Paralysis by Analysis

Posted Yesterday, under Uncategorized
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There is such a thing as “paralysis by analysis”. The key is starting with the objective and by this I don’t mean “what do you want to know” I mean what is the purpose of the research.
Are you developing an advertising plan and want to see research that will help you know which channels to use, or expanding inventory and want to know what new products should you add to your shelves, or perhaps expanding your restaurant chaing and want to know where to open a new location…
Before diving into getting data, ask yourself what questions you need answered. Let’s take the example of where to advertise for a new restaurant. Here are the questions that I would ask.
Who are my target customers? Hint, NOT EVERYONE! People who eat out the most, have disposable income and have certain personal and professional lifestyles that result in the need and desire to eat out more frequently. Note, segment your target customers.. you’ll see why in # 3
What is the best way to reach the biggest number of potential customers? WRONG QUESTION! The question here should be “what advertising channels provide the greatest potential return for my advertising investment”. Don’t think volume, think effectiveness. It is better to run 10 targeted ads to smaller groups of consumers with a higher rate of response then pay $1,000 for a TV ad where maybe .05% of the viewers are potential customers.
What do I need to say to them to get them to come to my restaurant? RIGHT QUESTION! Messaging, Messaging, Messaging. Don’t think cool and stupid, you aren’t budweiser and can’t afford meaningless commercials. Think about what they are looking for such as “happy hours, professional lunch specials, rewards programs, healthy menus…” Knowing what drives people to make a purchasing decision is the key. This is why segmenting customers is so important. The more personal the message feels the greater the chance of a response.
Data is meant to help make decisions, but if you ask the wrong questions you will make the wrong decisions.
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The Right Amount of Information

Posted 4 weeks ago, under Uncategorized
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There is such a thing as “paralysis by analysis”.
The key is starting with the objective and by this I don’t mean “what do you want to know” I mean what is the purpose of the research.

Are you developing an advertising plan and want to see research that will help you know which channels to use, or expanding inventory and want to know what new products should you add to your shelves, or perhaps expanding your restaurant chain and want to know where to open a new location…

Before diving into getting data, ask yourself what questions you need answered. Let’s take the example of where to advertise for a new restaurant. Here are the questions that I would ask.

  1. Who are my target customers? Hint, NOT EVERYONE! People who eat out the most, have disposable income and have certain personal and professional lifestyles that result in the need and desire to eat out more frequently. Note, segment your target customers.. you’ll see why in # 3
  2. What is the best way to reach the biggest number of potential customers? WRONG QUESTION! The question here should be “what advertising channels provide the greatest potential return for my advertising investment”. Don’t think volume, think effectiveness. It is better to run 10 targeted ads to smaller groups of consumers with a higher rate of response then pay $1,000 for a TV ad where maybe .05% of the viewers are potential customers.
  3. What do I need to say to them to get them to come to my restaurant? RIGHT QUESTION! Messaging, Messaging, Messaging. Don’t think cool and stupid, you aren’t Budweiser and can’t afford meaningless commercials. Think about what they are looking for such as “happy hours, professional lunch specials, rewards programs, healthy menus…” Knowing what drives people to make a purchasing decision is the key. This is why segmenting customers is so important. The more personal the message feels the greater the chance of a response.

Data is meant to help make decisions, but if you ask the wrong questions you will make the wrong decisions.

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Market Segmentation… the wave of the future or thing of the past?

Posted November 13, 2009, under Uncategorized
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The power of the Web is undeniable.  It gives companies access to consumers in ways never thought possible.  Companies enjoy the luxury of leveraging online consumer groups for product development feedback, buzz generation, etc. 

Now, companies are flipping their segmentation strategies upside down and using consumer data gathered from the Web to build their segmentation strategies.  And, these companies are realizing cost and accuracy benefits.

