Business Self-Assessment

Tough Things First

In business self-assessment, few components are more important than identifying your customer. In this Tough Things First podcast, Ray Zinn discusses the elements of identifying your target customer and the obstacles to obtaining and retaining them.

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Rob Artigo: I caught a piece on a website called entrepreneur.com. It caught my attention for a couple of reasons, but I picked one little piece out that I thought would be interesting for us to talk about. In part, this is what it says. “For small to medium-sized businesses, it’s particularly important to perform a self-assessment. Are your revenue streams diversified and if possible, reoccurring? Do you have enough flexibility in your supply chain? Are you prepared to respond to new regulations?” That sounds like a good one. “What would happen to your business if sales completely stopped and how long would you be able to survive?”

So let’s talk specifically about market analysis as a way of doing this self-assessment. This is part of as self-assessment, and I thought focusing just on one part of it would be a good way to look at this and what our listeners would be interested in. For market analysis, there are four bullet points here and one of them is, who’s your target customer? When I’m doing that assessment and looking at it, how do I narrow down who the target customer is?

Ray Zinn: Well, it’s an interesting question because if you look at who your target customer is, then you’ll have identified your market. I mean, years and years ago, I don’t know how many, maybe 35, 40 years ago, there was a product that came out called the Pet Rock. And if you can just think of that… I think you can still get them, as a matter of fact. I think I saw them online. You can still buy Pet Rocks. But to me it was a dumb idea, even though they sold like crazy, but it was very short-lived. The product went away, as you would. That product’s got to be 55 years old now, because I remember my daughter who was in kindergarten, she made a pet rock for me for Father’s Day. It looked like a ladybug, and I still have it actually.

So anyway, yeah, it’s in fact it’s just sitting probably 10 feet from me here. But it was an idea that somebody had that, I mean, it was just a fad. Okay, so when you want to start a company, don’t think of it being a fad, and that’s the problem. Recently we’ve undergone this switch from one administration to another, and the other prior administration was focusing on the Green Deal, as you would, and trying to live off of non-fossil type products. And then the new administration says they’re going to focus on fossil because we have an abundance of it and it’s cheaper and so forth and so on.

And so, looking at regulations, looking at the administrations, local and national and global are important when you come up with your product. So who is your target market? There’s a company called Ulta, which is a women’s products company selling cosmetics and other products for women. So the target market for Ulta is women, not children. As soon as I guess a child is old enough to start using makeup and using older women products, that’s your target market. Say 12 on up and maybe it tapers off when they get to be in their 60s or 70s.

You got to look at the time period. What’s the lifespan of your product, and do you have multiple items that you can sell, not just one? For example, going back to Ulta, are you just going to sell hairspray or are you going to also do facial cosmetics, and other other lotions and so forth to try to expand your customer base when they walk in the door to buy the product. So again, you have to look at the legal, at the legislative aspects. Also, whether it’s a local or national or global type market, and that’s how you identify the individuals that you’re trying to target.

Rob Artigo: Number two on here is what are their pain points and needs when talking about your target customer? The pain point in particular is interesting because if you really don’t know what pain point means, then you can’t really address it. And I think a lot of people who are new entrepreneurs that haven’t had a lot of training in business might miss what a pain point is. So I’ll just mention that definition I found says, “That’s a problem or frustration a customer experiences when interacting with a company.” It’s the product or its services. So pain points can negatively impact the customer’s experience and can be a key factor in customer satisfaction, loyalty, and decision making, right?

Ray Zinn: When you look at your customer base and identifying the pain points, in other words, if customer returns, I know that Amazon makes it easier for you to return products, within 30 days, that is. And also free shipping because a lot of people don’t want to pay for shipping. Say, if I got to pay for shipping, I’ll just go down to the store and buy it. So Amazon said, “Hey, we don’t want you to worry about the shipping costs, so we will cover that in the product that you buy from us online.”

And so what they did is they looked at all the pain points associated…. Amazon, I’m speaking now, looked at all the pain points associated with their online marketing business. They spent a lot of time analyzing what it would take. For example, if it’s going to take a month or two to get the product, that’s a pain point. So they said, “Okay, we want to make sure it’s less than a week,” and maybe preferably two or three days because otherwise the customer’s just going to go downtown to pick up the product. So they worked very hard, diligently at figuring out how to make it easy to return the product and then also how quickly they can deliver it. So I think they’re in a good example of what we’re talking about, about these pain points.

