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Know Your Demo: Why Understanding Who Your Customers Are Is Key To Small Business Success

woman-article-portraitby Iris Dorbian.

It’s the first lesson of Small Business 101: If you want your company or product to be a success, you must know your target audience, and more specifically, your customer demographics. Too often a business can struggle and even fail because its corresponding marketing efforts didn’t understand the who, what, when, where, why, and how of their customers make their buying decisions.

Ask Important Questions

Four years ago,

when Derek Christian bought My Maid Service, a small independent cleaning service based in Cincinnati, his immediate goal was to grow the existing customer base. Christian, who previously worked as an account executive for Proctor & Gamble’s commercial products group, decided a good way of defining his target audience was to ask the company’s existing customers several questions. Some of these were fairly intuitive, like “Why were they hiring a cleaning service?” but others might seem pretty far afield, such as “What were they looking for in life?” and “Where do they shop?”

 

The answers Christian received not only gave him keen insight into his clients’ psychographic profile, they helped him recognize three specific demographics
within his customer base: new parents, pet owners, and young urban apartment dwellers. Once these three groups were clearly defined, My Maid Service, which currently
has 50 employees, began a campaign push to market to them.

“For example, new parents care deeply about not only having spotless floors, but also what chemical

s we are using to clean those floors because their baby is crawling on it and putting their hands and feet in his or her mouth,” explains Christian. “We make sure our people know child safety laws and we make sure we don’t arrive at nap times. It’s not just about cleaning.” As a result of targeting these three specific groups, Christian was able to grow the company’s annual revenue from $250,000 to $2,000,000—quite a coup for a small business during a recession.

Zeroing In

Now that you know identifying and understanding your customer demo can play a big role in improving your business, how do you go about it?

Try asking yourself the following questions:

Who is your best current customer?

  • What is their age range?
  • How about their income level? Or education level?
  • Where do they live?
  • How do they s pend their money? Are they frugal, extravagant, or in-between spenders?

This type of additional detail is essential if you want to flesh out the customer profile of your company or product’s target. “The objective is to close in that person,” says Lou Rubin, a seasoned marketing and advertising professional whose career includes an 11-year stint as an executive director at ad agency Doremus. “Once you know everything about how they interact with you, you can seek similar customers.”

Mine for more data

Other tips:

Utilize your local Chamber of Commerce and state Commerce Department to find additional statistics, like census data, on a subgroup you’d like to target within your community. Be insatiable in your appetite to learn all you need to know about the customers you want to attract.

  • Leverage resources such as Experian, a credit-reporting agency that provides information on consumer online purchases, to your benefit. Doing so will give you a clear-cut idea on your demo’s purchasing behavior as well as the history of any interactions they may have with your brand.
  • Get first-hand information directly from customers. One good way is through detailed, one-on-one interviews. Your marketing or research department, if you have one, can do this using a customer database. Or if you have the budget, hire an outside firm that specializes in gathering this data for companies. If your marketing is more the shoestring variety, you can do exactly what Derek Christian did after taking over the reins of My Maid Service: Simply ask your target customers a few questions. Offering a discount on a future purchase is usually enough of an incentive to get people to participate in a short marketing survey. (To get started, check out the questions at this free customer survey library.)
  • Another best practice—examine the competition. How are they engaging with your audience? Are they using old-fashioned direct mail, e-mail, or SEO marketing? Or are they engaging with your shared customer base via word-of-mouth? What innovative solutions are they offering your customers that you are not doing? What are their aggregate strengths and weaknesses? Are they leveraging social media to their advantage or not?
  • And speaking of social media, how is your business using it further its brand and heighten audience engagement? Have you set up Facebook, Twitter, or LinkedIn accounts? In this dizzying 24/7 digital age, it behooves you to do so. The give-and-take of customer interaction on these sites will not only help you promote your message, but act as a catalyst in gaining insight into what makes your target audience tick.
  • Also, go to events or conferences that cater to your target audience(s). For instance, because Christian’s My Maid Service targets new parents, the company frequently participates at trade expos aimed at new parents. If they’re not going to come to you, then you go to them.

Remember information is power and knowing your demo is critical to maximizing your chances of realizing your goals and achieving success.

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January 19, 2012 Today's Business, , , , , , , , , 0 Read more >

Rolling with the Punches: Optimism and Guts in a Down Economy

By Sherron Lumley.

“In my mind, it seems like I’ve been through this cycle three or four times,” says Rick Reed, founder of R.A. Reed Productions in Portland, Oregon, a company that creates scenery for theaters, opera houses, and performance venues around the world. “Persistence comes from doing something you like and believe in,” he says, with the wisdom of 33 years at the helm of his company behind him.