Excerpted from Strategy & Business, “The Promise of “Self Segmentation”,” By Nick Wreden, October 5, 2009

… Today, a community-based approach to segmentation — which is both less expensive and more effective than the traditional methodologies based on customer relationship management (CRM) systems — is becoming possible …

Self-segmentation provides a foundation for leveraging customer experience and input … The rise in social networks and online communities, combined with the new era of the Web-empowered consumer … consumers are increasingly segmenting themselves into communities, based on common characteristics, passions, interests, or needs. Such “self-segmentation” is likely to be much more accurate and reflective of consumers’ attributes …

Companies can now bind themselves to consumer communities of interest or “tribes,” … such self-selected communities not only reflect consumers’ true interests but also involve their connection to others with the same passions. This opens the door to fostering brand ambassadors, enabling customer collaboration, and facilitating word-of-mouth cross-fertilization …

Since relevant communities represent self-selected groups who share one or more interests, marketers can substantially reduce the costs, time, and toil required to identify, and segment, qualified prospects … and the communities provide a better guide to potential purchasing behavior …

Interactions within communities represent an ideal listening post, enabling marketers to glean direct insights without the filter of market research …

Engaged participants can provide product development guidance and identify shortcomings in service or other areas to help a company improve its brand …

Companies can utilize three approaches to leverage self-segmented communities — engaging with social networks, tracking online communication behavior, and mass customization …

Segmentation is vital as mass marketing slips into irrelevancy, with information overload causing consumers to block out many corporate communications … But CRM-based market segmentation can be expensive, complex, one-dimensional, and static. It fails to accommodate the multidimensional nature of consumers … It leads to top-down initiatives that view potential customers as targets to be blitzed with campaigns, ambushed with messages, and subjected to guerrilla marketing.

In this new era of branding, companies must focus on ethnic, cultural, religious, sports, or other segments, not markets. This pivot could be achieved through CRM systems, but self-segmented communities of interest provide a more effective alternative. Such communities can provide fast, low-cost market research, generate ideas and feedback about new offerings, help improve corporate and customer-to-customer service, strengthen relationships, provide an early warning system about problems, and promote favorable word-of-mouth. It all starts with finding communities united by a passion or an interest, and talking with them, not at them.

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Marketing done the right way

Posted November 12, 2009, under Uncategorized
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Marketing is a very important aspect in business since it contributes greatly to the success of the organization. Production and distribution depend largely on marketing. Many people think that sales and marketing are basically the same. These two concepts are different in many aspects. Marketing covers advertising, promotions, public relations, and sales. It is the process of introducing and promoting the product or service into the market and encourages sales from the buying public. Sales refer to the act of buying or the actual transaction of customers purchasing the product or service.

Since the goal of marketing is to make the product or service widely known and recognized to the market, marketers must be creative in their marketing activities. In this competitive nature of many businesses, getting the product noticed is not that easy.

Strategically, the business must be centered on the customers more than the products. Although good and quality products are also essential, the buying public still has their personal preferences. If you target more of their needs, they will come back again and again and even bring along recruits. If you push more on the product and disregard their wants and the benefits they can get, you will lose your customers in no time. The sad thing is that getting them back is the hardest part.

Marketing Promotes Product Awareness to the Public

It has already been mentioned in the previous paragraph that getting the product or service recognized by the market is the primary goal of marketing. No business possibly ever thought of just letting the people find out about the business themselves, unless you have already established a reputation in the industry. But if you are a start-out company, the only means to be made known is to advertise and promote. Your business may be spending on the advertising and promotional programs but the important thing is that product and company information is disseminated to the buying public.

Various types of marketing approaches can be utilized by an organization. All forms of marketing promote product awareness to the market at large. Offline and online marketing make it possible for the people to be educated with the various products and services that they can take advantage of.

A company must invest in marketing so as not to miss the opportunity of being discovered. If expense is to be considered, there are cost-effective marketing techniques a company can embark on such as pay-per-click ads and blogging.

Marketing Helps Boost Product Sales

Apart from public awareness about a company’s products and services, marketing helps boost sales and revenue growth. Whatever your business is selling, it will generate sales once the public learns about your product through TV advertisements, radio commercials, newspaper ads, online ads, and other forms of marketing. The more people hear and see more of your advertisements, the more they will be interested to buy.

If your company aims to increase the sales percentage and double the production, the marketing department must be able to come up with effective and strategic marketing plans.

Marketing Builds Company Reputation

In order to conquer the general market, marketers aim to create a brand name recognition or product recall. This is a technique for the consumers to easily associate the brand name with the images, logo, or caption that they hear and see in the advertisements.

For example, McDonalds is known for its arch design which attracts people and identifies the image as McDonalds. For some companies, building a reputation to the public may take time but there are those who easily attract the people. With an established name in the industry, a business continues to grow and expand because more and more customers will purchase the products or take advantage of the services from a reputable company.

