The Lanchester Strategy in Sales
A Time-Tested But Under-Used Approach to Sales Dominance
Frederick Lanchester was a brilliant engineer, inventor of the Lanchester car and multiple automotive innovations including the disc brake. He was appalled by the waste of the Great War and applied his highly-tuned brain to find a better way,
He adopted some of the thinking of Chinese strategist Sun Tzu who wrote in The Art of War some 3 centuries ago: “He will win who knows when to fight and when not to fight.”
While Lanchester’s work was originally focused on military tactics, it has since been adapted and applied to various fields, including sales and marketing. This strategy offers a unique perspective on how businesses can approach their sales efforts, focusing on concentration and dispersion to achieve market dominance.
Understanding the Lanchester Strategy
The Lanchester Strategy in sales is based on the fundamental idea that in any market, there are two primary ways for a company to gain an advantage: concentration and dispersion. Concentration refers to the approach of focusing resources on a specific target market or segment, often involving highly targeted marketing and sales efforts. Dispersion, on the other hand, involves spreading resources across a broader spectrum, casting a wider net in the hopes of capturing a larger share of the market.
To understand the strategy, consider two fundamental principles: Lanchester’s Square Law and Lanchester’s Linear Law.
Lanchester’s Square Law: This law states that the effectiveness of sales efforts is proportional to the square of the resources deployed. In other words, if you double your sales inputs, it can potentially have four times the impact on the market.
Lanchester’s Linear Law: This law relates to the principle that market concentration often leads to a linear increase in market share. The more resources you concentrate on a specific target, the more likely you are to dominate your chosen target area.
Lanchester’s strategy was applied by the USA in the war in the Pacific (WWII). They identified the islands they could capture and concentrated on those, choosing to ignore the ones they believed they could not capture.
After the war the economist W. Edwards Deming applied the strategy to help weakened Japanese companies achieve success well beyond the competitive strength.
Applying the Lanchester Strategy in Sales
Now that we’ve grasped the basic principles of the Lanchester Strategy, let’s explore how it can be effectively applied in sales:
Market Segmentation: The first step is to identify and segment your target market. Understanding your customer base is crucial, and dividing it into various segments allows you to allocate your resources more efficiently. High-value segments may receive concentrated efforts, while others can be approached with a more dispersed strategy.
Concentration on Key Accounts: In accordance with Lanchester’s Square Law, dedicating more resources, both human and financial, to high-value accounts can significantly increase your chances of gaining dominance within those accounts. Building strong relationships and offering tailored solutions to key accounts can lead to substantial market share growth.
Dispersion in Broader Markets: To maintain a diversified customer base and mitigate risks, it’s essential to disperse resources across less focused segments of your market. While you may not achieve dominance in these areas, you can secure a broader reach and more stable revenue streams.
Continuous Monitoring and Adaptation: The key to success with the Lanchester Strategy is flexibility. The market is ever-changing, and your strategies must evolve with it.
Regularly assess your market segments, shift resources as needed, and adapt your approach to maintain a competitive advantage.
Leveraging Technology: In the digital age, technology plays a crucial role in implementing the Lanchester Strategy effectively. Customer relationship management (CRM) systems, data analytics, and marketing automation tools can aid in resource allocation, target market analysis, and campaign optimization.
Case Studies of Lanchester Strategy Success
Several companies have applied the Lanchester Strategy to great effect. One prominent example is Amazon, which initially focused on a single market segment (books) and concentrated resources to gain dominance. As it grew, itdispersed into a broader range of products and services, effectively applying the principles of the Lanchester Strategy.
Another example is Canon which was able to supplant Xerox as the dominant force in copiers by identifying the cities where Xerox was weakest and applying all their resources to win dominance in that city before moving onto the next.
Step 1: Identify potential targets Step
2: Initial Yes/No point
Step 3: Deep research
Step 4: Second Yes/No point
Step 5: Concentrate resources on the chosen opportunity
If you would like to talk in more detail about this article you can reach out to me Richard Higham via LinkedIn