The Facts of Business Life (32 page)

Unfortunately, most owners don't begin their research or start to develop marketing plans until after they have chosen which opportunity to pursue because they think doing so prior to making that decision is a waste of time. This is a big mistake, because at this level, making the right decision is the goal, and you are going to have a problem if you commit to an opportunity only to discover, for example, that the market has a huge appetite for what your business offers but not at a price at which you can make adequate profits. It doesn't matter how smart or talented a marketer you are, if you get the opportunity decision wrong, very little will go right. So whether you are starting a new business, buying one, or expanding your current one, researching the market and developing a marketing plan can bring clarity not only to the opportunity decision but also to the challenges of attracting customers, selling them, keeping them, and managing the gross profit they generate.

In order to help you decide which opportunity would be best for you, there are several questions you should ask yourself about each of those you are considering. The purpose of these questions is to help you focus on making an accurate assessment of the various opportunities, and they must be answered with facts rather than assumptions. These questions include:

• How large is the market? That is, does everyone need this product or service or just a small number of people?
  
• Is the market already overcrowded, and is it one that's easy for new competitors to enter?
  
• Is the product or service I'll be offering in the early stages of its life cycle or nearing the end?
  
• Who are my potential customers, why do they need the product, and how large is the demand for it?
  
• What will my gross profit margin be, and how will it hold up to aggressive market pricing?
  
• How much money can I reasonably make in this business, and is it proportionate to the investment in effort and money it will require?
  
• Why will customers buy from me, and how will my competitors defend their positions when I come into the market?
  

These are not the only questions you have to ask, but they do represent some of the most important ones. You will, hopefully, have noticed that in one way or another all of these questions revolve around profit and product, and the reason for that is simple: it's profit and product that make everything worthwhile. If there's no profit, there's no business. This may not sound politically correct, but it's true. It's equally true that profit is what's important to bankers or other investors, because it represents the sustainability of your business, and that's ultimately all they are really concerned about. There are, of course, other reasons for going into business—because you enjoy the challenge of it, because of your “love” of the business, or because you like the lifestyle. But none of this will matter if your company can't make enough money to be self-sustaining. As a matter of fact, if the business can't be self-sustaining, then all your investment will have done is buy you a job, and you could end up becoming a slave to your business.

The Benefits of Marketing Research at Level 1

• Marketing research enables you to determine the competitiveness of the market and forecast how far other owners will go to protect their turf.
  
• Marketing research provides you with a clear understanding of the pricing matrix and the gross profit opportunity.
  
• Marketing research enables you to analyze and determine the strengths and weaknesses of your potential competitors.
  
• Marketing research provides you with information you can draw on to work out estimated marketing costs and develop preliminary marketing strategies.
  
• Marketing research helps you recognize the challenges of selling the customer even before you make the opportunity decision.
  
• Marketing research provides you with a good overall view of the opportunities you are considering before you choose which to pursue.
  
• Marketing research draws attention to the important marketing realities and variables that are factors in the opportunity decision-making process.
  
• Marketing research provides support for the research conducted for the other Facts of Business Life.
  

Since at this level there is no business yet, you obviously can't start to implement any effort to attract customers. And because of that, the majority of businesspeople don't even think about how to attract customers at this point. If you do think about it, though, you will have a head start on the process. That is, if you do the appropriate market research, you will know the size of the market, your target market, who your customers are, and how the marketplace prices its products, as well as have a good idea of how you will attack the market. And you can learn all this by answering the questions suggested above, in effect killing two birds with one stone—gathering the information you need to make an informed opportunity decision, and preparing yourself to start attracting customers even before you open your doors. Attracting customers is where marketing starts, and where successful owners shine. The lesson at Level 1 is that if you want to shine at marketing, you have to do the kind of research that will enable you to understand your market. This “digging for details” not only helps you determine which opportunity would be best for you but also provides you with a means to attract, sell, and keep your customers.

At Level 1, selling the customer is still a long way off. After all, at this point, you're still trying to figure out if you're ready for ownership and, if so, what kind of business you want to own. Developing a sales system—that is, determining how you are going to sell the customer—is always a good idea. But whether you're ready to do it at this level will depend on how much importance you put on marketing overall. You can't put enough emphasis on marketing because, as this Fact of Business Life says, “If you don't market your business, you won't have one.” And since everything you do is ultimately measured in sales and the gross profit those sales produce, it doesn't make sense to not think about how your business will sell the customer—even before you have any customers to sell.

