In this series, we will see how three questions for business success are approached and provide some practical tools and techniques for the SME owner to answer them.

Since businesses have been in existence, these questions that have perplexed most of their owners. Before AI, before the internet and even before electricity.

Who is my ideal customer?

What makes my product or service attractive?

How should I be pricing my product or service?

An article in the NZ Herald from June 2024; Big Red, What went wrong for The Warehouse, highlighted the struggles of one of New Zealand’s most famous retail brands, The Warehouse. A senior analyst at investment house Forsyth Barr posed the question, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on”.

Another analyst, Greg Smith of Devon Funds Management, commented, “They need to recalibrate what is the value proposition”. For The Warehouse, which has used bargain prices as it’s core attraction, now has its competitors like Kmart dictating to Warehouse customers what a bargain actually is.

Given The Warehouse is a large, complex business in a highly competitive market, you might believe that it’s relevancy doesn’t apply to SME’s. But it does. No matter what size of business, the principles of success are all the same.

Who are you selling to, why should they buy it and how much will they pay, are the foundations of success for global conglomerates through to food trucks. In fact, these questions are all linked and once you unlock the first two, then the third is much, much easier to answer.

In this series we will take a look at each of the three questions and shed some light on some approaches to get to the answers. This article looks at identifying a value proposition.

What makes my product or service attractive – my Value Proposition?

Borrowing from the world of advertising, Rosser Reeves of US agency Ted Bates was the first to coin the single minded proposition phrase in his book Reality In Advertising back in 1961.

He concluded that unless an ad (or any communication) had a core proposition at its heart, then what you are saying is a waste of both the readers and and the advertisers time.

A great value proposition should:

• • • Be easy to understand for your target audience, something that resonates with them.
    • Communicate specific results that the target customer will get.
    • Explain how you’re different from an alternative they might be considering.

A good value proposition has to be both relevant and compelling. Click bait is sometimes quite compelling but often not very relevant. Making you click, only to reveal that the compelling nature of the message is completely missing. Don’t be that person.

Good value propositions that find their way into the wider world can stem from:

The product: M&M’s: Melt in your mouth, not in your hands.

Service: Avis: We’re no 2, so we try harder.

Location: Disneyland, The happiest place on earth

Price: Walmart: Save money, live better.

So, how do you go about writing one for yourself?

Answering these questions is a good foundation:

1. What difficulty do you solve for your audience?
2. What do you do to solve it?
3. How does your product or service do it differently from other options out there?

To the extent you can, fight the temptation to break your business down into different product lines or services. Try to think about the big picture — your business as a whole. To write your value proposition, start by aiming to answer all of these questions in a single sentence.

It may be a long sentence, but that’s OK. Then start to reduce the longer sentence down to something short and punchy. A good test is to think of it as if it was the only piece of signage you could have that told people passing in the street what was good about your shop or office. What would it say?

So, it goes to show that if you are struggling to answer the three questions or want to step back from the day to day for a minute to consider these questions – then it’s a good exercise.

If a publicly listed company like The Warehouse is struggling to answer them, then you are not alone and shouldn’t see it as a problem but an opportunity to ensure your business has some of the fundamentals of success covered.

The following content was originally published by BOMA. We have updated some of this article for our readers.

In this series, we will see how three questions for business success are approached and provide some practical tools and techniques for the SME owner to answer them.

Since businesses have been in existence, these questions have perplexed most of their owners. Before AI, before the internet and even before electricity.

Who is my ideal customer?

What makes my product or service attractive?

How should I be pricing my product or service?

An article in the NZ Herald from June 2024; Big Red, What went wrong for The Warehouse, highlighted the struggles of one of New Zealand’s most famous retail brands, The Warehouse.

A senior analyst at investment house Forsyth Barr posed the question, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on”.

Another analyst, Greg Smith of Devon Funds Management, commented, “They need to recalibrate what is the value proposition”. For The Warehouse, which has used bargain prices as its core attraction, now has its competitors like Kmart dictating to Warehouse customers what a bargain actually is.

Given The Warehouse is a large, complex business in a highly competitive market, you might believe that it’s relevancy doesn’t apply to SME’s. But it does. No matter what size of business, the principles of success are all the same. Who are you selling to, why should they buy it and how much will they pay, are the foundations of success for global conglomerates through to food trucks. In fact, these questions are all linked and once you unlock the first two, then the third is much, much easier to answer.

In this series we will take a look at each of the three questions and shed some light on some approaches to get to the answers. This article deals with the first question.

Who is my ideal customer – target audience?

Advertising copywriting icon, David Ogilvy, wrote about “man’s unchanging needs”. What he meant by this was that no matter the time or circumstances, consumers had and were driven by, an unwavering set of needs. These needs for example, were about youthfulness in the beauty industry, safety and style for cars, refreshment for drinks, and security for banks. Some of Ogilvy’s ads for these products contain claims and descriptions that could have been written yesterday, rather than in the 1950’s.

It’s important to remember that a demographic never bought anything. People do. A requirement to understand who you are selling to as an actual person is vital to understanding how to pitch your product or service at them in a way that they identify with.