Rob Artigo: Going on to who are the competitors and what are their strengths and weaknesses. So you have to really, let’s say you’re the Pet Rock guy. Well, you didn’t have any competitors, I’m sure at first, and then people started making their own pet rocks and trying to sell those. Even though that guy made some money on it, it was an easy product to copy. But it is important to know who your competitors are because almost in anything, you’re going to have some form of competitor out there, right?

Ray Zinn: Well, again, we’ll go back to this Amazon thing. I mean, they had to overcome some of the obstacles. Customers don’t like driving downtown, getting in traffic, shopping with a bunch of other people, waiting to pay for the product. So they’ve overcome a lot of the pain points associated with shopping. And with AI coming online, it’s even easier now to do shopping because there are so many competitors out there that are providing the same product because almost anybody can be an online marketer, and so there’s no pain points associated with developing a marketing strategy for online. Whereas in a store, you’re going to have to stock the store, you have to keep the product rotating, you got to pay pay for rent, for other things that associated with having a physical store versus an online.

So the more technology we have available to us, the more you’re going to find online taking over. A lot of stores are closing up because of that. So you have to look at, is the business I want to get into, can it be taken over by an online marketer? If it can, you want to be careful, then what are you going to offer, if you’re going to set up your own store, what are you going to offer the customer that you can’t get online? I tried it the other day. I was saying, I’m going to see if I can find something that can’t be purchased online. I was going through the store called Murdoch’s, which is kind of a farm store, and I was trying to find things you couldn’t really get online. And so like tractors, like a 20-ton tractor, you don’t find very many of those online. I don’t know how many people want a 20-ton tractor as you would, but again, this is examples of what we’re talking about.

You have to look at if you’re going to do an online versus a store, then you have to look at, okay, what’s going to entice your customer to come to you online versus going down and just buying it at the store. So again, I use that 20-ton tractor as an example. I didn’t find very many of those that were available online. You could get locations. In other words, it would come up and tell you how far you are from the nearest 20-ton tractor store, but certainly you’d be hard-pressed to buy one off Amazon as you would.

Rob Artigo: Yeah, and it works the other way too. If you are competing with online and you are a brick and mortar place, then you have to figure out how to get people into your store instead of looking online for it. The market size and a potential for growth, let’s talk a little bit about that.

Ray Zinn: We kind of talked about that to begin with. So you have to look at what’s your longevity, as you would, how long is your business able to survive? What’s your runway? What do you have in the way of resources to survive? Just online of course, don’t need a whole lot of inventory. At least you don’t have to store it if you’ve got a good access to inventory from your supplier, as you would. Because if you’re just a marketer and you don’t have any inventory, you’re going to have to rely on your distributor to get that product out to you. This is all a matter of whether or not you can sustain your growth and whether or not you have the wherewithal to do that.

For example, if your product has a short shelf life, like milk is an example. I don’t buy milk online. I go down to the store to get it because the shelf life. Or I don’t buy eggs online, and even though eggs have a lot longer longevity. I guess you can buy them online, but there are certain grocery items that I prefer to go to the store, especially produce and things like that. Even though I was amazed at some of these companies that supply ready meals, as you would, I’m surprised how they pack that and how fresh that stuff is when you get it, even though it takes two or three days to ship it.

Even products like milk, they do supply things that have a shelf life, but they do get it to you pretty quickly, like within a day or two when they put the product in delivery, as you would, they have to look at who can get that product to that customer within a day or two at the most, and they put these ice packs and other things like that to protect it. But again, you got to look at where’s the market headed? Which direction are they going?

I’ll go back to the electric car versus the fossil fuel car. What’s the direction? I think electric is going to improve, battery life and so forth, the other environmental aspects of electric cars. I think there’s a future for them. I think it’ll grow. I don’t know that it’ll totally supplant the fossil fuel vehicle, but certainly there’s I think a growing opportunity for products that supplant fossil fuel. So again, which way is the market headed?

I don’t think anybody would go into making buggy whips because we no longer have wagons pulled by horses. And so I don’t think anybody would go into making wagons as you would for horse-drawn unless you’re competing or just doing it for a novelty. So you got to look at where’s the market headed? What’s the opportunity for growth? And that that’s the key for establishing a long-term business. If you’re just short-term, in and out, then of course you don’t worry about that. But if you’re looking for a five to 10 year business, then you have to look at where’s the market headed?

Rob Artigo: Well, Ray, the listeners can join the conversation at toughthingsfirst.com. They can get questions to you if they choose, they can make some comments. Always welcome at toughthingsfirst.com. Follow Ray Zinn on Twitter or X, Facebook and LinkedIn, and of course, pick up Ray’s books, Tough Things first, the Zen of Zen Series, that’s one, two, and three.

Ray Zinn: Pick up our new book, the Essential Leader.