Introduction:
As business owners we must never be mistaken about why businesses exists and what makes them successful. Starting a business has less to do with the needs of the business owner but more to do with customers. Even our employees and suppliers come before us. Look at how the money flows in a business and you will see this fact. We must first serve our customers to get paid, but the second we are paid we must pay our employees and suppliers. If we manage these processes well, then we are left with profit that we can use to pay ourselves. But what we pay ourselves is also limited by what we have to reinvest back into the business. As business owners our needs come last in every sense.
But the beauty of it is that when we do business well. Our needs are always catered for. But everything starts with the customer. So, why is it often that we start businesses and fail to attract customers? Why do we struggle to sell our goods and services? Why are we always struggling to make money through our customer service?
This Blog's contents:
1. It all starts with why you are in business.
2. Are you an entrepreneur or a survivalist?
3. Study your customer’s needs, wants and desires.
4. 2 areas you need to study about your customers.
5. Is this an idea worth pursuing?
6. Your competition.
7. Conducting market research.
8. keep track of your market research learnings.
It all starts with why you are in business:
An entrepreneur is a person who creates a business that meets the needs and desires of customers. They are always looking for new and innovative ways to improve their products or services, so that they can better meet the demands of their customers. Entrepreneurs are willing to take risks and seize opportunities, all with the goal of providing high-quality solutions to their customers' needs. They are often driven by a desire to make a positive impact on the world and are committed to delivering value to their customers.
On the other hand, a person who starts a business purely to meet their personal needs is more focused on fulfilling their own desires. They might start a business to generate income, to achieve financial independence, or simply to pursue a personal interest or hobby. While there is nothing inherently wrong with starting a business for personal reasons, these individuals may not be as attuned to the needs of their customers and may not prioritize customer satisfaction as highly as an entrepreneur would. This person we call a ‘survivalist’.
When we spend our time concerned about meeting our personal needs, we detach from the main reason we are in business, ‘meeting the needs of the customer’. Business is much less about our needs as entrepreneurs but more about the needs of our customers. If we want to succeed in business, we should take our eyes off ourselves and put them on our customers. If we help them meet their needs, then we will be able to meet our needs also. This goes hand in hand with the principle Jesus delivered to his servants. In Mark 9:35, Jesus says, “If anyone wants to be first, he must be the very last, and the servant of all." This verse captures the main spirit behind entrepreneurialism.
If our focus is on the needs of our customers – then we will know what they want and when they want it. We will then be able to adapt and help them get it. And when we do so, they are happy and will come back to us again and again when they are in need. A satisfied customer is also likely to tell their friends and family about the help you gave them. This will result in more customers coming into your doors seeking assistance. This will result in recurring revenue and increasing numbers of satisfied customers. A business focused on its customers needs rarely runs out of customers to serve.
Are you an entrepreneur or survivalist?
Generally entrepreneurs are more successful in business than survivalists. Read these questions and analyze your approach to business. The lovely part with all this is that if you are willing - you can change.
1. Do you enjoy finding ways to solve problems or meet the needs of others? (An entrepreneur is someone who is driven by the desire to create solutions to problems or fulfill the needs of others. If you enjoy the challenge of finding ways to meet the needs of others, you may have an entrepreneurial mindset.)
2. Are you willing to take risks to achieve your goals? (Entrepreneurs are often willing to take calculated risks in order to achieve their goals. If you're someone who is willing to step outside of your comfort zone and take chances, you may have an entrepreneurial spirit.)
3. Do you have a vision for how you want to impact the world? (Entrepreneurs often have a strong sense of purpose and a vision for how they want to make a positive impact on the world. If you're motivated by a desire to make a difference, you may be more entrepreneurial.)
4. Are you focused on meeting the needs of others, or primarily concerned with your own needs? (Entrepreneurs are typically focused on meeting the needs of their customers or creating solutions that benefit others. If you tend to prioritize your own needs above those of others, you may be more of a survivalist.)
5. Do you enjoy collaborating with others to achieve a common goal? (Entrepreneurs often work collaboratively with others to achieve their goals. If you enjoy working with others to achieve a shared vision, you may have an entrepreneurial mindset. On the other hand, if you prefer to work alone or primarily for your own benefit, you may be more of a survivalist.)
