DIY Business Review – Asking yourself the tough questions Part 2

This is part two of the five part diy business review series, asking yourself the tough questions. Today we are focused on Your Customers and Consumers and Your Market and Market Segmentation. 

Your Customers and Consumers

1. Who makes the purchasing decision to use your products and services?

Often the person who uses your product or service is not the person with purchasing authority or purchasing influence. The person with purchasing authority may be the Managing Director; the person with purchasing influence may be the Office Manager; but the person who actually uses the product may be the Office Junior, a Storeman or even a Sub- contractor.

In many large organisations, the Purchasing Officer has a high degree of autonomy; in others the buck will always stop and cheques will always be signed only by the Managing Director or CEO. Ensure you are fully aware of the purchasing decision making hierarchy. You may be wooing the wrong person.

2. Typically, who is involved in the purchase decision to use your products or services?

Does management ‘tell’ the user? Is it a group decision? Are there unusual key influencers in the purchasing process?

Ensure you know all the people involved in the purchasing decision. It will likely be a combination of who uses it and who pays for it. But in large organisations there could be key influencers such as Accountants. One of my clients deals with nursing homes and hospitals. There are myriad people involved in the purchase decision from clients (in-house or long-term patients), the family of clients, occupational therapists, nurses, nursing directors, and boards. It is not uncommon for everyone in this hierarchy to give a tick of approval only to be over-ruled by the Accountant.

3. Who uses your products and services?

The person who uses the product or service may have a different viewpoint as to its value or importance. Thus, they could be an ally or someone who inadvertently causes you to lose a customer. Take a nursing home. Often nurses will influence the buying decision of a bed or club chair because they are the ones moving it around. But the client or patient is the end user. There needs and ‘value judgements’ will likely differ from those of the nursing staff. Because the patient will be looking for comfort, whereas the nursing staff will be looking for good mobility and occupational health and safety concerns.

4. How much repeat business do you have?

Do your customers know everything you offer? Could you easily customise a product or service in order to gain more business from the same client? Do any of your customers have different divisions with different purchasing requirements and decision makers to whom you could introduce yourself?

One of my clients has three divisions all with separate sales teams. The three divisions have different but complimentary products and services in office equipment, telecommunications and IT. Inexplicably, the sales teams did not share a Customer Relations Management system or information about clients. Therefore, their combined 2400 clients were purchasing from one division only (one of the three) but purchasing their other requirements (which they could easily get from this one company) from another company.

The sales team ‘mind set’ was only on their own product offering. There were two key reasons for this. One was that the separate divisions didn’t know much about each others products. And, two, they didn’t want to risk losing a commission if the client decided to spend funds elsewhere or split the budget. My client’s sales teams were not customer focussed. Ensure that you are.

5. How do you price your products and services? Is this above or below industry standard?

This is always an interesting one because unless you can walk in to a retail store and directly compare prices, it can be difficult to ascertain details of competitor pricing. This is especially difficult in business-to-business dealings and when you offer professional services, not a product.

Simply put, price is the amount of money exchanged for a product or service. The extension of this is the value consumers place on the benefits of having or using your product or service. Price is usually the major consideration in poorer nations, among poorer groups and with commodity products. In wealthier markets, price often is not the major concern for consumers. Your pricing decision will be based on internal company factors – costs, overheads, marketing objectives, marketing-mix strategy, and external environmental factors – supply & demand, competitor pricing, competitor offers, and other external factors.

In many sectors, price is de-emphasised and other factors such as convenience, features, benefits and value-adds are ‘marketed’ to consumers. Often, the best strategy is not to charge the lowest price but rather to differentiate your marketing offer to make it worth the higher price.

6. How do you package/deliver your services?

Do you have professionally designed packaging, wrappers, labels, a logo? Buying decisions can be greatly influenced by packaging – and not just for products. The ‘packaging’ of services with regards written proposals, PowerPoint presentations and how reports are delivered are all visual branding issues. At the very least a label identifies to a consumer what a product is. But labels will also promote a product.

One of my clients writes customised software with the ‘product’ being installed by the software developer. There is no ‘packaging’ per se. Sometimes they will be asked to provide a back-up CDRom, which they provide – no logo, no identifying marks, no packaging. After going thru the business review session, they now provide fully ‘branded’ CDRom’s upon request.

Having spent much time in Japan, I know that the wrapping of a gift is as important as the gift itself. What does your packaging say about the ‘gift’ of your product or service?

Your Market and Market Segmentation

1. How would you define the market in which you operate?

For example, telecommunications for medium-sized businesses. Your target market consists of buyers but those buyers may differ in their wants, location, resources, buying attitudes and buying practices. Because buyers have unique needs, each buyer is potentially a separate market. Because you can’t realistically design a different marketing program for each buyer, it is worth understanding if you have different classes of purchaser.

2. Within this market are there any distinctive market segments?

This refers to groups of customers who have particular characteristics. There is no single way to segment a market but you can categorise. Identify categories such as age, income, geography, gender, spending habits, occupation, etc – whatever set of categories suits your business. For example, you may have a product or service more suited to women. But what are their age groups? Are they stay-at-home mums or professional business women? Are they single? Do they have children? Do they live in a big city or smaller town? What is their approximate annual income?

3. What trends have you identified in your market (in technology, innovation, buying behaviour)

Are you attracting more customers from a certain market segment? Are sales increasing or decreasing? Has technology or government regulations affected your business? Are there market segments that are increasing or decreasing? Why?

4. Is your business seasonal/does it experience peaks and troughs? Why?

Is your business affected by Christmas, public holidays, weather, school holidays, community events, tourism, overseas students, government grants, or any other influences?

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About the Author: Penelope Herbert was born in New Zealand, lives in Australia and has worked in Japan, Malaysia and the USA. She trained as a Film Editor/Director in New Zealand before embarking upon various media, marketing and public relations roles overseas. Her time as Editorial Director for a national fashion and lifestyle magazine gave her a passion for print and the impetus to open a marketing & public relations agency, Hot Pepper, in 2002. For seven years she has been a Contributing Editor to ‘in-business’ magazine specializing in women in business and the issues & challenges of small business owners.

A sought after public speaker and seminar presenter, Penelope has authored two comprehensive workbooks based on her popular workshop series and her work with small business owners & corporate clients. She also recently finished an eight-week television segment based on her co-authored book, Underdog Marketing, to be released in March 2009. The book is a complement to the state-of-the-art, skills development, 12-step mentored marketing platform which features video, podcasts, structured courses, interactive features and a members forum. Penelope lives in Adelaide with her partner, Terry Reeves (himself a marketing guru so good for bouncing off) and their gorgeous Hungarian Viszla dog, Shelby.

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