This is the fourth part of a five-part series on understanding your customer.
In this post we are going to answer two questions:
How many of your target customers will you really reach?
How frequently will you interact with your customers?
How many of your target customers will you really reach?
It is great to know that there are a billion customers out there waiting to buy your product. The trouble is that you have $500 in your pocket. Your largest competitor spends over $1 billion on marketing each year. No one has heard of you.
You will not get those billion customers any time soon. It will take years of hard work. That big number is a great symbol of the eventual payoff. Right now the focus has to be on practicalities.
How many people can you reach with that $500? If you estimate that it costs $10 to get a customer you have got 50 customers. Perhaps.
Does this feel like a big bucket of cold water coming all over you? That’s a good thing because it helps you build a reliable financial model.
To start with it takes lots of money to get customers. You have to spend money or time. Entrepreneurs who don’t ask this question are often disappointed with their impact. Entrepreneurs who do ask it chose to focus on a much narrower segment to start with. That often delivers far more success.
Its a simple tradeoff. Do I spread my money over millions of people each of whch I have a small chance of winning? Or do I spend my money where I have a much better chance of winning a few people.
How frequently will you interact with your customers?
All other things being equal the more that you engage with your client the
- stronger the relationship
- more you sell
- greater the expense
- greater the loyalty
This depends a lot on your product or service. The stage and length of the sales cycle is also important.
Many goods have a natural sales cycle. This is due to their life expectancy or consumption rate. The bake sees me daily when I buy bread. The butcher sees me weekly. The car salesman sees me every few years.
You can play with the frequency. Often customers will have an existing purchasing habit. They will buy according to that habit. You won’t be able to alter it.
If you think it is every 6 months when it is actually every year – then your revenue takes a 50% hit! Ouch. If you can predict it and target them as they approach renewal then the equation shifts in your favour.
With some goods customers need lots of interaction upfront. They then need less going forward. With other goods there may be little interaction to start with but far more down the line. Both could be true for the same good.
For insurance. You may buy through a salesman because you have complex needs. With no claims every year is very simple. It is renew and forget. Or you may buy insurance online wth no interaction. Making a claim can involve dozens of emails and a high level of interaction.
Understanding the different patterns that you can have is important. This is because by tailoring your operations to that need you can please him far more. Often far better than more traditional companies in your sector.
