Online Business

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Before you begin applying the four P’s of marketing to your business, you need to understand the most important “P” of the discipline. The other four, product, price, place, and promotion, all intersect at one point: People.

“people” as in customers. “people” as in the folks who buy your product or service. It doesn’t matter if you are a manufacturer, wholesaler, retailer, has an inventor, an insurance agent, banker, Restorer, doctor, lawyer, butcher, baker, or candlestick maker. Without customers, the auto manufacturer’s cars turn to batteries of rust. Without customers, a farmer’s corn burps in the silo. If you don’t have a customer, you don’t have a business. And customers, of course, are people. Attracting their attention, persuading them to buy from you, and ensuring their satisfaction with your product or service all require good people skills.

Doing these things really well is how small businesses grow to be big ones. If that is your goal, I urge you to invest your time, energy, and yes, some money, in learning everything you can about the people with whom you do business-your customers. The more you know about what makes them tick, what they want out of life, why they get out of bed in the morning, the more you will know about things like why they buy your product or your competitors’, what price might make them change their purchase intentions, and which services they think are important and which ones they find a colossal bother.

The behemoths of marketing, companies like Procter & Gamble and Pepsi, have legions of market researchers to find, dissect, and analyze their customers. They can pay for consumer surveys, test products, finance assembles focus groups, and use dozens of other relatively scientific tools to determine the kinds of things a good marketer wants to know about his customers. As the owner or manager of a small business, you probably don’t have those kinds of assets at your disposal. That doesn’t mean you have to operate in the dark, however. You can learn almost as much about your customers as they do by turning to that acknowledged expert on almost any subject, your mother-in-law.

Seriously, information gathered through what is known as “mother-in-law research” can be just as valid as the reams of data gathered by P & G’s army of white-coated market researchers. It will also be a whole lot cheaper and, even more importantly, it will be much more timely and specific to your business.

Your market research department

“Mother-in-law research” is pretty simple: look around you at your customers and try to spot some patterns in their behavior. If you are observing and objective, you can learn a ton about who they really are and why they act the way they do. As the term implies, you can also learn some interesting things about your customers by asking people who know them-if not your mother-in-law, then your friends, vendors, and employees.

You can get started by making a simple tally of who comes into your store or office during a given week. Are they men or women? How old are they? What would you guess their household income to be? Their education? Blue collar or white? Are there any other salient facts that might pertain to your particular business like how many cars they own or whether or not they have children? You can often tell a lot by spending some time in your parking lot and watching the people come and go. Keep in mind that you don’t have to ask the customer a bunch of questions. Use your powers of observation to make some educated guesses – they’ll be close enough.

Another good method is to look at your sales records for a given period. If your data allows, individual rank transactions by profitability (not by gross margin percentage, by gross profit goal in total dollars). If gross profit data by transaction isn’t available, use the dirty gross figure for each one. Credit card transaction records are a good source, although you’ll get a more complete picture if you can reconstruct single cash or check transactions as well. Even if you don’t have transaction records available, you can use inventory turnover data as a substitute. In that case, rank items by profit volume and try to connect specific customer names to them.

Now make a list of the top 20% of those customers ranked by the size of gross profit they produce. Those are your best customers. According to the justifiably popular 80/20 rule, eighty percent of your gross profit probably comes from them, making them your most profitable customers.

Profile your best customers

Next, do a little above-board sleuthing. Compile your best customers’ street addresses from credit card records, phone numbers, delivery destinations, etc. Plot them on a map and look for clusters of them. Good marketers know that birds of a feather flock together. similar people tend to live in similar neighborhoods.

Once you’ve figured out where your best customers live, you can look for other birds of feather-they’re your best new prospects that. Now drive through those neighborhoods. Guesstimate the value of the homes and look at the cars there to get a rough idea of income. Check for kids and/or their bikes, swing sets, sports and equipment (or lack thereof) to get an idea of their parents’ ages. Don’t limit your monitoring to weekdays, either. Take a few minutes on the weekend to drive through to see how many residents are doing their own yard work or washing their own cars. These things will also tell you a lot about their lifestyle.

The more you know about your best customers, the better marketing decisions you will make.

If you are a business-to-business marketer, your job is actually research a little easier. You probably have fewer (but bigger) transactions with fewer customers than someone who sells to the general public, which you simplify your data-gathering. What may complicate it, though, is the tendency for businesses to have multiple decision-makers in their buying processes. Don’t be daunted by the details, though-just gather data on one person at a time until you’ve got a clear picture of who they are and what their role is.

You may also think that personal information like education and lifestyle choices aren’t relevant to business buyers since their job is to make rational, profit-oriented purchases. Nothing could be further from the truth. Corporate buyers are people, too, and they allow plenty of emotion to influence their decisions. In fact, a personal, human reaction to a vendor’s marketing approach may be the only factor that separates two competitors. The more you know about that business-to-business customer as a person, the greater your chances of tipping their decisions in your favor.

So, before you make any decisions about price, or which products to sell, or what ads to run, take a good hard look at your customers as people. Identifying your best customer takes some work. The end result, though, is marketing that works better, costs less, and generates greater profits.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business managers and owners in the Dynamic Manager’s Guides, a series of how-to books, ebooks, audio books and podcasts. Topics in the Dynamic Manager series include marketing and advertising, sales techniques, hiring, firing, and motivating personal, financial management, and business strategy.

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