Do you sell razors to someone with a 5 o’clock shadow or to someone with a beard?
Really think about this question, especially if you are about to start a new business. Once you think you have a great idea for a venture, you must understand that the act of choosing a target market is one of the most important aspects to address. Without this first crucial step, you are stepping out blindly and wasting energy, time, and even money by talking to the wrong people.
Let us take as an example the two brothers, Mike and Joe. One sunny day, these two started a window cleaning operation. They invested in buckets and squeegees and went out into the neighbourhood to look for dirty windows. The first neighbour they reached had dirty windows. They believed that they had hit the jackpot because she desperately needed their services. When she opened the door, they gave her their well-rehearsed pitch: “Can we clean your windows? We charge R500 for no more than twenty windows.”
She nearly fell over upon hearing the price. “No, that is way too expensive. My husband will wash the windows himself.”
A great entrepreneur does not stop at the first sign of trouble so onwards they moved to the next house, delivering the same pitch to the elderly gentleman who answered the door. “Can we clean your windows? We charge R500 for no more than twenty windows.”
He seemed annoyed. “No, no, no, my son does that.”
What does an entrepreneur do at the second sign of trouble? Entrepreneurs laugh at such trivialities. However, after they had repeated this scenario a few more times, it didn’t seem funny anymore. Being at your wit’s end will do that to you. Mike scratched his head as he looked at the mansion at the end of the lane. They avoided it on purpose because the windows were sparkling clean. Mike told Joe that he just had to try one more time, despite the fact that the mansion owner would probably not need their services. Joe couldn’t see why they should talk to the owner of the mansion but Mike was a stubborn man and knocked on the door. Imagine their surprise when the lady of the mansion loved their pitch.
“Only R500 for no more than twenty-five windows? Marvellous! The current window cleaning company charges me R750!”
Another great example is Kabelo with his roof cleaning business. He went through the same struggles as Mike and Joe did but he soon realised that the people most interested in his business were those with clean roofs, those only just starting to show signs of dirt. They were also interested in his extra service where he not only removed the dirt but also applied his own uniquely formulated product to ensure that the dirt stayed away for longer.
There is a pattern here.
The good news is that you can create a target market profile by asking the right questions. Here are 8 questions you can ask to help you to know your target market:
1. In what area do they live?
2. What car do they drive?
3. How many children do they have?
4. Are they single or married?
5. Are they male or female?
6. Into what age bracket do they fall? (25 - 35; 35 - 45; 45 - 55; etc.)
7. Are they South African or international?
8. What do they do in their spare time? (watch rugby, read books, hiking, etc.)
With your newfound insight, you will be able to answer the question at the start of this article: Do you sell razors to someone with a 5 o’clock shadow or to someone with a beard?
Your target market is not someone who only has a problem that you can solve. Yes, the man has a beard. But despite that fact that he has the ability to grow facial hair, he is clearly not in the market to be rid of his fashion statement anytime soon.
Your target market is, in fact, the people who value the business solution that you provide. These are your lifelong fans. They are prepared to pay you and, what’s more, they will even tell their friends about you. They are the guys who shave every day.
If you want to find your ideal target market, then get in touch with me right away by using the form on the Connect page.
How much should I allocate to my marketing budget? This question comes to me in many forms. It could be, “How much should I spend on marketing,” or, “How much should I spend on advertising?” The answer I always give is, “Do you have a working customer factory?”
A Working Customer Factory?
Yes, a working customer factory. If you have never heard that phrase before, you should read Ash Maurya’s book, “Scaling Lean.” ‘Customer factory’ describes the effects of having a working marketing funnel. If you have a factory where traffic coming in on the one side equals money going out on the other side, then you should scale up your marketing budget as fast, and by as much, as you can with respect to your cash flow. For example, if you have a thirty-day window from the time you have to spend on advertising to the time that you get your money back from real customers then, allowing for that delay, you should spend as much as you can on marketing because you are guaranteed a return on investment.
Unfortunately, most people do not have a working customer factory, which is often why they come to us for help. Advertising on Facebook or Adwords does not guarantee ROI. The only guarantee is that you can reach the people on those platforms with a given message.
Building A Customer Factory Is A Whole Different Challenge
You need to understand who your customer is, what their problem is, how you are going to solve that problem to generate income, and how you are going to position your offer so that your customers take action and purchase the product or solution from you at a sufficient margin to justify the cost of the acquisition. While you are building a customer factory, ROI is not guaranteed. You should go for ROI on a very small marketing budget because the real cost at this point is time and waste. Keep in mind that spending more money while you are building your customer factory does not speed up the building process. In fact, increasing the budget often means that you are more active and, if you are not clear on your customer-solution-fit, you can slow down the process instead of speeding it up, creating chaos when you should be creating order. When trying to build a complex machine in a factory, adding more people to the project will not necessarily speed up the process because the whole system needs to work as a seamless unit. If the people working on the one part are not in perfect synchronisation with the people working on the other sections, your result will be a machine that will not even start. We often see customers who have engaged a marketing agency, and when they cannot gain ROI month after month, they increase their budget. However, this still won’t work and so they say, “Adwords don’t work,” or “Facebook doesn’t work.” In reality, deep within the mixture of keywords, ads, landing pages, calls to action, and conversion tracking, nobody on that project could actually say with conviction what it takes to buy a customer. The actual problem was more than likely to have been that nobody clearly understood the problem faced by the customer or how to position the product or service so that the customer responded.
