Business Plans for Canadians For Dummies Cheat Sheet - dummies
Cheat Sheet

Business Plans for Canadians For Dummies Cheat Sheet

More than anything else in business planning, how well you know your customers ultimately determines how successful you are. It is vitally important to better acquaint yourself with your customers so that you can offer them more value and serve them more profitably than anyone else in your industry. This Cheat Sheet helps you gain insight into your customer’s perceptions and decision-making processes, shares tips and tricks on how to keep your customers happy, and imparts practical advice on how your business can learn from the disappointment of a lost or dissatisfied customer.

What Makes Your Customers Tick?

A good way to begin carving out your market segments is by researching who buys your product or service. If you focus on individual consumers, discover a bit about how they live their lives. If your customers are other companies, find out about their business operations.

Different customers approach your market in different ways, and you can often identify market segments based on certain customer traits as they relate to your product or service category. Some of the conditions that guide customer buying decisions include the following:

  • Speed of the purchase decision: The decision-making process (DMP) that customers go through before they purchase a product or service varies, depending on the product or service’s complexity and price tag. People may buy chewing gum at a drugstore without much thought. But car dealerships and real estate agents face a completely different DMP with their customers, resulting in a slower decision to buy.

  • The actual decision-maker: Families represent a common decision-making unit (DMU) that buys various consumer goods. But who in the family has the final word? If you sell clothes designed for teenagers, for example, it makes a big difference whether the kids have the final say, or Mom or Dad is always in the background, giving the thumbs-up or thumbs-down sign. This difference alone may lead to two separate market segments, each with a unique set of requirements.

  • Customer loyalty: The way that companies relate to their customers can easily define a set of market segments. Service industries, for example, go out of their way to identify and encourage customers based on their loyalty. You’ve probably been asked to join more than one frequent-flyer program or to keep track of frequent-caller, frequent-diner, or frequent-you-name-it points. Companies that offer these programs promise to cater to and reward customers for being a member of their loyal group.

  • Level of product use: In many industries, a small percentage of consumers accounts for a large percentage of sales. If you want to sell beer, for example, you may not want to ignore the heavy-beer-drinking population — an estimated 10 million Canadians. Keeping this high-consumption group of customers satisfied can be profitable indeed.

Remember that old saying about not seeing the forest for the trees? Well, when you first start to think about your customers, you don’t want to fall into a similar trap. Focusing on a small number of individual customers and their personal habits, likes, and dislikes is tempting. But don’t!

Don’t view your customers and your business activities too narrowly. Look instead at the larger forest — the general customer behaviours and basic needs that define your market. Understanding your customer’s mindset can go a long way toward fostering innovation, generating new strategies, and providing expanded market opportunities.

Your Business’s Good and Bad Customers

Good customers are the ones who bring a smile to your face, the ones you like serving, the ones who appreciate you, the ones who keep you in business. You want these customers to keep coming back time and again. But how do you keep them all satisfied? Success is a matter of knowing who your customers are, understanding their backgrounds, and fulfilling their needs better than the competition.

Your business can measure and describe its good customers in several ways:

  • Track where your customers are, breaking them down by country, region, province, city, or neighbourhood.

  • Figure out who your customers are, including their age, gender, occupation, income, family status, and nationality.

  • Discover more about how they live — their hobbies, most frequented social media sites, favourite sports teams, restaurant choices, and vacation destinations, for example.

“A bad customer? Isn’t that a contradiction?” you ask. Not at all. Bad customers simply cause you more trouble than they’re worth and don’t fit into your company’s values and strategies. Bad customers do the following:

  • Ask you to serve them in ways that aren’t practical for your company

  • Distract you, causing you to veer away from your strategy and your business plan

  • Purchase in such small quantities that the cost of doing business with them far outweighs any profit that they generate

  • Require so much service and attention that you can’t focus your efforts on more valuable (deserving and profitable) customers

  • Remain dissatisfied with what you do, despite all your best efforts

The pundits have come up with a principle that you can apply here: the 80/20 principle. In this case, the rule says that if you survey all your customers, 20 percent of them account for about 80 percent of your business. Your good customers make up that 20 percent. You obviously want to keep them — and keep them happy! But look at the remaining 80 percent of your customers, and you may discover some that you’d rather hand over to the competition.

Learn from Your Business’s Lost Customer

You can often gain a better understanding of your most loyal customers by taking a look at the customers you’ve lost. Your former customers may paint a rather grim picture for you, highlighting where and how you fall short of their expectations. But their insights are worth the discomfort.

Although lost customers may represent a series of disappointments to you, you may find their individual experiences invaluable when you focus on your business-planning efforts. So, take the initiative and contact some of the customers who walked to find out why. Employ the following tips to contact the missing:

  • Hang around places where people buy similar products or services. Engage these customers in conversation. A few of these people were probably your customers at one time, and they can tell you something important about why they aren’t your customers any longer. Be sure to make them feel comfortable about giving you honest criticism.

  • Use mailing lists or old customer registration data. Ask lost customers why they left and what you can do to get them back. If you’re too shy to ask customers directly, a number of online survey tools exist that make asking the questions easy and answering them even easier. Because lost customers remain anonymous, these tools encourage a more honest response.

  • Advertise a toll-free number or an e-mail address. Encourage current customers to contact you with any complaints

You may think that when customers take their business elsewhere, it points to a failure on your part. On the contrary, these people present an opportunity. The fact that you haven’t been able to serve this group gives you a challenge: finding out what your market really thinks is important. Your competitors’ customers tell you what you lack as a company. This information is extremely useful, especially when you work on the big picture in the early stages of business planning, defining who you are and who you want to serve.

Getting to know your competitors’ customers is often difficult, but not impossible. Follow these tips down the road of discovery:

  • Spend some time where customers gather. Use trade shows, user groups, social media forums and group discussions, blogs, and industry conferences to make informal contacts and begin a dialogue with your prospective customers.

  • Ask pointed questions of people who choose competing products:

    • Did they take the time to see what was available on the market?

    • Have they even heard of your goods or services?

    • If they have, did they actually take the time to look at them? If not, why not? If so, what were their impressions?

    • Listen to what they have to say, no matter how painful. Don’t get defensive if people say negative things about your company or products.

Information about your customers is valuable, if not priceless. Consultants charge you thousands of dollars for much of the same stuff, but they can often get to information you can’t. How you use outside help depends on how much info you can gather first on your own.