Gender, age and class form part but not the complete answer. A buyer’s attitude to your sector, circumstances that might lead them to consider your product or service are the first steps to building a profile of your customer.

Think of your ideal customer as a person pen portrait. Like how a character would be described in a novel. What would they look like, where do they live, what would they drive, what would they wear? And more importantly, why would these things matter to them?

And then, where does your product fit into their world and why? Are they suddenly different person when they purchase your product? Different attitudes and values?

Your typical customers might not be able to be contained in one person, as you might have a primary audience and a secondary customer. Write these portraits separately. Work out which is the larger of your audience and assign a rough percentage to what of your business they represent.

Bring them to life. Make them real to you. Give them a name. Live with them in your mind for a few days. Imagine how they live. And again, imagine them making a decision to purchase a product or service from you or your sector. When you are making a decision you can now reference your customer portrait and ponder their likely reaction.

Yes, I get it – this might sound like a project out of high school and you are an adult running a business, but believe me, it works. Great brands throughout the years grew using this technique – why shouldn’t it work for you?

So, it goes to show that if you are struggling to answer the three questions or want to step back from the day to day for a minute to consider these questions – then it’s a good exercise. If a publicly listed company like The Warehouse is struggling to answer them, then you are not alone and shouldn’t see it as a problem but an opportunity to ensure your business has some of the fundamentals of success covered.

The following content was originally published by BOMA. We have updated some of this article for our readers.

Price elasticity is an economic concept that you should get to know. It is instrumental in understanding demand for your product and the price you can set for it.

A price elastic product is one that experiences changes in demand as the price rises or falls. Some products are staples, and their price is inelastic. (Think things like bread or milk). People will buy these regardless of price fluctuations. When your product is price elastic, a price rise might prompt people to buy an alternative product or wait until the price is cheaper. Products that are affected in this way are often non-essential or luxury goods.

Working out price elasticity of demand

You can determine price elasticity of demand, using an equation. The equation takes the percentage change in demand and divides it by the percentage change of price.

For a product that increases 10% in price and sees a 10% drop in demand, their price elasticity of demand is negative 1.

Most products range between negative one and zero.

The pricing factors you need to understand

Here are the factors you should consider before increasing the price of your product:

• • • Are there substitutes to your product? – If people can easily switch to another product they may be price sensitive.
    • Your customer’s budget – If the cost of your product represents a small percentage of your customer’s budget, they may pay less attention to the cost.
    • Need or a want? – If your product is a necessity, your customer will buy it no matter the price. But they may not feel very good about the price increase!
    • Loyalty to your brand – The goal is to have people choose your product over your competitors on factors other than features and price. Boosting brand loyalty can help to reduce price sensitivity.
    • Your buyer – If your product is usually purchased through an expense account, your demand may more inelastic, because the purchaser is not paying the final bill.

With competition increasing in most sectors, understanding your price elasticity can give you the tools to pitch your product competitively.

The following content was originally published by BOMA. We have updated some of this article for our readers.

Marketing moves fast, especially in the digital arena, where the latest trend, app or meme can suddenly become the flavor of the day. But is it always best to jump on the latest bandwagon?

When you’re coming up with strategies and tactics for marketing your business, it’s important to know the difference between responding to the market and merely reacting to the latest big trend, viral social media hashtag or marketing success story.

Let’s take a look at how ‘responding’ and ‘reacting’ differ in marketing – and which strategy is usually the more reliable, long-term approach to take in your business marketing.

How do you respond to your market and customer needs?

Responding to the market is all about understanding the needs and wants of your customers, and then creating products and services that meet those very specific, real-world needs. You’re listening to feedback, keeping a close eye on your industry market, analyzing your sales data and taking onboard customer requests – while tailoring your company’s offering to the exact needs of this market. The real focus here is to know how your market is evolving, to pay attention to your customers needs and to make sure you’re evolving and flexing your offerings and marketing.

How is reacting to trends different to responding to the market?

Reacting to the latest trend or fad, on the other hand, means creating products/services that are popular at the moment, even if they’re NOT something that your customers actually want or need. You’re following the trend, but at the expense of actually listening to your customers.

This is reactive marketing, and it’s generally a far less effective way to drive your business strategy and promotional activity. When the Barbie movie launched, anything Barbie-related became incredibly topical and popular. Jumping on that hashtag, or tying in your product with the pink and sparkly Barbie theme may have given businesses some short-term attention. But it’s unlikely it drove long-term customers and stable sales and relationships.

Put the customer at the center of your marketing strategy

Responding to the market is likely to be a far more sustainable approach to your business marketing than simply reacting to the latest trend, fad or viral meme.

Responding is based on sound research, evidence and feedback, and caters to the evolution of the market and the needs of your satisfied customers.

Reacting is just a case of ‘keeping up with the latest hip trend’, without thinking through how it impacts on customers or your long-term strategy.

By getting granular with the needs and wants of your customers, and creating products and services that meet those needs, you can build a loyal customer base who love what you do. That’s far more important than short-term, transitory gains, in the long run.

The following content was originally published by BOMA. We have updated some of this article for our readers.