Marketing plays a very essential role in the success of a company. It educates people on the latest market trends, helps boost a company’s sales and profit, and develops company reputation. But marketers must be creative and wise enough to promote their products with the proper marketing tactics. Although marketing is important, if it is not conducted and researched well, the company might just be wasting on expenses and time on a failed marketing approach.

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Why Market Segmentation is So Important

Posted November 11, 2009, under Uncategorized
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One of the critical aspects of marketing management is identifying the target market and creating market segments with common specific wants and preferences where a business bases its marketing strategies and orientations.

A group of individuals or organizations having similar characteristics causing them to take on a similar product or service need is called a market segment..

Why a Business Needs Market Segmentation

When the market is treated as a homogeneous group of individuals where the same marketing mix is offered to customers market-wide, it is called mass marketing. It employs mass production, distribution, and product dissemination.

However, since every individual has personal preferences, it is quite impossible to satisfy all customers by giving them equal treatment and offering the same products and services. A business has to be sensitive to the needs of the customers. If not, a competitor might take advantage and address the need of your customers that was not fulfilled.

On the contrary, when a company understands and recognizes the differences of the customers’ needs and does not offer the same product or service to everyone, this is called target marketing. So, the diverse market is then classified based on various factors and considerations.

The process of dividing the market into classified groups is called market segmentation. A company is able to better satisfy the needs of its customers when they are properly segmented depending on the need and commonalities of the customers.

Criteria for Segmenting a Market

A true market segment meets the criteria that are required of a company. Effective market segmentation is a product of proper categorization of different customers. Accessibility is one of the criteria which means that the target market should be closely available to the company. This includes the ease of communication and distribution channels.

Another factor that should be considered is that a market segment should be identifiable. This means that the different characteristics and similarities of the segments are determined so that one market segment can be distinguished from another.

A market segment must also be substantial. A high volume or production must satisfy market segments that are sufficiently large enough in order to properly distribute the product to them. The availability of the products must considerably compensate a large market segment for an increased profitability.

Apart from substantiality, durability must be considered in a market segment. Since people have changing preferences, it is better to cater to a market segment that does not alter too quickly in their tastes. The segments must keep a sense of stability in order to minimize frequent changes.

Lastly, market segments must be evaluated on their unique needs. They must have differences in their responses to the marketing mixes in order to justify the various products that are offered. To illustrate, let us use bath soaps as an example. Some people prefer those with whitening components while others would go for the moisturizing effect. Even others have unique needs on the kind of soap they use.

Basis for Consumer Market Segmentation

A large, diverse market is classified into different factors but these factors are consistent in a particular segment. For a consumer market, there are four main categories in segmenting the market. One of which is geographic segmentation where regional variables are considered.

Examples of these variables are region, population size, population density, and climate. Some companies take advantage of selling suntan lotions in tropical regions such as Hawaii while other businesses promote fur coats in colder places like Alaska.

Demographic segmentation relies on variables like age, gender, ethnicity, religion, education, occupation, income, social status and family status and size. The customers are grouped basing on the particular need and tastes.

Psychographic segmentation classifies customers based primarily on lifestyle. So, the variables for this kind of segmentation are social activities and interests, opinions, values, and attitudes.

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What is Consumer Behavior?

Posted November 10, 2009, under Uncategorized
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Consumer behavior is defined as, “studying the process individuals or groups employ to select, purchase, use, and dispose of goods or services to satisfy their needs… so why do individuals purchase products the way they do?

The consumer decision making process beings with Problem Recognition. In “Problem Recognition” with purchasing clothes, I look into my closest and realize that I do not have any clothes! This would probably happen while I am preparing to go out to a party, or when I look outside the window and see that there is a plethora of snow and I do not have anything to keep me warm! After this problem recognition, I move on to the second step, information search.

In the information search section, I would probably use both external and internal sources. Internal sources consist of memory based sources. Therefore, I would look back on my memory, and rememebr which shops and stores I find favorable . If I am unable to completly use my memory, I would have to use external sources, namely, the internet. Because I do live in Pullman, and there are no stores near by, I would have to inevitably use the internet and purchase my products online. After, I would move on the the third set, evaluate alternatives.

As I am evaluating alternatives, I would have to look into my own opinions and decide what types of products I am interest in. I would narrow my alternatives by creating evaluation criteria. Eventually, I will need to make my decision.

