Market A Business
Q1. What General Role Does Marketing Play In Small Business?
Your customers are the most important part of your business. Without customers you wouldn’t be in business. It’s critical to carefully analyze who your customers are, how much and how often they buy from you, and why they do business with you rather than someone else.
This portion of our site will cover the basics of marketing a small business. We have included information to get you thinking about your target market and the importance of focusing your advertising efforts to the correct group within this market. In order to successfully sell your product or service, you will need to know who will be buying it. By clearly defining who your customer is (age, gender, income, occupation, etc.) you can begin to carve out your niche market.
Q2. What Should You Focus On To Drive Up Your Revenue Base?
As you begin to plan your business, it is important to understand where your financial resources will be coming from. Aside from loans or lines of credit for things like capital expenses or expanding a product line – where does the money come from to pay the bills? The customer, of course! If you want to generate a steady revenue stream, you must know your customers. You must be able to not only entice them, but also keep them coming back. The only way you can find out who your potential customers are is through market research. Finding out what type of person will be buying your product or service and learning to focus your advertising efforts correctly is paramount to running a financially successful organization.
Q3. Who Is Your Customer, And How Do You Define Your Customer?
Marketers usually define their customers by their physical characteristics such as age, gender, occupation, income, etc. These are important because they represent the natural categories of customers. Some of the more common customer characteristics include:
Gender – Men and women exhibit different habits when it comes to purchasing.
Age – Second only to gender as most important characteristic to measure.
Income – A good indicator because it often shows whether the customer can buy.
Occupation – Relates closely with age, income, and education.
Location – Can be designated in any of several different ways.
Family status – Couples differ significantly from singles.
Children – Households with children can exhibit very different buying habits.
Education – An indicator of advertising comprehension, reasoning power, etc.
Ethnic origin – People from different cultures have different values and needs.
When you are analyzing your market, the 80/20 Principle is a good one to keep in mind. It states that 20% of your customers will consume 80% of your business’s products or services. Conversely, 80% of your customers will use only 20% of your products or services. So why is this important to a small business owner? It is key for you to focus your advertising and marketing dollars on the group of customers who will be consuming 80% of your product. Let’s look at the beer industry in America as an example.
First of all, think of a beer ad you’ve seen on television. Now, can you describe the person this ad is targeting? What is this person’s age, gender and interests? The beer industry advertises to basically one group of individuals, right? The reason is, that group consumes 80% of the beer in America! The beer companies are getting “the most bang for their buck” by targeting this group of people – 20% of its customer base. The other 80% of beer drinkers will likely continue to drink beer whether or not beer ads appeal to them. These are the people who will drink watching a game, with dinner, or maybe at a special event. Their drinking habits are more of a sure thing, albeit in smaller quantities.
When thinking of this example, it is your job as a small business owner to identify your “20%” and market toward them. This group can be identified utilizing your national trade association and by obtaining market analysis reports.
The links below will help you in obtaining market research information. They include trade association information, census statistics and additional market analysis information. Use these resources to guide you through the next area, which focuses on determining actual numbers of potential customers and how to begin to analyze the data you collect.
Q4. What Types Of Market Research Are Available To Your Business?
Marketing research can help you learn valuable information about your business. One of the most important pieces is an idea of how many customers you potentially have, and how many of these potential customers are likely to become actual buyers.
The information you need to identify and count potential customers falls into four basic areas:
- Information within your own files.
- Information available to everyone (known as secondary sources).
- Research you do yourself.
- Research you pay to have done.
Click on the link below for a worksheet that can be completed in conjunction with this information on five key areas in marketing research:
Market Research Worksheet
- Determining the number of your potential customers.
This step requires doing homework. If you are selling to the general public, you need to look at the US Census data for your market area. If you sell to other businesses, there are many potential sources of information; one of the best is a trade association.
- Determine the number that will likely purchase from you.
This is a very tough question! You need to consider your competition, both in numbers and quality. You also need to realize that some potential customers will not buy the product from either you or your competitors.
- Determine your average customer sales per year.
This step requires more homework. Trade association or industry publications are good sources of information needed to answer these questions.
- Determine your annual sales volume.
You now know the number of customers and average amount each customer will spend per year. Multiply these two numbers to calculate your expected annual sales volume.
- Evaluate the annual sales volume figure.
Does the number you calculated in the previous step make sense? If not, go back to the first step and try again. What assumptions have you made about your customers? How accurate or risky are these assumptions? You want to substitute actual figures derived from some information source for your assumptions whenever possible.
A key to the success of your business is establishing a unique market niche. In order to do so, you must take a close look at your competitors so that you can identify areas where you have a competitive advantage, as well as those areas that could use improvement. The worksheet below will help you think about your business and how it ranks against the competition.
Competitive Analysis Worksheet
Q5. What Should You Consider When Deciding On The Best Advertising Strategy?
Once you have a firm grasp of who your customer is, your advertising efforts must be clear and focused. Target your specific customer base and get your message to them in a way they will connect with and understand. Advertising is important, but it can also be costly. Don’t waste precious dollars on an ineffective ad campaign. When properly researched and executed, advertising can create stellar results for your company. But even the slickest print piece, catchiest slogan and coolest logo will mean nothing if they are not placed in front of the right audience.
The market research you’ve completed with guidance from this area will help you find your customer base and learn what kind of people you need to attract. Don’t guess – your hunch may not be correct. If it is, research will only reinforce your initial thoughts and help you to further develop your ideas. Do your homework, learn your customer, and develop your advertising accordingly.