Growing Net Profit – Choosing the Right Market Segment
I’ve nominated my net profit for FY18 and it is non-negotiable, so where will my sales growth come from?
Following on from my last blog on setting and growing Net Profit as the first goal in planning, well, how do I get there? As the owner, you actually do get to choose the markets where you will compete – so what is the first step – choose the market segment that is to be your sweet spot.
This sweet spot is where you have a competitive advantage or where you feel you can create and build that advantage over time. Perhaps your product is unique, your service is the best, or your price is the best, or your knowledge is so deep that you can meet exacting standards required. But perhaps you only have a vague idea of your market segment sweet spot. And how do I turn a great theory, into a plan that I can implement? You may also visit here for business market segmentation strategies.
Start with what you know about “why your customers like your product/service”. Make a written list of them. Hopefully, you should be able to identify key attributes based on “quality”, “service” or “price”, or a combination of these three characteristics.
Then rank each of these items on your list out of 10. If one (or more) product or service stand out, then there is a reason for this. PS; it may not be your top selling item.
Then the next step is to understand the customer profile. What solution does your product or service provide to these customers, and how important are these to your customer. Can you determine what their reason for buying is? Once identified, what do these customers look like (size of business, the segment of the industry, location) or what would a typical customer look like.
I speak with many business owners as a business coach and together we deep dive into understanding “why” a customer buys. The better you understand the “why” a customer buys, the better you can then understand the market segment/s of “how” your product/service provides the answers and solutions they need, and the type of customers they are.
Using a business coach as a sounding board to explore the “why” around why a customer buys, is an open discussion. It’s designed to take your head out of the day to day operational issues (e.g., can’t get enough sales or you are struggling to get your message out) and focus on the future (which in case you hadn’t noticed, is unlimited).
As a business owner, by identifying and better understanding the market you are selling into, or want to sell more into, by using your knowledge of your customers and product/service, then you will probably come up with some gaps. Either in knowledge (need to learn more about segment) or that your product/service needs to improve/change to be more aligned with what the market segment or customer is seeking.
Each part of the above process is a building block. So as to convert this into an actionable outcome, growing net profit, create a mini plan, say 90 days, with set days to achieve nominated outcomes where you put time aside to define and create the building block. Until you better understand the segment/customer, then the money you spend on marketing will be at best “hit or miss” and at worst, completely wasted.
If you would like to discuss why your customers like your product/service, then drop me a note.