 It is time to get to know your target customer.
Why is having a target customer so important? Have you ever received a call at dinner time from someone you don’t remember about a product or service you didn’t care about? Has someone knocked on your door, despite your “no soliciting” sign to sell you a product or service you weren’t interested in? Do you ever get random emails offering a product or service to you that you didn’t inquire about? These businesses were playing an expensive numbers game. Based on their history of success, they know that X number of people out of 100 will buy from them. They spend the time reaching out to the 100 in order to get the X number of people to buy. You can do the same thing if you want. We have already determined that your product or service has a market. If you were to contact enough people, you would find someone who is interested and would buy. Why spend time contacting those people who don’t want to buy? A target customer allows you to increase your chance of a sale because you have already determined who is most likely to buy from you. What would your sales be if you only marketed to and sold to the X number of people out of the thousand? Knowing your customer and your target customer allows you to have much higher odds of making a sale as well as spending much less effort, time and resources trying to make the sale. To clarify, your target customer is who you want to buy your product. There will be others who discover you and buy your product or service as you market to your target but you are after the target customer. If you are already in business, this may be a different exercise than if are just starting. If you are just starting out I want you to close your eyes and think of who you would most love to sell your product or service to (avoid the temptation to say “anybody with money in their wallet”.) What do they look like? How old are they? What income level do they have? Where do they live? Are they single, married, have kids? Where do they work? What do they do for fun? Where do they shop? What are their hobbies? Who are they friends with? What social media platforms, if any, are they active on? What do they enjoy most about their lives? What are they unhappy about? What are their dreams? How will your product or service help improve their lives? If you are selling to a business instead of a consumer, tweak the questions a little bit but keep the answers to your questions as if the business was a living, breathing thing. Congratulations! If you were able to answer these questions, actually giving some thought about them, you have completed a basic demographic and psychographic analysis of your target customer. With this information you can prepare a marketing plan to reach those target customers. You may have multiple target customers that you may want to do this exercise again for. If you are already have customers, your exercise is a little different. You should go through your list of customers and put them in three buckets. Bucket A comprises your top ten customers. These are the ones you love to do business with and who love to do business with you. It may turn out that these are your top ten revenue generators but this list shouldn’t consider revenue. Bucket B comprises all of your other customers except the customers you put in Bucket C. Bucket C contains the customers who you really shouldn’t be doing business with (but may need to still do business with) – the ones that make you cringe every time they call. For your Bucket A customers, go through the questions above for each one of them. Compare the answers to see what similarities you find. From these ten profiles, you should be able to create a target customer profile. You can then use this profile to develop a marketing plan. We will talk about marketing and marketing plans in the future, but having your target customer in mind as you make decisions about how you do business will be of great benefit to you.
0 Comments
 My wife and I find ourselves asking our children the same question when they ask if they can go “hang out” (children apparently do not “play” anymore) with some friends – “Is your homework done?” Before you can go out and play with your new business idea, you need to do some more homework.
You tested the feasibility of your idea earlier but still have more homework to do. You know there is demand for your idea. You know (not think) that people will buy your idea. You know your idea fills an unmet need. Your next homework assignment is to see if anyone (i.e. your competition) is already doing what you want to do and then determine if you can compete with their offerings. You are probably thinking – My idea is new. How can I have competition already? Mark Twain said, “There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely; but they are the same old pieces of colored glass that have been in use through all the ages.” There may not be a competitor doing exactly what you want to do but chances are someone has thought of and is doing something similar. You need to find out what is out there. MP3 players were around before the iPod and they essentially do the same thing. Why did Apple make the iPod? Apple’s idea was not the iPod. Their idea was iTunes. The iPod was the tangible version of iTunes. I guarantee Apple examined the MP3 player market and determined if their idea of iTunes would be enough to compete before they pushed forward on their idea. You need to at least look for the similar ideas to yours. Can they be a substitute for what you want to do? How does their pricing compare to what you were considering? How are you different? How are you the same? What do they do well (Strengths)? What could they do better (Weaknesses)? Who do they see as their competitors? What are their Threats and Opportunities? How busy are they? Who do they sell to? How do they market their products or services? Is there enough of a market for you to participate in and survive? Do they have patents or trademarks that would prevent you from competing? All this is really what people call market research. After looking at specific competitors, you can also check the industry. Visit your library or search online for periodicals in the industry. Ask for information from trade associations. Ask associations or advisors for comparative financial ratios in the industry (Robert Morris Associates, Hoover’s, and Bradstreets’ Business are some providers). Look at what the government has collected with census information and the Bureau of Labor Statistics. Another resource is your local Small Business Development Center and they can provide you a lot of industry and market research for free as well as provide other opportunities for business learning. Once you know your competitors, get ready to do your homework on your customers.  In in earlier blog I wrote about looking at opportunities and how the idea associated with an opportunity can become a business. In this post, we are going to dive a little deeper.
