TNG Blog

This month, I have found myself constantly thinking about Lesson #3, which as always would be dedicated to small businesses. As much as I try to distance myself from the current economic situation, I find myself being drawn back to its continuing impact to all aspects of life.

Serious economic downturns such as the one that we are facing today, can cause a number of changes that reach multiple markets, from banking to technology. A positive outcome that we hear about often is the significant acceleration of innovation and entrepreneurship Nevertheless, while new ideas and theories arise in the short term, the consequent appearance of new products and services on the market is more of a long term development. Large corporations often have the vision, resources, and luxury to address such long term change even in face of short term issues. Small businesses,on the other hand, must first face and overcome short term challenges to ensure that they survive long enough to be part of that change.

Small businesses often have to address numerous challenges, including reduced overall market demand, supply chain limitations, increased cost of goods and so on. In some cases, these issues may be too dramatic to overcome. For example, the demand for housing and construction over the past year has dropped to the extent that regardless of service quality or innovation, some companies could not survive. On the other hand, for many markets, demand will continue albeit at a lower or at a much more competitive level. If your small business is in this latter situation, it is important to step back and revisit your sales and marketing strategy in an effort to increase competitiveness, along with brand awareness and loyalty.

Today, in many markets, there is still a good level of demand, but customers are much more sophisticated in their decision making process.Today, customers are looking for value and are willing to make tradeoffs between quality (including branding) and cost To capture this new customer, you should follow these three steps:

1. Determine your value proposition (cost vs. benefit)
2. Identify customer segments that best fit your value proposition
3. Target these customer segments with a revised marketing strategy

Determine your value proposition

Let’s simplify the value proposition in one sentence -what do your customers receive and how much does it cost them? Sounds really easy, but most businesses fail to clarify the link between cost and benefit, and at the same time distinguish themselves from competition. Some businesses may be able to determine their value proposition easily while others will need research. If you are a small business that doesn’t have the ‘resources and luxury’ to hire consulting companies like large corporations, engage your most valuable resource – current and loyal customers. Ask your customers why they choose your product over competitors’, what are differentiating factors, and what tradeoffs they are willing to make between cost and benefit. This feedback will help you clarify your product or service’s strengths and weaknesses.

Now that you have started to analyze your internal situation, you can turn to analyzing the entiremarket and your competitors. Overall market data, whether statistics or trends, is relatively easy to access in today’s world (e.g., average prices for a given market). However, more specific data on individual competitors may be more challenging. That is the key question -do you know your competitors? If you don’t know the answer, perhaps it is time to buy a competitor’s product (or range of products) and test it yourself. It might sound weird, but getting the real experience of a competitor’s product, their marketing materials (i.e., brochures, catalogs, and newsletters), or their ‘value proposition’ can be valuable research. Compare your competitor’s product cost and benefit to your own and revisit your own value proposition. There will be some threats to your product, but also some opportunities, after you break down the competition and the market environment. If you juggle the cost versus benefit well, and if you determine a proper value proposition, you will have a chance to survive the economic downturn.

Identify customer segments that best fit your value proposition

Remember that this new and almighty customer, armed with information and gifted with choices is your ticket to the next fiscal year. You don’t want to fight, trick, or seduce this more sophisticated customer – it is too dangerous for your business. You want to play a fair game by identifying and targeting key segments of customers that will be a perfect fit for you value proposition. Start with abasic customer segmentation that determines the number of customers and their breakdown according to a number of factors such as age group, gender, location, income, and so on. Next, begintracking buying behavior for existing customers (or use historical data if available) to determine recency (timing of most recent purchase),frequency, andmonetary value of purchases. By combining the basic segmentation with buying behavior, you should be able to develop more advanced customer segmentation.

Target these customer segments with a revised marketing strategy

Once you have identified key customer segments, you should perform a final round of research to match each segment to variations of the value proposition. This can be done in a number of ways, using interviews, surveys, or even comparing prior marketing initiatives with sales history. After determining the best ‘segment-level’ value proposition, you may need to update or totally redesign last year’s marketing strategy to develop it into a more effective vehicle for your newly discovered value proposition. Rethink your product description, promotion materials, distribution channels, and pricing points. You have already discovered how each customer segment will react, so now put this into action. Develop the most effective marketing materials to transmit your message to different segments. Your message should be simple, memorable, and consistent through different marketing channels. Remember, you are dealing with a customer that balances both benefit and cost so make sure that you adequately address both.

Not so long ago, I saw ‘Cirque du Freak: The Vampire’s Assistant.’ An irresistible urge pulled me into the movie theater to see what else remained to be said about vampires and what new products could be launched in this ‘year of the vampire’ (this is how I refer to the period of time following the release of ‘Twilight’), a year that has seen incorporation of the vampire trend in everything from nail polish (e.g., black, dark purple) to television series (e.g., The Vampire Diaries) to foods and drinks (e.g., Vamp Energy Drink). I would lie if I did not admit that I was attracted by the fact that the director of ‘Twilight’ (and the soon to be released ‘The Twilight Saga: New Moon’) is brothers with the director of ‘The Vampire’s Assistant.’ Oops! Is this simply a family’s obsession with vampires or an insider’s tip about how profitable it is to make vampire movies; either way, there is a clear message – do it as soon as possible and as much as possible (that is why both brothers have left their respective movies open ended). An alternative concept is that the director of ‘The Vampire’s Assistant’ just wanted to follow the latest trend, one set by his own brother.