The beauty of digital marketing is that you can have those answers, and all the necessary tools that will allow you to receive the data, and create structured experiments faster and more cost effectively than ever before. However, the discipline to be able to do that is difficult to find.
In conclusion, if you haven’t successfully been able to create a working customer factory, you should not increase your ads budget. If you find someone who knows how to do this, are if you are willing to spend the smallest amount of money possible, and until you have worked out how to deliberately buy a customer at a profit, only then do you increase your marketing budget.
If you would like us to help you with this, click here to book a brainstorming session or a lean canvas session with us, and we will unpack the leverage points within your business and look into building you your own customer factory.
Photo by Fabian Blank on Unsplash
“How long will it take to get a return on my investment?” I am often asked this question and I
believe that it deserves an answer. After all, it’s a perfectly reasonable question for a
business owner to ask of their marketing company. Unfortunately, the problem is that the
answer is a thorny one. Return on investment is not a “one-size- fits-all” and it varies from
company to company. Let us take a look at the two very different businesses:
Business 1 is a gambling website already making money. The owner decides that he wants
to advertise on Google Adwords to extend his company’s reach, and become widely known.
He has heard that Google changed the rules recently, allowing gambling websites to
advertise with Google Adwords, and he is excited at the idea of adding a well-established
marketing avenue to his existing marketing plan.
Business 2 is in the idea phase. The owner wants to develop an app to enable an iPhone to
function as a computer mouse. Since everyone and their aunt advises them to start
marketing from day 1, the owner approaches us to help their business succeed as soon as it
Now we look at three of the key factors that influence ROI
The first factor is product-solution- fit. Does your product solve a problem? With the gambling
business, the answer is yes. The business is making money, which is the proof. With the
web-app business, the answer is yet to be discovered and, ultimately, will be answered after
extensive market research.
The second factor is product-market- fit. Will people pay money for the solution? Again, with
the gambling business, the answer is yes. People are already paying money; the owner just
wants more customers. With the second business, the owner has not established this. A
quick look at the app store shows that there are already people giving away a free iPhone
mouse app. This creates a challenge for the business.
The third factor? The two business owners need to establish scale. Can they gain a
sufficient number of customers in order to keep the business afloat? Option 1, already done.
He has calculated his lifetime customer-value and knows his target cost-per- acquisition.
Bonus? Google clicks for gambling are reasonably cheap, around R10 a click. The gambling
business owner calculated that a customer is worth R3000 - R4000 per year, so the math is
pretty easy from there. He could probably spend R1000 per customer and see a return. With
the app business, the price of an app is R3 - R4. The margin on that is tiny and he still has to
give a percentage of what the app makes right back to the app store. Obtaining the scale
portion of this is a challenge. In short, the second business owner has no validation
whatsoever that anyone will buy his product, or whether he can gain them in sufficient scale.
And even if he could, the odds are stacked against him because he will have to acquire
these customers for a few cents in order to see a return – a most unlikely scenario.
A good marketing company should be able to tell the difference between business 1 and
business 2 and everything in between. If iteration and testing needs to happen, there will be
optimisation. The key thing that you can control in addition to restraining the variables is the
speed that you can go through the optimisation process. It is best in the long run to work with
a marketing company that builds and tests quickly so that you can optimise your ROI in a
shorter amount of time. Give me a shout in the comments section or fill in the form on the
Connect page if you need any marketing assistance.
“If you don’t know where you’re going, it doesn’t matter which road you take.” How clever was little Dorothy! She knew she was on her way to see the Wizard of Oz and so she knew which road to take. It is the same in a business. It is imperative that you know where you’re going.
In the eighties and maybe even in the nineties, our approach was all about “as many as we can.” As many products as we can sell; as many people as we can reach; as many brochures as we can print; as big a target as we can reach… Sell to anyone and everyone and we will make money!
We feel things have shifted, shifted to knowing exactly what you are selling and knowing exactly to whom you want to sell it. The market has become clever. You can no longer force anyone into buying things that they do not want. And if you do, good luck trying to sleep at night while your conscience gnaws at you...
It’s all about finding the right person, who wants exactly what you have to offer, at the exact time they want it, and for the price at which you want to sell it. So know your target market. Know where they are, and know how to find them. If you don’t know, call us so we can offer suggestions. Also, know exactly how many of your products/services you want to sell and set a time limit. Create a target for yourself in your sales cycle, a target within your reach. This will be determined by your own rhythm, which you control – not your prospects.
Know what you’re doing in every month, for example:
- I am calling 100 new people.
- I am making 20 new appointments.
- I will have 15 new quotes.
- I will have 10 new clients by month end.
This is the start of a sales process. So easy! And really, we are serious about helping you find your target market. Give Lara a call. Her number is on the Connect page.
Do you have a sales target? Is it working for you? Let us know in the comments below, we would love to hear from you.