Tuesday, 22 April 2014

Year Two: Development

Risk: High
Satisfaction: High
Key Challenge:  Focus
It’s difficult to develop an FAQ until you have any questions.
Congratulations... you have survived your first year in business.  The second year of business is a year for growth and development.  Developing your business takes many forms.  The first is obvious…developing a customer base.  In theory, we know our target market before we start our business.  The reality is that we don’t always get it right. 
I heard a great story on this topic.  Some entrepreneurs decided to start a valet parking service in Kelowna BC over the Christmas shopping period.  The thinking was that seniors wouldn’t want to walk in the inclement weather and would use the valet parking service.  When the business started a curious thing happened.  The problem was that seniors didn’t use the service.  As children of the depression, seniors found that paying for parking a car was an indulgence.  However, there were customers for the service.  The sub-twenty-five year old crowd used the service.  They felt that this was an affordable luxury and used the service for status rather than for pragmatic reasons.
The second part of focus is your product or service mix.  As we get a better idea of who our customers are, we can also get a better sense of what our customers want.  This can mean honing,  focusing and expanding our product / service mix.  There is often a ‘disconnect’ between what we offer and what our customers actually purchase.  One metric we use in planning sessions, is to determine the most common products or services purchased by our customer. 
Think of a restaurant menu.  If you were to evaluate your menu, you would see the most popular and the least popular menu items.  You then ask why an item might be popular, or unpopular.  Is it the price?  Is it the menu design?  If there is no obvious reason, then it is an item your customers just don’t want to order from your menu.  The product mix, for goods or services, often reflects the entrepreneur and not the customer.  We start out not knowing what the customer wants, but; after a year we should have a better idea and adjust our product mix to suit the customer. The problem for many entrepreneurs is they are still running the business for themselves and not for the customer!
The third focus issue is the promotional message.  Even when we get our customer and our product right, customers often buy for reasons other than those we considered.  In our valet parking example, the business owner should shift the marketing message to a status message from a pragmatic message.  In businesses where multiple parties make decisions, it is important to create messages for each decision maker rather than an overarching marketing message.  These multiple messages become clear once we see how real customers make decisions.
Selling software to businesses is a good example. This type of sale requires three distinct marketing messages. 
Message one is the user message.  This message focuses on what the software done, and how it helps the users of the software. This user based message is the most common message provided by software companies.  This message is for the product user.   
Message two is the business message.  This is the business case for using the software.  The message is on issues including increased productivity and cost savings.  This message influences the owners, managers and accountants in the customer organization.
Message three is the technical message.  This is the technical case for the software.  This is all of the geeky stuff that the technical people need.  Issues such as compatibility with other programs and systems, customer support and security are often included in this message.  This is the addressed to the Chief Information officer or systems professional whose job it is to install and integrate the software.
The first message is often accurate, but it takes time to develop the technical and business message until you have real users.  There are often hidden advantages we learn from customer usage that we can never learn during the start-up phase.  Updating the message is critical to ensure business growth.
Evaluate your client base...Analyse your product mix...Re-visit your message.  These three strategies are essential ingredients to business development in year two.  Focus takes time and discipline, but focus is an important building block on your road to developing a sustainable business.  
Next time, we move into the third year, the management year.

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