The absolute number one marketing rule for any type of business is ‘Know thy customer’! It is also the number one mistake (small) business owners make: not defining and knowing their target market well enough. I see it over and over again. You ask a business owner who they are targeting and they – depending on their type of business – will for instance answer small businesses or people who want to be healthier. Have you ever counted how many small businesses there are? And do you know anyone who doesn’t want to be healthier? Conclusion, these descriptions are way too broad to be useful.
So why is knowing your customer important?
Say you have a food supplement web shop located in The Netherlands and you target people who want to be healthier. Not knowing anyone who wants to be unhealthy, that is pretty much everyone so if you wanted to reach them all and wanted to take out an ad for instance, you would have to go to the biggest newspaper in the country in order to reach them all. Or have a commercial made and buy airtime on the TV channels. In order to reach the masses you have to take to using mass media. If you are a small business owner, you do not have the budget for that.
You have to have a more targeted approach and select one or more market segments you want to single out. With the food supplement web shop you could for instance target pregnant women. Whatever your business, you in order to target your customers and know more about them, you have to go through a number of steps to take a more focused approach.
And don’t think that because you don’t do offline marketing, you are off the hook. Knowing your customer is simply Marketing Rule #1. Yesterday evening I attended a Malaga Business Minds event where Sonia Ingriselli of Plush Global Media gave a presentation on The Essential Introductory Guide to Search Engine Optimization to local business owners. She said a lot of important things and in my opinion she should moonlight as a SEO Standup Comedian. One thing specifically that stuck with me when she explained about keywords, was her statement ‘but you know your customers right?”. Meaning that by knowing your customers, you know how they search for products or services that you are offering. And I agree. That is the way it should be, but more often than not, businesses have little knowledge about how their customers think and act. Even though it is one of the basics of marketing: Know your customer!
Because if you do not know your customer, you do not know how they behave, what they do, what they read, where they go, and which tools and media you should use to actually get your marketing message across (although SEO is a non-negotiable basic for any business with an online presence). So how to go about it?
Group consumers with similar problems together
As an entrepreneur you are in the business of solving your customers’ problems. You provide them with a solution that they need. In the case of the food supplements there literally are a lot of problems you could help your customers with; energy levels, brittle bones, depressed moods, an extra everyday boost, you name it.
Define those groups that have identical problems and needs. In the case of food supplements you may have quite a lot of problems you could solve, so you may have to make a selection before going to the next step, but you catch my drift.
Attach characteristics to each group
Then for each segment determine if you can attach certain characteristics to that group. You can look at demographic characteristics (old, young, family with children or retired people, how much money they make etcetera). You can look at geographical characteristics (do people from urban areas use more food supplements, or people from areas that are closer to nature?). You can look at psychographic characteristics like lifestyle or personality. Or you can check for behavioral characteristics. Or you can combine from the groups of characteristics.
I made a downloadable B2C and B2B segmentation cheat sheet with all these segmentation criteria. (Beats having to Google it and getting a lot of poor results. I know that because I tried it to see what is out there.) If you want more tips and tricks be sure to subscribe to my newsletter by clicking on the image below.
Compare the groups to your yardstick of attractiveness
You as a business owner have to decide what you think is attractive in a segment. Compare the groups you came up with, with your own criteria as well as your business objectives and resources. If they do not match, eliminate them. Compare them with similar clients you already have and decide if you want more of those, or if you rather leave them to someone else.
Estimate the profitability of a segment
There is a formula for this in which you multiply the number of customers by the average sale per customer and multiply that again by the number of sales per customer per year. From that sum (the revenue) you subtract the cost.
This of course is really hard to do as you as a small business owner really do not have access to all kinds of predication models, so I would just look at factors like income and social class. Being small also has the benefit of being flexible, so you can always take a trial and error approach to this.
Once you have found who your target customer is, you can go out and connect with that customer. That in itself is another marketing task you better think about and plan, because know who your customer is and then not reaching out to them properly is another mistake you want to avoid.
A similar approach works for defining B2B target markets. You can download a segmentation cheat sheet. The complexity with Business to Business is that depending on your business, there may be more than one person within your potential client deciding if they should purchase your product or service. In marketing terms this is called a DMU or Decision Making Unit. The DMU consists of all the people involved in deciding to buy your product or service.
Using customer profiles to get to know your customer
Once you have defined and selected your target markets you can create a Customer Profile for every target market.
A customer profile is a fictitious representation of customers in a target market. They are based on knowledge of real users. Some form of research is conducted before they are developed to ensure they represent the target market rather than the opinion of the person writing the profile.
Important to remember is that you have to compile each of these profiles as a representative of each target market based on facts, not on assumptions. This means that you may have to do some research. The profiles identify who the customers are, how they think, what they do, and where they operate. The WHO is related to the geographic and demographic segmentation variables (as mentioned in the cheat sheets). The HOW is related to the psychographic segmentation variables. WHAT is related to the group of behavioral segmentation variables. Profiles paint a picture of customers in target markets by giving them names, personalities and often a photo. Customer profiles are important because they help guide decisions on marketing the business and planning your marketing communication.
This method of customer profiles can be applied both to B2C and B2B. Where in regular segmentation for B2B you will identify the type of business you will be targeting, with the customer profile you will be profiling the person within the business you want to reach in order to sell your product or service. Within B2B it can be that you will have to make more than one profile for a target market because multiple people (DMU) are involved in the buying process. To give an example: You have a recruitment business and recruit middle managers for marketing and sales. Within the potential customer organization it is the Marketing Director who may conclude at a certain moment that she needs a new Product Manager and wants to recruit for that function through a recruitment agency. Selecting the recruitment agency could in this situation be a task of the Purchasing Department, the HR department, and of course the Marketing Department. If you are a recruitment agency and want this organization as your customer, you have to find out who is in the DMU and adjust your marketing and subsequent sales process accordingly.
Creating the customer profile
Let’s start with an example. The profile is literally fictitious as well as the business it was developed for. In other words, it is all fruit of my imagination, although it could be true.
The fictitious business for which this is a customer profile is a business that is new and wants to market online beading workshops to American beaders. They have segmented the market based on a number of things but an important one is beading techniques. One of the 4 target markets is the target market for mixed media beading techniques. This is the Customer Profile for this Market.
As you can see the profile consists of:
- A picture
- A name
- A short story
- Who they are
- What they think
- What they do, and
- Where they operate
Sometimes you will realize that you do not have the information you need. Then you have to do the research. In general you should always be actively looking for information on your customers, your competition, and your environment. Behave like an anthropologist. Study your customers!
The biggest trap is to stand by your own assumptions and not to challenge them. Having a sparring partner for this sort of things is good. Preferably one that asks you the tough but good questions. Contact us if you need our help. We offer 90 minute Skype marketing consults at 1 euro a minute (excl. VAT) in which we can help you with issues that hinder you in growing your business. Please contact us through the turquoise ‘How can we help you?” window on the bottom right of your screen.
If you have any questions or comments, please feel free to submit them below.
By Pepita Bos