I introduced the Japanese concept of Ikigai, that intersection of what you are good at, what you love, what the world needs and what you can be paid for. The first step of starting a business is to test your idea(s). My great-great grandfather David A. Flanigan was an inventor. This past summer I was able to spend some time looking over his scrapbook of sorts. There were newspaper articles, correspondence, several of his original patents, wax seal and all, and some of his own writings and journaling. I learned a lot about him as I slowly turned the pages in that book. David had ideas. He designed a better water wheel to bring irrigation to his farm. He designed a twin turbine wind mill that generated more power to pump water or generate electricity. He even took that twin turbine idea and altered it to become a flying machine (think of it as an early helicopter). Perhaps his most famous invention was the cable works in Zion National Park for which Cable Mountain is named. At the age of 15, he had an idea that if he could create a cable system to carry logs and lumber down from the top of the mesa, where trees were more plentiful, into the canyon he could save days (3-10 days) of hauling logs and lumber by wagon team. It was interesting to read about his idea and the many trials he had learning about how wire stretches, geometry and physics and the importance of creating a brake to control the descent as the first cargo was bashed to pieces. Having proved it was an idea that would work, he set out looking for investors to start a sawmill and run the lumber down the cable. The cable system lowered lumber over 2,000 feet into the canyon in about two minutes. The cable works ran for about 26 years and moved hundreds of thousands of board feet of lumber during the time it was in operation. There are still remains of the cable works on top of the mesa today. David was a good inventor and loved to create. He saw something that the world at the time needed and he could be paid for. He found Ikigai for this project. Now it is your turn…take your business idea and ask yourself – Do I love this idea? Am I good at or can I be good at making or doing this product or service? Does the world need this? Will the world pay for it (does the world want it)? Now that you have your answers, you should be clearer about whether to proceed. The next step is to ask others what they think. Families love you and want to support you. Many of us with close families will take our ideas to them first. Because they love us, they will either be encouraging of you whether or not they think the idea is a good one or they will be discouraging to protect you, not wanting to see you fail if it doesn’t go right. Keep this in mind as you discuss your idea with immediate or extended family. I would suggest that your spouse should always be consulted as a business impacts their life and your life together. Look for a potential customer to test your idea. Invite them to lunch and say, “I have been thinking about this idea and wanted to get your thoughts.” Explain your idea. If their eyes light up, you have a great idea. If their eyes don’t light up, ask questions to get their thoughts. Try this on a few people and you will have a good idea as to whether or not your idea is needed and wanted in the world. You are only testing ideas – you don’t have to have an established product or service for these conversations. Last year, I started a different business with a friend. We felt we should go into business with each other and we brainstormed our ideas. She is a visionary and is great at creating ideas and big pictures. I am an integrator and am great at filling in the details and systems to make big pictures a reality. We agreed upon an idea and designed it. We then took it to a potential customer who had access to other potential customers. We explained it and they liked it as it benefitted them and their students. We then presented in front of a group of their students, also potential customers, and were met with blank stares. There was little to no interest. They liked the idea but it was a distraction from what their current goals were. In other words, they didn’t want it at the time and wouldn’t pay for it. Through this process of testing an idea, we learned we had a good idea but not a good business idea – we would be good at it, the world needs it, we would love or enjoy doing it but it wasn’t something we could be paid for. We put it in the great idea folder for later should the world change and be willing to pay for it and moved to the next idea to test. Testing your idea should be the first step of starting your business. Let me know how your testing goes. Image Source: National Parks Service  I had a neighbor who said, “If the recipe calls for a pound of butter or a pound of bacon, it is probably a good recipe.”
My grandfather was a professional chef and food service manager and worked in and ran many restaurants and cafeterias. I loved visiting the kitchen and watching him work. My father was also a chef and food service manager for a good portion of his working life. I enjoyed watching my dad pull an ingredient list from his head after taking a bite or two of a dish at a restaurant. After he started teaching, he continued catering on the side as well as doing some competitive cooking, winning many state competitions and even a world championship. I liked to watch him and his cooking partner create recipes from scratch and tweak them to achieve the desired result. Despite this pedigree, my mom was the one who taught me to cook (and also to never make bread dough on the piano again). She taught me how to follow a recipe and what different terms meant – simmer, boil, roast, bake, broil, stiff peaks, etc. I learned to cook from her and am grateful for her lessons. I did learn to taste from my dad. I pay attention to textures as well as flavors and presentation. I enjoy cooking. There is still something special when cooking from scratch. I would read recipes and cookbooks and watch cooking shows on PBS. I was studying the recipes rarely making many of them just to learn about flavors, ingredients, steps and techniques to make the recipe. Baking was a different story. While I can open the pantry and the refrigerator and assemble a meal from scratch without a recipe, I follow a recipe when I bake. The chemical reactions that take place to make a great loaf of bread require the exactness of a recipe. After having worked in industry and in my own business, I have become a believer that to make a great business requires a recipe. Many business owners start their businesses from scratch. Some buy a business. Some inherit one. Regardless the method of their start, when starting from scratch there is a lot of trial and error involved. Many businesses fail because they don’t have a recipe to follow to make what they dreamed of when they started a reality. Many go about business without having read, studied or even following a recipe for a successful business. Over the coming weeks, I would like to share some of my ingredients and recipes for a successful business. Bon Appetite! |
PurposeThis blog allows you to experience the raw, gut wrenching drama of human conflict through accounting in each of its three stages: preparing to do battle, the thrill of victory and the agony of defeat. Archives
December 2022
Categories |
RSS Feed