Being successful in business requires that your focus on the needs of your customers above your own needs and desires. Ask yourselves these questions and consider where you could be going wrong with your business. If you do not know your customers and their needs, if you don’t know why customers must buy from you and not your competition – you have some thinking to do. Put yourself in the shoes of your customers and see the world as they see it. Why should they spend their money on you? Are you asking them to do what you wouldn’t do? Is your only competitive advantage the fact that you are a Black person doing business? Well, do you only buy from black businesses? When spending money on something – are you concerned about the color of the persons skin who is selling you? Or are you more concerned with solving your problems and meeting your needs? Will you not buy an apple at Pick n Pay for R3, but buy it from Sfiso for R7 just because he is black?
Study your customer’s needs, wants and desires:
To know what your customers need requires that you study the market.
A market is a place where people buy and sell things like food, clothes, or services like haircuts or car repairs. When people buy and sell things in a market, they decide how much things are worth based on how much people want them. This means that if a lot of people want something, it will be more expensive, but if not many people want it, it will be cheaper. In a market, people can find things they need or want, and sellers can make money by selling things that people want to buy. Markets can be big or small, and they can be in real-life stores or online.
In a market it is not just your customers who are present. As you can see from above, there are also other people selling goods and services. These people can also be selling the same goods or services you are selling to the people you want to sell to. This is your competition. This is why it is important to understand your customers well. You need to know what your customers options are. Does it make sense to you that they should pay R10 for something they can get for R3? Is this how you make your buying decisions? Do you spend the extra R7 just because you can? Or do you consider your options and pick the best option for you? Which is, if you can save the R7, you save it so you can buy other goods or services that you need.
2 areas you need to study about your customers.
- Demographics: these are facts about people, like how old they are, where they live, how much money they make, and if they are married, etc.
- Psychographics: these are things about people's personalities, like what they like to do for fun and what they care about, etc.
Companies use both demographics and psychographics to figure out who might want to buy their products. For example, a company that sells baby things might look for women who live in cities, are between 25 and 40 years old, and make a lot of money. They might also look for women who like to take care of the environment, so they can sell eco-friendly baby things to them. By using both demographics and psychographics, companies can make their marketing better and sell more things.
Your competition studies their customers like this. This helps them speak directly to their customers and avoid trying to please those whom their products or services are not meant for. If you are selling baby products – your interest is those who have babies. You are not trying to impress single people who do not even want to have a child. Which means, you have to know exactly who you are trying to sell to. And you want to know why they will buy from you. You have to know their needs so that you can speak to this need and show your customers that you can help them meet it.
When you know who your customers are and what their needs are – you can tailor your marketing message directly to them. In this case, you will be able to get their attention. With their attention, you might be able to get them to try your goods or services. And if you deliver on your value proposition (a clear statement that explains the unique benefit or value a product, service, or offer provides to its customers) – the customers will trust you and retain your services. When you can do this, you can limit the cost of your marketing initiatives. As a small business owner you can’t afford to do mass marketing (a marketing strategy that targets a large and diverse audience with a standardized message or product). It is expensive and you cannot afford it. With lower marketing costs and a clearly targeted customer segment – you will be able to get a steady flow of customers on an ongoing basis.
Is this an idea worth pursuing?
The more people you serve, the more money you stand to make. If you are selling something for R1, but this is something 20 million people need – you can make R20 million in sales. But if you are solving something that costs your customers R20 000, but only affects 5 people – you will only make R100 000 in sales. This is where you are allowed to consider your needs. Are you comfortable making only R100 000 in sales? Or do you need the R20 million? Or more?
You must then consider how many people need your solution (goods and services)? This is your total addressable market. You must also consider how often these people will need your solution. For example, you can only remove an appendix once. But you can use Microsoft Office daily for a lifetime. Knowing how often a person needs your solution and how much they are willing to spend on it, will help you determine your customer lifetime value. The customer lifetime value is a very important term in business development.
Customer lifetime value (CLV) is a way for companies to figure out how much money a customer will spend over the course of their entire relationship with the company. This includes all the time the customer buys something from the company, and how much they spend each time. Companies use CLV to help them decide how much money they should spend on marketing to keep that customer coming back, since it's usually more expensive to get a new customer than to keep an existing one.
When you know how much a customer will spend on your business for a lifetime, you are then able to calculate how much money you can spend to attract them to you. You wouldn’t want to pay R50 to get a customer who will only pay you R25, you will be making a loss. But you can spend R5000 to attract a customer who will earn you R50 000 in their lifetime.