Whatever spurred on the brothers Weitz, it seems that an old family recipe was followed: start with a mix of good and evil vampires, add a few friendship issues, spice it up with a little romance, and top it off with a dash of teenager – put them on the screen and serve the movie to an audience that is guaranteed to chew it up (since they can’t go to clubs, bars, or other venues of entertainment). In this ‘year of the vampire’, making a movie about vampires or incorporating ‘vampire’ ideas into mass products and services is a sure profit, or at least some directors and companies appear to think so. But wait, there is enough money to go around for everybody; the mass market can consume the entire ‘vampire’ offer and leave room for seconds. Just one magic word: Twilight. Voilà…the trend of 2009! Should we consider ‘Twilight’ as a trendsetter? While ‘Twilight’ did not invent the ‘vampire’ flick, this reinvention was a nicely done piece of work that drove many industries to ‘vampirize’ their offer and suck in a little bit of extra money by exploiting this new trend. Why then would you just sit idle and let someone else ride the wave and steal your share of this ‘trendy-money.’

I am a complete supporter of leveraging popular trends for your company’s own benefit. Moreover, I urge my clients to always keep up with the current hype as well as ongoing and new trends. Why shouldn’t you extract the utmost benefit from the ‘year of the vampire’ if you have the opportunity to incorporate this trend into your company’s product or service, or perhaps simply into your marketing mix, to attract an entirely unexpected group of ‘bonus’ customers or clients? However, the current ‘vampire’ trend could be too bold of a move for some small businesses – I find that my dark purple nail polish is not viewed as trendy or professional and vampire images on my invoice definitely do not appear creative. If you also are not prepared to take such risks, I offer you an alternative approach inspired by the same logic as that used by the Weitz brothers…three words – Generation Y, Universal Themes, and Real People.

Generation Y. This generation is both casted for the movies described above and targeted as the audience for these same movies. They are teenagers – old enough to know what they want and yet immature enough not to think about the consequences (by the way, I am not encouraging you to take advantage of them). Do not ignore this age group. The brothers Weitz didn’t. Through your offer, brochures, promotions, and/or ambient music, try to get closer to this group and show them that you acknowledge their existence, their expectations, their taste. Show them that your business takes them seriously and that you are willing to reinvent yourself because you want their business. This generation can be quite demanding, because they are growing up ‘multitasking,’ they live on ‘Facebook’ and ‘Twitter,’ and they are the preamble for Generation Z, who will be even savvier customers. You and your business want to remain on the market and will do so only by immersing yourself in evolving trends. Don’t forget to make them loyal, because you will be flying sky-high as this segment of the market is just about to start earning and spending money (and you want to be in that circle).

Universal Themes. Your customers want to know that you are present in the moment, partaking in the same recession crisis as they are, looking forward to the first snow, and acknowledging October as ‘National Breast Cancer Awareness Month.’ While you and your business follow the trends and the hype, ensure that you play intelligently and adhere to the universal themes of love, friendship, spring, and harvest. Look up to both of the Weitz brothers who aim to create global hits – refrain from religious issues that can be misinterpreted, refrain from incorporating nationalistic pride, and refrain from discussion of politics or other sensitive topics. During a financial crisis, you want to attract as wide a range of customers as possible and not unnecessarily alienate customers or limit yourself to any one segment (as far as niche marketing goes, we will discuss that at another time).

Real People. We are living in an era where power is presented to the ordinary, real person…also known as the ‘era of reality shows’. Did you ever think that one day an ordinary person from your neighborhood would be paid thousands of dollars just for allowing cameras to follow him through a mediocre day? Worse yet, did you ever think that someone (turned millions of people) would actually watch that mediocre person? No glamour. The power lies in real people. Both of our case-study movies follow lives of ordinary people (i.e., not an extremely wealthy heiress, not a celebrity) who face something extraordinary; both movies have some fresh faces in their main cast. The Weitz brothers glorify a regular person and separate them from the masses. You should do the same. You don’t need a Paris Hilton to come to your business to receive motivation to offer exceptional service – you should provide exceptional service to any customer who walks through the door. Do not waste your time daydreaming about what you would say to Oprah should she walk into your store, rather say something nice to each of your customers. That real, ordinary person (your beloved customer) has the power to research your business on the internet, write a good or bad review about your business, and stimulate or prevent their friends and family from being your new customers.

In summary, the ‘year of the vampire’ trend or the ‘baby boomers’ trend, or the ‘green’ trend are not the only ways that your business could earn an additional profit. There are so many ways to show your clients that you are present in the moment, aware of current problems and trends, living in the same world with the same idols and the same dangerous repercussions of global warming. Doing so and doing so consistently will ensure that you eventually become part of the trend and not only a follower.