The final decision is ultimately based on heretics and brand loyalty. I am a very loyal person to forever 21, hence, I would probably purchase my product from this website.

Finally, I will evaluate my purchase decision. Did I make the correct choice? Should I have purchased from another retailer? These types of decisions would leave me pondering for quite a bit.

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Marketing Best Practices

Posted November 9, 2009, under Uncategorized
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Developing a set of best practices for all categories of your business model is not only important, but essential. Loosely defined, a best practice is a way of doing business that has been proven to work based on previous experience and research.

To become a best practice, the method has shown consistent success over time and should be used as a model for business going forward in the future.

Why is it important to follow best practices for marketing? One reason is that developing a set of best practices for any area of your company, but specifically marketing, allows you and your team to move together toward a positive end result, whether it be a 10 percent increase in inbound calls from a direct mail campaign, or adding 100 more qualified connections or friends to your social networking circle.

Through continuous improvement and development of these best practices, you will ultimately find the most effective and successful way to achieve an objective or task.

Track your progress and your setbacks, as these will play an integral role in creating marketing excellence.

Last year, the American Marketing Association redefined the definition of marketing, steering the theme away from functionality and emphasizing the societable aspect of marketing.

In other words, marketing is social, educational, and no longer just another business function to be included in overall strategy. The new definition reads:

“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Whereas the old definition read:

“Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

Let’s take a look at the difference between various marketing best practices and how they relate to your business:

• Product driven versus market driven – or even better, “market driving.” You no longer want your product to be driving your marketing initiatives nor do you want the market to be the influencer.

Best practices here are when you are pushing a specific market forward with your marketing initiatives, generating energy and engaging with your customers. You are the driving force, not a product or a follower.

• Mass market versus segmentation, but ultimately niche marketing. In today’s fledgling economy, mass marketing simply doesn’t work.

You must connect on a very human level with your customers and the best way to do that is to target specific niches as they relate to your business, products. services, and core values. You will have a higher ROI targeting a smaller, yet more finely focused market.

• Function-oriented versus process-oriented versus outcome-oriented. Customers are going to show quicker buy-in when they are presented with outcome-oriented information and ideas specific to their day-to-day needs and problems.

Presenting a dog and pony show about the latest features in Product X isn’t going to win over customers. Showing customers how Product X can specifically save tens of thousands of dollars to their bottom line will.

• Exploitation versus partnership. Creating partnerships with your vendors and distributors is best for all involved. Instead of trying to see “what you can get out of them,” work together with your partners to develop your own collaborative best practices that will benefit you both.

What can each of you bring to the partnership that will ultimately benefit the end-user? Create an end-to-end solution together rather than trying to develop individual solutions.

• Average products and services versus legendary. Wouldn’t it be great if we could all provide legendary products and services? There is no reason why you can’t.

Developing best practices that make you legendary will only help to build brand recognition and trust with customers and potential leads alike. As marketing guru Seth Godin preaches, “Be remarkable.”

Developing key benchmarks within your marketing initiatives will help you grow your ideas into best practices that you can successfully use over and over again.

It’s important to take the time to work through strategies, analyze setbacks, and fix mistakes. Soon you’ll have your own best practices for marketing excellence.

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How to Gather Market Intelligence

Posted November 7, 2009, under Uncategorized
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Market Intelligence is about providing a company with a view of a market using existing sources of information to understand what is happening in a market place, what the issues are and what the likely market potential is.

Market Intelligence can be divided into two spheres

  • Market Intelligence based on external data
  • Market Intelligence based on internal data

Often Market Intelligence relies purely on external data such as analysts reports, but there is often a great deal of untapped information internally that would give you an insight into your market, from sources such as databases and prospect lists, and an holistic view can prove very insightful.

Market Intelligence from External Sources

Market intelligence from external data is normally gathered through what is known as desk research. This means sourcing and analysing published information to build a picture of a market and to try and answer some specific commercial questions such as what is the market potential. Central to successful desk research is the ability to track down sources of information and to provide the right level of analysis. For example identifying who your competitors are and analysing their market position against yours to find strengths and weaknesses and indications of new developments.

A specific form of Market Intelligence is competitive intelligence. This is typically undertaken on an on-going basis and involves the collection of news, materials and other information about competitors from a wide variety of sources. Because of its on-going nature, Competitive intelligence is more about putting structures in place than specifically finding one-off pieces of data.