Again, at this level, there is nothing to implement, but there are efforts you can make that will stand you in good stead when the time comes to start doing it. One of these is to learn what your competitors are doing to sell their customers. Find out who the best marketers and sellers in your industry are, and learn how they do what they do. This is easier to do than most people believe and more important than new owners realize. To begin, talk to industry-related national or regional organizations, tell them what you're thinking about doing, and ask who they would recommend you talk to. The vast majority of owners will be candid about their businesses and give you their opinion of what you present to them, as long as they don't perceive you as a threat. Besides, you never know—an opportunity may appear that you didn't even know existed. It happened to me, and it could happen to you as well. This can, in any case, be extremely helpful to you, and you should think very seriously about doing it.

Another step you can take is to determine how aggressive those companies are in their efforts to sell their customers. In fact, finding the answer to this question speaks to both ownership and opportunity. If the market is full of competitors with the “killer instinct,” you have to determine if you will feel comfortable and be able to function effectively in such an environment. But even if the market is full of sharks, it doesn't necessarily mean that the opportunity isn't big enough for more passive owners to thrive. Lawyers provide a good example of this. Every market seems to have some lawyers who advertise themselves as so “bad” that they will destroy their opponents. But every market also has a place for lawyers who don't portray themselves as killers, and both seem to survive. So if your market is like that, even if you don't consider yourself to be a “killer,” you can still have a very successful business. One way or the other, though, this is something it's important for you to think about even before you start your business.

Understanding how you want to sell into a market is an important issue to consider, and ignoring it could lead to an irreversible mistake. Knowing the selling climate speaks to both your specific ownership philosophy and your competitiveness. Doing so will enable you to find the opportunity that will most closely match the way you want your business to be recognized and the reputation you want your business to develop. In other words, as far as marketing and selling goes, it's essential that you be comfortable with the way it's done, and that you know even before going in whether you want to compete with the “killers” or will be satisfied making a good living by selling less aggressively.

Part of the formula for keeping your customers is being smart, creative, and copying what great companies do to keep their customers; that is, finding out the best practices and trying to duplicate them. But that's a lot easier said than done. And there's not much point in even trying unless you know you have the determination and passion to enforce the discipline necessary to keep customers. In this regard, keeping customers is more about ownership than opportunity. By this point, the opportunity has been achieved—you've created a customer by making a sale—so now you have to make the most out of that sale by doing whatever you can to make sure the customer comes back. The fact that someone bought from you once doesn't mean he or she will do it again. Your business has to not only treat customers right—as you define it—the first time but also work continuously to earn their business.

In order to illustrate the best way to keep a customer, in his book
The Seven Habits of Successful People
(Free Press, 1990), Steven Covey talks about the difference between shearing sheep and skinning them. He suggests—and successful owners will certainly agree—that it's much better to shear the sheep time and time again than to skin it once. It's the same with customers. You might be able to “tag” them once, but if you do you will never see them again. This is the way you need to start thinking about keeping customers at Level 1, and the way you will have to get your employees to think about them at later levels. But it requires effort, and unless you're strong enough to make that effort, to make sure your employees are sufficiently disciplined and professional to treat your customers “right” so they keep coming back, competing and winning will not only be difficult, it may be impossible.

In the discussion of marketing at Level 1, I said the kind of marketing an owner chooses to do reflects both his or her personality and competitiveness. This is equally true at Level 2, but at this level, marketing also reflects the owner's character. This is because the way an owner chooses to sell the company's products says a great deal about the kind of person he or she is. For, example, owners who advertise a product at a particularly low price even though they only have one or two items at that price are likely to have a somewhat questionable character. However, owners who are honest with their customers are unlikely to engage in such deceptive practices, and will accordingly be able to earn the customers' trust. In other words, marketing is not only about driving traffic to your business, it's also about building and displaying an attitude that's reflected in how you market your business, how you operate it, the type of people you hire to serve your customers, and the way your customers are treated. In other words, it's about your company's DNA.

Having decided to become an owner and selected an opportunity at Level 1, at Level 2 you have to begin to match your company's marketing to the opportunities available. That is, you have to make sure your marketing goes where the customers and the opportunities are. If, for example, you determined there was a market opportunity in the automotive supply industry for low-priced tires and batteries, you would stock such items, hire and train your staff to help your customers, and then let those customers know that you have what they are looking for. Similarly, if your research indicated that there was a demand for quality automobile body work, you would hire experienced repair people, get the most up-to-date equipment, and start advertising to your target market. The point is that the opportunity defines the market, marketing attracts the customers, and your business's DNA has to support the image your marketing projects. In order to accomplish this, it is necessary that you essentially develop both internal and external marketing programs.