Solving the Mystery - What Business Are You Really In

The first thing that the overall analysis sets out to do is to answer the question, “What business are you really in?”

On the surface this may appear to be an absurd question to ask. Certainly most if not all small business owners/managers can tell you what market their business operates in.  For example: the book market, the shoe market, the men's wear market, and so on.  However knowing this is not enough.  You must also know exactly what market segment your business caters to.  For instance, based on the examples given above, your business might be in:

1.      The educational book market for primary and secondary level schools but not tertiary (as part of the overall book market).

2.      The high–fashion, leather shoe market catering only for women and not men (as part of the overall shoe market).

3.      Affordable, medium quality/medium priced men’s wear clothing and accessories (as part of the overall men’s wear market).

In each of these three examples, the business operates in one segment and not in all segments of their respective markets. Constructing a profile with key descriptors about your business will help you to identify the specific segment to which your business belongs. You may want to create this profile by using a checklist of ‘who, what, when, why and how’ regarding your customers and their needs.

Checklist of key questions

 

1        Who are your main customers currently?

2        What other potential customers could be targeted by your business?

3        What are the main products (goods or services) sold by your business to these current customers?

4       What is the key need that is met by these products?

5        What other products could your business supply to its customers?

6        When do your customers mainly buy?

7        Why do they buy the product to begin with?

8        How do they buy?  (Buying patterns and methods).

9        Why do they buy from your business?

10     What don’t your customers like about buying from your business?

11     What related items do they buy elsewhere and why?

	EXAMPLE

 

The owner of a small but profitable computer-programming firm considered that his business specialised and catered to no particular market segment.  He believed that his business designed software with a fairly even cross section of customers from various industries. 

However, on closer examination, the owner discovered to his surprise that about 40% of his customers were accounting firms.  This realisation prompted the firm to target this area more rigorously, with the result being an increased clientele list and increased profitability.

What really happened here? :

Over time, the business had developed a superior and specialised knowledge of accounting systems in direct response to customer needs. Because the specialisation was gradual, this market segment was not identified until an analysis of the business was conducted.

(iv). Think broadly about the business you are in.

Once you have accurately determined exactly which business you are in, the next step is to take a broader look at what (beyond the actual product) the customers are buying from you.

	EXAMPLE

 

Have a look at the three columns in this example. In the first column, the names of a number of well-known businesses are listed. The second column displays their respective product offerings.  It is, however, more important to identify what the customer is actually buying beyond the product itself. This is found in the third column.

Business                                 Product offering                      What’s in it for the customer

Universal Studios                      Movies                                     Entertainment

Revlon Cosmetics                     Make-up                                   Beauty

Telstra                                     Telephones                               Communication

Carrier                                      Air-conditioning                         Comfort

Mt. Buller                                  Skiing                                       Recreation

Metrail                                      Trains/Trams/Buses                 Transportation

Coca-Cola                                Soft Drink                                 Acceptance

Club Med                                  Travel & Tourism                      Escape

From this type of analysis, the true nature of a business is quickly revealed.

Consider Cadbury Schweppes Company.  Their product offering is food and beverage.  But what are the customers really buying?

Mark Smith (Managing Director of Cadbury Schweppes – Australia & New Zealand), said:

               “I work for an outstanding company. And I'm really passionate about what we do, 

                 which put simply, is to bring delight into the lives of millions of consumers.

Therefore, Cadbury Schweppes is in the business of putting joy and fun into people’s lives.  Not simply selling confectionery. 

  

The customer’s perception of your product can be more important than the product itself. Coca-Cola is a classic example of this.  The long-term popularity of the Coca-Cola drink has been sustained over many decades. This would suggest that there is more to the drink than its taste.  The advertising is perennially the same and is targeted at young people. “Coke is it” really says, “Drink it and with it comes acceptance, status and fun.”  Not bad for a soft drink.

Similarly, once it was established by Revlon that women are really buying ‘beauty,’ Revlon tailored the marketing strategies, packaging and advertising to reinforce this perception.

By understanding what a customer is really buying, your marketing strategies and promotions will more accurately hit the mark.