“Starting your own shop is a passion; you want to create something special,” says Sander Flaum, CEO of Flaum Idea Group in Manhattan, a consulting firm he launched in 2004 after retiring from decades in the top ranks of global advertising. “I decided I didn’t want to work for anyone anymore,” he says.

Sidebar.pngCall it having a growth strategy coupled with calculated risk-taking or more simply optimism and guts, being able to roll with the punches means adjusting to difficult circumstances as they happen. This idea has a literal meaning, from boxing, where staying in constant motion lessens the impact of your opponent’s blows, an apt metaphor for the small business owner—finding opportunity in the face of adversity, surviving, and winning.

Finding opportunity certainly isn’t easy nowadays, however, as a recent National Small Business Administration study confirmed. Among the NSBA’s members, who represent every state and industry in the nation, the survey found that 72 percent had serious concerns about the economy. Perhaps not surprisingly, business optimism has likewise eroded in the face of stagnant economic growth. In fact, optimism is lower than it was a year ago, lower than in the Reagan-era recession, and it’s now even lower than during the Great Depression, a phenomenon the Pew Research Center calls the Optimism Gap.

Nevertheless, the hardscrabble years of the 1930s provide an important lesson for the small businesses of today. Despite the economic catastrophes, financial fragility, and a longer-lasting period of high unemployment, Pew found that Depression-era Americans still remained hopeful for the future. And today’s entrepreneurs should understand that adopting a head-in-the-sand, do-nothing strategy is not the way to get through tough situations. So, here are three business strategies that have stood the test of time in the worst of times.

Market Development – Finding new customers for current products

Perhaps the easiest of the three strategies, at least on paper, involves finding new target markets for a business’s current products. In addition to stage scenery, Reed has a large supply of barricades for outdoor concerts and festivals. The cache of crowd-control equipment he has in stock is something that sits idle in a warehouse most of the time, waiting for that next festival to come along. It is not something he would want to sell, though, as the need comes up again and again. So, by being willing to rent the product to others, Reed was able to tap a new target market. In fact, the barricades have been rented to new customers—some as far away as Japan—that were never going to be in the market for his scenery.

Product Development – Making new products for current customers

Despite the additional revenue from this clever rental strategy, Reed’s business has significantly declined, forcing him to lay off 85 of his 100 employees. “We’ll do almost anything for money,” Reed says with a little laugh. But he has seen this happen before.

With a smaller crew, Reed now focuses on industry innovation, creating automation software for what he sees as the future of the business. “Our customers are moving away from stage hands pushing stuff around,” he says. Similarly, a product development strategy means finding new products and services to sell to your current customers. It can involve creating an altogether new product or it could mean extending the product line—for example, by offering less expensive products that meet the needs of customers’ smaller budgets.

Diversification – New products and new customers

Call this strategy the haymaker—a hard swing with all of one’s might. Diversification means providing new products and services to new markets, and it has a long history of success. A famous example comes from the Prohibition era, when alcohol became illegal in the United States. Beer brewers sitting atop vast acres of farmland and thousands of square feet of warehouse space decided to redirect their resources toward dairy farming, providing a new product (milk) to new customers.

Although going after new markets with new products sounds highly risky, it doesn’t have to be. “Everyone is kind of wringing their hands about the economy,” says Flaum, “but we are doing better than ever.” During its seven years of existence, the company has grown from two initial employees to a staff of 29 today by doing something entirely new, what Flaum calls focusing on the big idea—providing breakthrough strategy for new customers in the healthcare and biotech industries. “We do whatever service in whatever area that the clients need,” he says. “We give the customers hope and they put their trust in us.”

All this will happen again, so just be ready to deal with it

Although Reed is retrenching and Flaum is in expansion, both have decades of experience in weathering business cycles and don’t worry too much about them.

“You only have 24 hours in a day. How much time do you want to spend angry, depressed, rejected, and thinking ‘Why me?’” Flaum says. A struggling national economy, an industry lifecycle in decline, a seasonal dip in the market—whatever the scenario, a small business will experience some hits. It’s part of the territory. But it’s what you do afterwards that makes all the difference.

Additional Resources

Books

Breakthrough, by Paul Kurnit and Steve Lance (2011)

Make Your Own Luck, Success Tactics You Won’t Learn in Business School, by Peter Morgan Kash with Tom Monte (2002)

Selling When No One Is Buying, by Stephan Schiffman (2009)

Web

“Learning from the Great Depression,” Bloomberg.com, Businessweek, by Stacy Perman, October 17, 2008:

http://www.businessweek.com/smallbiz/content/oct2008/sb20081016_825689.htm

National Small Business Administration, 2011 Mid-Year Economic Report:

Click to access 2011_nsba_my_survey.pdf

The Pew Research Center

October 16, 2011 Today's Business, , , , , , 4 Read more >