SAINT-GOBAIN 4 4.4% 0.5% 1.0%

9 CVRD 3 2.8% 3.9% 3.6%

10 GRUPO FOLHA 3 2.3% 1.3% 6.9%

11 UNIBANCO 2 3.9% 3.3% 0.8%

12 MINISTERIO DA SAUDE 2 3.3% 0.0% 1.4%

13 MINISTERIO DA FAZENDA / SEFAZ 2 1.8% 1.3% 2.3%

14 BRASIL TELECOM 2 1.1% 2.4% 2.2%

15 BANKBOSTON 2 2.8% 0.4% 0.8%

16 EMBRAER 2 2.4% 1.0% 0.8%

17 MINISTERIO DAS COMUNICACOES/CORREIOS 2 1.2% 2.6% 0.1%

18 ITAU 1 2.4% 2.6% 0.6%

19 ABN 1 2.9% 1.3% 1.1%

20 LIGHT 2 1.0% 0.7% 1.2%

21 BRADESCO 1 0.9% 4.7% 0.5%

22 GM 2 0.5% 0.7% 1.9%

23 SERASA 2 0.7% 0.7% 1.0%

24 SIEMENS 2 0.2% 0.7% 2.1%

25 MINISTERIO DA JUSTICA 2 0.0% 0.0% 0.7%

26 GLOBO 1 1.3% 0.7% 1.3%

27 MINISTERIO DA PREVIDENCIA 2 0.0% 0.0% 0.0%

28 CITIBANK 1 0.5% 1.3% 0.4%

29 BANCO CENTRAL 1 0.2% 1.6% 0.0%

30 FURNAS/ELETROBRAS 1 0.5% 0.7% 0.2%

31 VW/GEDAS 1 0.1% 1.0% 0.2%

32 SANTANDER 1 0.0% 0.4% 0.2%

14%23%

30%

37%

43%

47%

51%

55%

59%

63%

66%

68%

71%

73%

75%

77%

79%

81%

83%

85%

87%

88%

90%

92%

93%

94%

96%

97%

98%

98%

99%

100%

Compound and reorder based on the weighted parameters

(modified account names and data)

●Telefonica●Bradesco●Itau●Unibanco●GM●VW/Gedas●Embraer●Saint Gobain●BankBoston●ABN●Santander●Citibank●Serasa●UOL/Folha●Siemens

Telco

●Caixa Econom Federal●Banco do Brasil●Banco Central●Min. of Fin/Sefaz/Serpro●Min. of Just/TJs●Min. of Comun/Correios●Min. of Social Security●Brasil Telecom

●Petrobras●CVRD●Telemar●TIM●Embratel●Light●Globo ●Furnas

The courageous decision: from 30 Direct Coverage Accounts…

(modified account names and data)

●Telefonica●Unibanco●Saint Gobain●UOL/Folha●Bradesco●Itau

●Caixa Econom Federal●Banco do Brasil

●Petrobras●TIM●Embratel●CVRD●Telemar

The courageous decision: to 13 Direct Coverage Accounts only

(modified account names and data)

CDP

EMM

AMM

P-AMM

13

17

400

Open

Relational Sales Process

Transactional Sales Process

Client driven

Opportunity driven

Product drivenTransactional Sales Process

Account Management

Territory Management

Channel Management

Adjusting Accounts x Partners Coverage Model

Actual Revenue Addressable Mkt Share of Opportunity New Addressable MktAccount 76% U$ 660M 17% U$ 430MTerritory 7% U$ 315M 3% U$ 650MChannel 17%

Sharing and Selling the Opportunity to your Partners

27%

15% 18

%

8%

11%

2%

6%

8%

U$ 650Mopportunity

Geographic Coverage Models

o Take advantage of your regional executives knowledgeo Existent partners from your pre-entry or pre-acquisitiono Leverage local markets information services

o Channel analysts surveyso Channel and general IT ranking publicationso Channel oriented publications

o Review public bids announcementso IT solution oriented events and associationso Social Media is removing relationship barrierso Don't forget… asking for references from your customers

Finding your right Partners

o U$ U32M (+78%) growth in booking levels from Direct coverage accounts

o U$ 18M (3.7x) growth in booking levels from Partners coverage accounts under the company relationship leadership

o Increased participation in the share of wallet at the selected Direct coverage accounts

o Partners achieved margin and cash flow levels necessary to fund the technical readiness and regional sales coverage investments

Results achieved (over two sequential years)

Final Recommendations

o Invest time on segmenting your opportunitieso Make your choices and stick to it for 1 or 2

years at leasto Don’t change your key accounts too

frequently; your customer will notice and tacking breaks boat momentum

o Customers need to trust you to share strategic,long term projects

o Partners need to trust on your commitmentsto support capacity building investments

o Consistency builds trusto Yes... It takes courage (analytical self confidence)

aecheverria@uol.com.br