This doesn’t stop here. When you know how much customers will spend in your business and how many customers share this problem – you are able to determine your total addressable market (the total amount of sales a product or service can potentially achieve within a specific market). A simple formula is:
Total addressable market = (Customer lifetime value) x (total number of customers who share the problem you are solving)
When you know this, you know the total market opportunity that exists for your business. Your investors will be very interested in this figure because it tells them how much money stands to be made with your business.
All in all, all this will tell you is if your idea is worth pursuing. They say that ideas are free, but they are costly to implement. You don’t want to start your business on false pretenses. You will spend a significant part of your productive years working on your business. And you want to make sure that you are chasing something that will benefit your customers, but also help you live the life you want to live. Knowing your total addressable market will help you remain focused knowing that you are pursuing a proper idea that will benefit everyone involved
The decision to scale (i.e., expand your operations, increase resources, and grow revenue while maintaining efficiency and profitability), your business comes with advantages and disadvantages. It is important to carefully consider the pros and cons before deciding to scale your small business.
Your competition:
Knowing who your customers are is just 1 part. You also need to know who else out there is helping your customers achieve the result you are promising them. If you are selling food in town, you have to know who else is selling food in town. What food do they selling? How they present this food to their customers? How much do they sell it for? How do they package the food? You must study their customers and their behavior: why do these people buy from this person? What draws them to this particular food stand?
It is important for you to ask these questions. Customers will compare you to your competitors, and you will have to convince them to buy from you instead of your competition. If you don’t know how you are different from the competition – your customers will make up their own reasons. You want to be on top of this. If you are Checkers, you want your customers to know why they should choose you instead of Spar. Communicating this difference to your customers will help them make their decision easier, whilst also increasing your bottom line.
Knowing your customers well will help you differentiate your business from the competition. The goal is not just to be different. What makes you different to the competition must matter to your customers. Apple and its founder, Steve Jobs give us a perfect example of this differentiation. When Jobs returned to Apple in 1997, the company was struggling to compete with other computer manufacturers. Jobs recognized that in order to stand out, Apple needed to create products that were not only technically superior but also visually stunning and easy to use. This led to the development of products like the iMac, which featured a colorful, translucent design that was unlike any other computer on the market at the time.
Apple continued to differentiate itself with the introduction of the iPod, which revolutionized the way people listened to music, and later the iPhone, which redefined the smartphone industry. By focusing on design, user experience, and innovation, Apple was able to carve out a unique niche in the market and establish itself as a leader in the tech industry. Today, Apple is one of the most valuable companies in the world, and its products continue to be synonymous with quality, style, and innovation.
Knowing your customers and your competition will help you to decide what products or services are missing in the marketplace. It will also help you figure out the best ways to deliver your services. For example, Capitec's owners differentiated their bank from FNB by focusing on providing low-cost, simplified banking services that were accessible to a wider range of customers, while FNB focused on offering more premium, high-cost banking services.
Knowing your customers will also help you to set appropriate prices. If a solution exists in the market for R50, you will not spend your time working on a solution that costs R150. If people can meet their needs for R50, they will not give you the extra R100 just because. This is exactly how you would make your buying decision. One example of a company that spent a lot of time developing a more expensive solution than what was on the market, only to fail dismally, is the Google Glass company.
Google Glass was a wearable technology device that was released in 2013 with much fanfare and hype. The device was essentially a pair of glasses that could display information in the wearer's field of vision, including messages, directions, and other notifications. However, the device was expensive, with a price tag of $1,500 (R28 676 using the current exchange rate), and was criticized for being impractical and intrusive, with many people feeling uncomfortable being around others wearing the device. Despite Google's investment in the technology and marketing of the product, it failed to gain widespread adoption, with only a small niche of tech enthusiasts and early adopters showing interest in the device. Google Glass was eventually discontinued in 2015, and Google shifted its focus to other products and technologies.
So, even the best companies in the world fall into this trap. Don’t do what Google did. Do what Capitec and Apple did. Look at your customers, study your competition and provide goods or services that cater for an actual need and at a price that customers will pay.
Conducting market research:
There are many ways that you can conduct a market research. Below, we just look at the steps you can take to do this research:
1. Define your research objectives: For example, you may want to understand customer satisfaction with your product, identify new market opportunities, or assess the potential demand for a new product, etc.
