In this series, we will see how three questions for business success are approached and provide some practical tools and techniques for the SME owner to answer them.
Since businesses have been in existence, these three questions have perplexed most of their owners. Before AI, before the internet and even before electricity.
The 3 Pivotal Questions
Who is my ideal customer?
What makes my product or service attractive?
How should I be pricing my product or service?
A notable example of a business failing to recognize its ideal customer in Australia is Dick Smith Electronics.
Background:
Dick Smith Electronics, once a thriving retail chain, specialized in electronics and gadgets. The company was known for its wide range of consumer electronics and hobbyist components. In the early 2010s, Dick Smith struggled with declining sales and profitability. The issues were compounded by the fact that the business did not adequately address the changing needs and preferences of its customer base.
Failure to Recognize Ideal Customer:
1. **Shift in Consumer Preferences:** The company did not keep up with the shift in consumer preferences towards online shopping and the increasing competition from e-commerce giants like Amazon and eBay. They failed to recognize that their traditional customer base was increasingly looking for more convenient online purchasing options.
2. **Inventory and Product Range Issues:** Dick Smith's inventory strategy and product range became misaligned with what their ideal customers were seeking. Instead of focusing on niche markets or emerging trends, they continued with a broad, less specialized product range that did not resonate well with their target audience.
3. **Customer Experience:** The in-store experience was not effectively tailored to the modern shopper’s expectations. Their stores were often criticized for being outdated and not providing the engaging or informative shopping experience that could attract tech-savvy customers.
Outcome:
In 2016, Dick Smith Electronics went into voluntary administration and was subsequently sold off in parts. The brand was eventually purchased and relaunched with a focus on a more targeted product range and improved online presence, reflecting a better understanding of their ideal customer.
This case highlights the importance of continually reassessing and adapting to the evolving needs and preferences of a target audience to avoid business decline.
In this series we will take a look at each of the three questions and shed some light on some approaches to get to the answers. This article deals with the first question.
Who is my ideal customer - target audience?
Advertising copywriting icon, David Ogilvy, wrote about “man's unchanging needs”. What he meant by this was that no matter the time or circumstances, consumers had and were driven by, an unwavering set of needs. These needs for example, were about youthfulness in the beauty industry, safety and style for cars, refreshment for drinks, and security for banks. Some of Ogilvy’s ads for these products contain claims and descriptions that could have been written yesterday, rather than in the 1950’s.
It’s important to remember that a demographic never bought anything. People do. A requirement to understand who you are selling to as an actual person is vital to understanding how to pitch your product or service at them in a way that they identify with.
Gender, age and class form part but not the complete answer. A buyer's attitude to your sector, circumstances that might lead them to consider your product or service are the first steps to building a profile of your customer.
Think of your ideal customer as a person pen portrait. Like how a character would be described in a novel. What would they look like, where do they live, what would they drive, what would they wear? And more importantly, why would these things matter to them? And then, where does your product fit into their world and why? Are they suddenly different person when they purchase your product? Different attitudes and values?
Your typical customers might not be able to be contained in one person, as you might have a primary audience and a secondary customer. Write these portraits separately. Work out which is the larger of your audience and assign a rough percentage to what of your business they represent. Bring them to life. Make them real to you. Give them a name. Live with them in your mind for a few days. Imagine how they live. And again, imagine them making a decision to purchase a product or service from you or your sector. When you are making a decision you can now reference your customer portrait and ponder their likely reaction.
Yes, I get it - this might sound like a project out of high school and you are an adult running a business, but believe me, it works. Great brands throughout the years grew using this technique - why shouldn’t it work for you?
So, it goes to show that if you are struggling to answer the three questions or want to step back from the day to day for a minute to consider these questions - then it’s a good exercise. If a publicly listed company like Dick Smith Electronics is struggling to answer them, then you are not alone and shouldn’t see it as a problem but an opportunity to ensure your business has some of the fundamentals of success covered.
Contact us
Want to know more about growing your customer base, feel free to contact The Neill Family Group.
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