Market Intelligence from Internal Sources

Much marketing intelligence information can come from making better use of existing information. For instance by carrying out database analysis on orders taken it may be possible to understand where you have cross-sale and up-sale opportunities, or to understand what type of customers are your most profitable. Database information is not the only source of market data. Your website may also include a high degree of valuable information about who is looking for your products and services. Web site traffic analysis can help you understand what customers are looking for and why.

Finally, don’t overlook knowledge about customers, markets and competitors that comes from your staff. Often this is a poorly tapped source of information. Collecting and disseminating such information falls into the realms of  customer knowledge management and making better use of this customer knowledge can help businesses focus far more on what the customer wants and says.

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Great Idea vs. Great Business

Posted November 4, 2009, under Uncategorized
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What is the difference between a great idea and a great business?
Execution, Execution, Execution.
TEAM, Team is capitalized because a one man business is destined for failure. Surround yourself with people who will challenge you, not people who are along for the ride. Challenge each other to make the best decision that takes into account the trends in the marketplace, your financial position and staffing resources and the upside potential, most likely outcome and worst case scenario of any decision.
Timing, Set milestones based upon metrics, not intangible goals such as “we have someone using our product”. How many do you need? What do they need to do? What metrics decide success, failure and adjustment? The window is limited, the market is moving and there are 1,000 other businesses that are working on the same thing you are… so you need to move, measure and adjust quickly… which leads into # 3.
Agility, It is important to be agile as a new business, and I mean that in all senses of the word. Don’t be tied down to a specific service, target market or even location. Sometimes market factors can make something that was a great idea 6 months ago a one way trip to the dead pool… think recession. So be tied to a mission and execute on that mission. How you execute on that should be fluid. As an example, your mission may be to make it easier for consumers to manage their personal finances and lower their bills. Just in case you live under a rock a company called Mint just got bought for $170 million because they delivered on this mission.

Many entrepreneurs have dreams of being the next Marc Cuban, Zuckerberg or Trump… You know what I’ve found as the common factor in successful entrepreneurs, they were driven by providing something different and valuable that served a real need, they worked very hard to make their business successful and grew over time with the market, instead of trying to change it.

So to all my fellow entrepreneurs out there… Be confident! Be open minded! Be focused!So what exactly does that mean? There are a lot of very smart entrepreneurs that execute their butts off and still fail. They fail because execution is about more than pointing your finger and running.I wrote execution three times for a reason. There are three key components of successful execution.

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Do your homework!

Posted November 3, 2009, under Uncategorized
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There was a line in the movie Sentinel where Keifer Sutherland said that “once a forensics investigator has a notion of how a crime was committed all of the evidence they find is used to support their assumption”.

Many of us in business and life do the same thing. We guess, have a hunch or have talked to a few people and then look for evidence to support our theory rather than try to poke holes in it. The danger in that way of thinking is that you can quickly end up married to an idea that leaves you in debt and a year down a path that doesn’t really make sense. Don’t feel bad, there are a lot of great ideas that don’t make great businesses and we have all had that moment where we realize our great idea would be a terrible business.

The key to making good decisions is information. Whether it is an article, a traffic report, a lecture or a look that says I am going to slap you…Everyday we react based upon information, information that we seek out because knowing that Microsoft has just launched a competitive product, there is a back up on 76, your significant other is upset because their cousin passed away or the CEO of your company was arrested for streaking through city hall helps us to decide how we should act or react.

So why do entrepreneurs and business owners guess? Because, quite honestly gathering information is a pain in the you know what. We all hated homework when we were in first grade and nothing has changed. It may not be fun, but you have to do it. Knowing where potential customers live, work, what they buy the most, what they read or watch, how many competitors are in the area, how much it will cost to advertise, your advertising ROI and how much it will cost to start or grow your business… this type of information is either used to create an effective business plan or turns out to be an “oh #!&*” moment when it is too late.

Conducting effective market research starts with identifying what you need to know. What questions do you need to answer to ensure success? I will give you a few hints.

  1. Size of the market opportunity/demand (how many consumers currently or could buy your widget?)
  2. Market competition (how many businesses already serve this need?)
  3. Operating costs (how much does it cost to run this business?… from office to supplies and marketing to staffing)
  4. Revenue projections (how much can you make from this business?… this is the result of your marketing and advertising plan)
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