2. Identify your target audience: For example, if you are conducting research on a new line of skincare products, your target audience may be women between the ages of 25-45 who are interested in natural or organic skincare products.
3. Choose your research methods: For example, you may use online surveys, focus groups, or in-depth interviews to gather the information you need. If you are targeting a younger demographic, you may choose to use social media platforms like Instagram or TikTok to reach your audience. However, if your business is still in its early stages of development – your focus should be talking directly to customers.
4. Develop your research instrument: For example, you may develop a questionnaire or discussion guide that includes open-ended questions, multiple-choice questions, or rating scales to gather feedback from your target audience. At the early stage of business development – focus more on open ended questions.
5. Pilot test your research instrument: For example, you may test your questionnaire or discussion guide on a small sample of people to make sure it is clear and effective before administering it to your target audience. Use family and friends on this stage.
6. Conduct your research: For example, you may administer your survey or hold your focus groups or interviews to gather the information you need. You may conduct the research online, over the phone, or in-person. Again, when your business is still quite small – focus on talking to customers in person.
7. Analyze your data: For example, you may use statistical analysis or coding techniques to make sense of the data you collected. This may involve creating charts or graphs to help you visualize the data. A simple excel spreadsheet can help you track the information you learn from your customers and analyze it.
8. Draw conclusions: For example, you may interpret the data to draw conclusions about your market and identify insights that can inform your business decisions. You may use this information to make changes to your product or marketing strategy. Do not shy away from being decisive.
9. Communicate your findings: For example, you may share your research results with key stakeholders in your organization, such as managers or executives, to inform business decisions. If you are alone in your business' - you must still share your learnings with your Advisors or Business mentors.
10. Use your research to improve your products and services: For example, you may use the insights gained from your market research to develop better products and services that meet the needs of your target customers. For instance, if you find that your target audience prefers natural or organic skincare products, you may choose to reformulate your products to meet this demand.
keep track of your market research learnings:
1. Organize your findings: Create a clear and organized system for storing your research findings, such as a spreadsheet or database, that can be easily accessed and updated. Microsoft Office and Google has these resources available.
2. Categorize your data: Sort and categorize your data into relevant themes and topics, making it easier to identify patterns and trends.
3. Create summaries: Develop summaries of your research findings that highlight key insights and trends, as well as recommendations for action.
4. Share your findings: Share your findings with relevant stakeholders, such as your team, partners, or investors, to gather feedback and ensure everyone is on the same page.
5. Continuously revisit your findings: Revisit your research findings regularly to ensure they remain relevant and up-to-date, and to identify any new trends or opportunities.
6. Use technology: Consider using technology such as data visualization tools or dashboards to help you store and analyze your research findings more effectively.
For example, if you conducted market research on customer preferences for a new product, you could organize your findings by category, such as price sensitivity, product features, and target demographic. You could then create summaries of your findings for each category and share these with your team to inform product development and marketing strategies. You could also use a data visualization tool to create charts and graphs that visually represent your findings, making it easier to identify patterns and trends.
Whatever you do, conduct proper market research before starting your business or continuing to grow it. The market is constantly changing, and you have to see trends and patterns to make the best decisions for your business. Your business exists to serve customers and so you must know them. If you do not know them well enough – your competition will run rings around you, as they should.
Don't confuse strategy to tactics:
Strategy is the big picture plan for long-term goals, while tactics are the specific actions and steps taken to make the plan work and achieve short-term objectives. When you decide to use Facebook to talk to your customers - this is a tactic. But when you decide to implement a comprehensive social media marketing plan to increase customer engagement and reach, that would be a strategy.
Conducting market research is essential for determining a smart business plan. It helps you understand what customers want and what your competitors are doing. With this knowledge, you can create a clear strategy to reach your goals. Without research, you're just guessing, and your actions may not be effective. So, research gives you a strong foundation to make smart decisions and develop effective tactics that lead to success.
Conclusion:
Study your customers and find out all you can about your competition. You want to deliver goods and services that the market actually needs. When you are struggling to sell your products and struggling to grow your customer base – you must go back to your market research. Remember that people can say one thing and go to do the opposite. You should not be gullible. And you must avoid the confirmation bias (Confirmation bias is when someone only looks for information that agrees with what they already believe and ignores information that doesn't fit their beliefs). When people spend money on your goods and services – you know you have hit the right spot. And when they aren’t – you still have work to do to confirm whether the problem you are solving is actually worth solving or not.