In today’s rapidly evolving retail landscape, technology is not just a tool but a transformative force.

For small businesses, embracing technological advancements can be the key to unlocking growth and staying competitive. Among the most revolutionary technologies reshaping the retail sector are artificial intelligence (AI), extended reality (XR), and advanced data analytics.

These innovations offer unparalleled opportunities to create immersive shopping experiences, enhance personalisation, and improve supply chain efficiencies. Let’s explore how small businesses can leverage these technologies to drive significant growth and customer engagement.

Artificial Intelligence (AI) in Retail

AI is no longer a futuristic concept; it’s a present-day reality that offers immense benefits for retailers.

Here’s how small businesses can harness AI:

• • • Personalised Shopping Experiences: AI can analyse customer data to provide personalised recommendations. By understanding customer preferences and purchase history, small businesses can tailor product suggestions, marketing messages, and even pricing strategies.
      This level of personalization can significantly enhance customer satisfaction and loyalty. Solutions like Shopify’s AI-powered tools can help small businesses get started.
    • Chatbots and Virtual Assistants: Implementing AI-driven chatbots on websites and mobile apps can improve customer service by providing instant responses to inquiries. These virtual assistants can handle common questions, guide users through product catalogues, and even assist with the checkout process, ensuring a seamless shopping experience. Consider using Zendesk’s chatbot services for efficient customer interaction.
    • Inventory Management: AI can optimise inventory management by predicting demand patterns and automating restocking processes. This reduces the risk of overstocking or stockouts, ensuring that popular products are always available while minimising storage costs. Tools like Zoho Inventory offer AI-powered inventory management solutions.

Extended Reality (XR) in Retail

Extended Reality (XR), which includes Virtual Reality (VR) and Augmented Reality (AR), is transforming the way customers interact with products.

Here’s how small businesses can benefit:

• • • Virtual Try-Ons: AR technology allows customers to virtually try on products such as clothing, accessories, and even makeup. This interactive experience can reduce the hesitation often associated with online shopping and decrease return rates. ModiFace, now a part of L’Oréal, provides AR try-on solutions for beauty products.
    • Immersive Shopping Environments: VR can create immersive virtual stores where customers can explore products in a 3D environment. This can be particularly beneficial for businesses without a physical storefront, offering a unique and engaging shopping experience that goes beyond traditional online browsing. Obsess offers virtual store solutions for brands.
    • Enhanced Product Visualisation: For items such as furniture or home decor, AR can help customers visualise how products will look in their own spaces. By simply using their smartphones, customers can see how a new sofa fits in their living room or how a painting looks on their wall. Companies like IKEA Place are leading the way with AR applications for home furnishing.
    • Advanced Data Analytics: Data is the new currency in retail, and advanced analytics can provide valuable insights to drive business decisions. Here’s how small businesses can utilise data analytics:
    • Customer Insights: Analysing customer data can reveal patterns and trends that inform marketing strategies. Businesses can segment their customer base, identify high-value customers, and tailor promotions to specific groups, enhancing the effectiveness of marketing campaigns. Tools like Google Analytics provide deep insights into customer behaviour.
    • Sales Forecasting: Predictive analytics can help businesses forecast sales trends based on historical data. This enables better planning for peak seasons, promotions, and inventory management, ensuring that businesses are prepared to meet customer demand. Tableau offers robust data visualisation and analytics tools to aid in forecasting.
    • Operational Efficiency: Data analytics can identify inefficiencies in operations, from supply chain logistics to staff scheduling. By streamlining these processes, small businesses can reduce costs and improve overall efficiency. Microsoft Power BI is a comprehensive solution for business analytics.

Implementing Technology: Practical Steps for Small Businesses

While the benefits of these technologies are clear, the implementation can seem daunting for small businesses with limited resources.

Here are some practical steps to get started:

• • • Assess Your Needs: Begin by identifying the areas of your business that can benefit most from technology. Whether it’s improving customer engagement, enhancing the shopping experience, or optimising operations, focus on the areas that will have the greatest impact.
    • Start Small: You don’t need to implement everything at once. Start with one technology that addresses your most pressing needs. For instance, if customer service is a pain point, consider deploying a chatbot first.
    • Invest in Training: Ensure that your team is equipped to use new technologies effectively. Investing in training can maximise the benefits and ensure a smooth transition.
    • Leverage Partnerships: Partnering with technology providers can provide access to the latest innovations without the need for significant upfront investment. Many tech companies offer scalable solutions tailored to small businesses.
    • Monitor and Adapt: Continuously monitor the performance of the new technologies and be prepared to make adjustments. Collect feedback from customers and employees to refine your approach and maximise the benefits.

Technological advancements in AI, XR, and data analytics present transformative opportunities for small businesses in the retail sector. By embracing these innovations, retailers can create immersive and personalised shopping experiences, improve operational efficiencies, and ultimately drive growth.

The key is to start with a clear strategy, invest in the right tools, and continuously adapt to the evolving technological landscape. In doing so, small businesses can not only survive but thrive in the competitive retail environment of 2024 and beyond.

The following content was originally published by BOMA. We have updated some of this article for our readers.