Introduction
In this series, we’ll explore how to tackle three fundamental questions for business success and provide practical tools and techniques for SME owners to answer them.
Since the inception of businesses, these questions have puzzled many owners, even before the advent of AI, the internet, and electricity:
- Who is my ideal customer?
- What makes my product or service attractive?
- How should I be pricing my product or service?
Table of Contents
Case Study: The Warehouse
An article in the NZ Herald from June 2024, titled “Big Red: What went wrong for The Warehouse,” highlights the struggles of one of New Zealand’s most renowned retail brands.
A senior analyst at Forsyth Barr questioned, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on.”
Another analyst, Greg Smith of Devon Funds Management, remarked, “They need to recalibrate what is the value proposition.” The Warehouse, known for its bargain prices, now faces competitors like Kmart who influence what Warehouse customers consider a bargain.
Relevance to SMEs
Despite The Warehouse being a large, complex business in a highly competitive market, the relevancy of its issues applies to SMEs as well. Regardless of the type of business, the principles of success remain consistent. Identifying your target customers, understanding why they should buy your product, and determining the right price point are crucial for any business, from global conglomerates to food trucks. Once you answer the first two questions, the third becomes significantly easier.
Understanding Your Ideal Customer
In this series, we will examine each of these three questions and offer insights into finding the answers. This article focuses on the first question: Who is my ideal customer – target audience?
Advertising legend David Ogilvy spoke of “man’s unchanging needs.” He meant that despite changing times and circumstances, consumers have consistent needs. For instance, youthfulness in the beauty industry, safety and style for cars, refreshment for drinks, and security for banks. Many of Ogilvy’s ads could have been written today instead of the 1950s.
It’s essential to remember that a demographic never buys anything—people do. Understanding who your target customers are as individuals is crucial to crafting marketing messages that resonate with them.
Crafting Customer Profiles
Gender, age, and class are part of the equation, but not the complete answer. Consider their attitudes towards your sector and the circumstances that might lead them to consider purchasing your product or service. These factors are the first steps in building a profile of your customer segments.
Think of your ideal customer as a character in a novel. What do they look like? Where do they live? What do they drive and wear?
More importantly, why do these things matter to them? Where does your product fit into their world, and why? Are they different when they decide to buy your product? Understanding different attitudes and values is key.
Developing Multiple Personas
Your typical customers might encompass multiple personas, including a primary audience and a secondary customer. Write separate portraits for each. Determine which is the larger segment and assign a rough percentage to represent their share of your business.
Bring these personas to life—give them names and imagine their daily lives. Consider their purchasing decisions and how they would react to your product or service.
This exercise might sound like a high school project, but it is highly effective. Great brands have grown using this technique, and it can work for you too.
Applying the Insights
If you struggle to answer these three questions or need a break from daily operations to reflect on them, this is a worthwhile exercise. If a publicly listed company like The Warehouse is grappling with these questions, you are not alone. View this as an opportunity to ensure your business covers the fundamentals of success.
By understanding your potential customers and crafting targeted marketing messages, you can gain a competitive advantage. Utilise social media platforms to reach different market segments, and adjust your pricing strategies to meet customer expectations. A well-thought-out marketing plan can help you capture more market share and position your business effectively in the marketplace.
Tailoring Strategies to Your Business
Consider the type of business you operate when developing your pricing strategies. Different types of businesses may require different approaches. For example, a service-based business might focus on value-based pricing, where prices are set based on the perceived value to the customer, while a product-based business might use cost-plus pricing, where a fixed percentage is added to the cost of production to determine the selling price.
Understanding Market Share and Competitive Advantage
Understanding market share is also crucial. Knowing your position in the market relative to your competitors can help you adjust your strategies to gain a larger share.
Competitive advantage plays a significant role here. Identifying what sets your product or service apart from others can be the key to attracting more customers. This could be anything from superior quality, unique features, exceptional customer service, or innovative technology.
Incorporating Demographic Information
Incorporating demographic information into your marketing plan can further refine your approach. Understanding the demographics of your target market can help you create more personalised and effective marketing campaigns. For example, if your target market consists of young adults, your marketing messages might focus on trends, social media engagement, and mobile-friendly content.
Developing a Marketing Plan
Remember, a well-defined marketing plan is a roadmap to success. It should outline your goals, target audience, marketing strategies, and the metrics you will use to measure success. Regularly reviewing and adjusting your marketing plan based on performance and market changes is essential to staying relevant and competitive.
Conclusion
In conclusion, addressing the three critical questions of who your ideal customer is, what makes your product or service attractive, and how to price your product or service appropriately is fundamental to business success.
By understanding your target customers, leveraging targeted marketing messages, utilising social media platforms, and developing effective pricing strategies, you can gain a competitive advantage and capture more market share.
Remember to incorporate demographic information and regularly review your marketing plan to ensure it aligns with your business goals and market trends. This approach not only helps in attracting potential customers but also in retaining existing customers, ultimately driving business growth and success.
