Tuesday, 06 June 2017 05:08

A Good Business Always Knows its Customer

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Peter Drucker, a leading Austrian-born American Management Consultant, once said: "The aim of marketing is to know and understand your customer so well, the product or service fits him and sells itself." Having been in business for a while now, I've seen and worked with businesses that are at all different stages of the Business Lifecycle, from startups to second generation companies and everything in between. One thing that I've noticed is that the businesses that have a very good understanding of who their customer is, are the ones that survive.

Your customer is NOT anyone who will have you

Just because a customer is willing to buy from you, does not mean that they are the customer you want, or the customer your business should focus on attracting. When you're starting out, this might sound insane - primarily because the startup phase in business is all about cashflow. But, you'll quickly come to find that some customers are not worth the cash they bring in. In fact, I'd go so far as to say that some customers can end up costing you money. Let me give you an example.

Some time ago, when my husband and I had just started an online business selling natural products, I took the above approach. I was far more concerned with winning a customer than with understanding who the right customer was. In the short term, this was OK. It brought in extra revenue. In the long-term, this proved to be a grave error. I found myself spending 80% of my time with those types of customers to keep them buying from me, rather than focusing my time on building a solid and secure business.

You'd be forgiven for thinking that I learned my lesson. I didn't. Some years later, shortly after I started Ovadia Services, I took the same approach. I signed on a few clients who, from the outset, I knew were going to be an issue. From the start, their expectation of what I could do for them was wrong. They didn't value my services, nor the price, so when it came time to pay, I would be forever chasing them. They didn't really understand why they needed me, so no matter what I did, I had to repeatedly convince them that we could help them. As you can imagine, sustaining a business with difficult clients like this is painful. Had I simply been clear on who the right client was for us, I could have saved myself a lot of headache. 

Put simply, if you understand your customer, and the value you can add to them, then there is no need to convince them. They will convince themselves. The key is work out who the right client is and match your services to them. 

How do you work out who your customer is?

This comes back to a fundamental question that every business should ask: "Why am I in business?". What is it that you are in business to do? What sets you apart from your competitors? Why should someone work with you? To truly understand your customer, you need to first understand your business and where it fits. You can't hope to have a good marketing strategy, nor attract the right customer to your business without understanding your business' purpose. Ask yourself:

  • Why am I in business? 
  • What is it that my business is here to do?
  • Where do I want my business to be in five to ten years?
  • Who are my competitors and how do they differ from my business?
  • What is my value proposition (the thing that sets my business apart)? 
  • Who is currently using my product or service? What are their demographics, their likes, their dislikes?
  • Are there opportunities within other customer groups?
  • Who do you ideally like to work with?
  • Who earns you the most revenue?

These are all important questions to ask if you are truly going to understand your ideal customer. In the marketing world, we call it building a customer avatar. I recommend my clients grab a pen and a piece of paper and start writing down the attributes and characteristics of the customer they want, based on the answers to the above questions. It is in there that you will find who your ideal client should be. 

Don't throw the baby out with the bath water

It's important to note that just because you know who your ideal customer is, that it doesn't mean you should only do business with them. Just don't focus all your time and attention on them. I work on the 80/20 rule. I spend 80% of my time working with and looking for my ideal client - a small business in need of marketing mentoring and assistance - and 20% of my time working with those that sit outside of that. I spend none of my time working with customers who do not value what I do. Adopting this strategy will allow you to build the right marketing strategy, the right sales process and the right customer nurturing.