Analyzing your Business
A mission statement defines an organization’s purpose. Market definitions of a business define the company’s mission in terms of satisfying the customer’s needs. Mission statements must be realistic and specific. Make the statement workable, designed to use as an analysis with you business plan. It must guide you along. For example, a mission statement asserting you want to be the best in the industry, producing the highest quality products at the lowest price, does not provide much value in helping you make tough decisions in the future. It is too generic and does not define your unique products/services and who your customers are. The mission statement must say something about what business you are in, your customers, and how you are positioning yourself in the marketplace.
Answer these questions when developing your mission statement:
These may be difficult questions to answer. But businesses, large or small, must continually analyze the answers to these questions to guide them in their business decisions.
The following are sample mission statements:
- A Fictional Company- Brian’s Book Barn will become the premier source of books and magazines for the Municipality of Ladbrokes and communities in the surrounding area. Our goal is to provide customers with a wide variety of choices and to promote reading in the community.
- Canadian Tire – To be the first choice for Canadians in Automotive, Sports and Leisure, and Home products, providing total customer value through customer-driven service, focused assortments and competitive operations.
- Telus – To be recognized as the premier Communications Company in the world. To help people communicate effortlessly.
- Ballard Power Systems Inc. – We will be the First, Best, Highest Quality, and Lowest Cost Manufacturer of PEM Fuel Cells, creating investment value.
The mission statement continually guides the growth of your business; but, company goals will provide you with specific targets to work toward.
Goals may include but are not limited to:
- Achieve x% market share by end of the first year
- Increase sales 5% each year
- Reduce customer complaints to 10% of all sales
- Ensure profit margin of 2% by the second year
- Generate sales of $100,000 by end of the second year
Your goals may be short- or long-term. You may consider breaking a long-term goal down into monthly or quarterly milestones. At each month or quarter, you can then determine if you are on track to reaching your goal. If you have not reached the goal, this gives you the opportunity to evaluate why. If you have, or exceeded your goals, you may want to determine if you can realistically support higher sales if this occurs during the next quarter, and adjust you milestones and goals accordingly.
Choosing your Market Strategy
Strategic planning sets the stage for the rest of the firm’s planning initiatives. Many small businesses fail to outline a plan and run into cash flow or other problems as a result. Bankruptcy is the ultimate failure due to a lack of planning. To prevent this outcome, a strategic plan must be developed that provides a clear company mission, objectives and strategies for growth.
There is considerable overlap between company strategy and marketing strategy. The company exists to satisfy customers’ needs and must continually evaluate the firm’s ability to satisfy customers better than the competition.
Described below are strategies you can use to identify growth opportunities and increase sales for your business.
- Market penetration Selling more of your current products or services to present customers (or market segments), without changing the product or service. To increase sales, you may reduce prices, increase advertising, get your products into more stores and/or obtain better display locations.
- Market development Identify and develop new customers or new markets for your existing products or services. This could include a new geographic market or a different group of customers.
- Product or service development Offer modified or new products or services to existing customers. This may include new service offerings, service enhancements, and/or products in different styles, colours or sizes.
- Diversification Start or acquire another business, different from your existing business. A restaurant owner acquires a fitness studio.
Generally, there are three market-coverage options.
- Undifferentiated Undifferentiated market coverage is when a company goes after an entire market with one product that is mass produced. The key drawback to this form of marketing is the difficulty in today’s marketplace to develop a product or service that satisfies all consumers. Also, because this approach targets the largest market segment, you may find yourself competing with many large firms for this segment. As an entrepreneur, you may find it difficult to obtain the necessary resources to compete with larger established firms.
- Differentiated This strategy involves targeting several markets and designing separate products for each. A good example of this is automobile manufacturers. Offering similar products to different market segments often achieves higher overall sales and a stronger market position in each segment, because the company is serving unique needs. However, reaching numerous market segments requires more focused promotional costs (since each market is different) and require varying levels of service. This strategy requires many resources which start-up companies may find difficulty assessing.
- Concentrated Many companies with limited resources use this strategy. A company chooses one market segment (a smaller market) with a focus on obtaining a higher share in that market. The risk of concentrating on a particular market is the possibility of strong competitors entering the market or the demand for your product/service decreases or diminishes. However, a company with a loyal client base and a strong market position may be able to utilize their resources and serve their market segment better than their competition, building a prosperous business.
Identifying your Customers
To develop a marketing program that helps you reach and meet the needs of your market, you must first identify you customers. A market profile identifies your customers. There are many ways to describe your customers, whether they are consumers or other businesses.
Consumers can be identified by a number of variables.
- country, region (prairies), city, density (rural, urban), climate (pacific)
- age (6-11, generation X, 65+)
- family size
- family life cycle (age <35, single or married, no children; age >35, married, teenage children)
- occupation (professional, manager, clerical, sales, homemaker)
- education (grade school, high school graduate, university graduate)
- nationality, ethnicity
- social class (lower, middle, upper)
- life style (leisure activities, exotic vacationer, saver)
- personality (gregarious, authoritarian, ambitious)
- purchase occasion (household staples, special occasion)
- benefits sought (quality, service, economy)
- user status (non-user, ex-user, potential user, first-time user, regular user)
- usage frequency (light, medium, heavy)
- loyal (not, somewhat, devout)
- readiness to buy (unaware, aware, informed, interested, desirous, intending to buy)
- attitude toward product (enthusiastic, positive, indifferent, negative, hostile)
Businesses may be identified in much the same way as consumers. For example, a firm may identify a target market according to user status, usage frequency, location, attitude toward the product, etc. A company may further identify a market by the size of a potential client firm or its purchase behaviour.
When developing a market profile, the key is to find buyer characteristics that are related to the purchase of your product, i.e. parents with infants use diapers.
After you have classified potential customers, you can build market profiles and segment markets according to customer potential.
A clothing manufacturer has developed a number of market profiles, one each for toddlers, athletes, grandparents (for their grandchildren), teenagers and tourists. For the small start-up entrepreneur, targeting large diverse markets such as these is extremely difficult. To make your marketing efforts more manageable, it may be wise to choose one or two market segments to initially target.
Determining the best market-coverage option for your business will be based on your product/service (demand, resources, market share required for success, etc.)
Choosing a Target Market
Consider the following when choosing a target market.
Measurability – Can you identify numerically how many people/businesses are possible customers? Determine the actual number of potential customers in your targeted area.
Accessibility – Can you reach your target market by the means available to you (i.e. web site, advertising)? It is important to ensure you are able to promote and provide your product to your customers.
Size – Can you determine how much market share you require to sustain you business financially? The market you are targeting must be large enough to ensure that you are able to sustain a profit. A restaurant targeting children may find that its market is too small if it is located in a senior’s community, which only has occasional children visitors.
Resources – Is your potential market reachable? You must have the resources and knowledge (or how to obtain the information you need) to effectively reach your market, initially and on an ongoing basis.
Once you have determined your market segment(s), you must determine how you will position you products and services to make your customers aware of your offerings.
Positioning refers to how your potential customer views your product or service, often described as the image of the product or service. Your goal is to create an image that places your product/service top-of-mind for your intended customers. There are many ways a firm may position itself against the competition. (One company successfully positioned itself directly against its top competitor by using the slogan, “We’re number two, so we try harder.”)
To position you product or service, utilize the following:
- Create a list of your competitive advantages. Advantages may include higher quality for lower cost, or higher quality and more technical support.
- Select the “right” competitive advantage for your product or service. What you choose, or which “bundle of benefits” you choose, will depend on who else is offering the same position. Some competitive advantages may be too costly to develop, inconsistent with other services or products, or simply not strong enough in the marketplace. The key components to developing a competitive advantage are:
- Determine what is most important to your customers.
- Ensure your company has the resources to promote and deliver these benefits.
- Provide the greatest perceived advantage over your competitors.
- Promote benefits competitors will find hard to match.
Once you have documented your competitive advantages, you can determine which benefits you want to use to position your company.
- Communicate and deliver your company’s position to the target market. It is essential for all of your marketing materials to support the position or image you are creating. For example, if the company decides to build a position on better service, it must ensure excellent service is delivered. Along with hiring and training staff on the components of delivering superior customer service, the company’s advertising and sales messages would consistently communicate its commitment to providing superior service.
A company must know its present and potential competitors. Examine their strengths and weaknesses. Then, selecting a market position that provides a competitive advantage will be clearer. Your overall position should emphasize those factors that your customers value most, and those which make you stand out from your competition.