Understand this Common Consumer Behavior for an Advantage in the Market
The first set of customers for any new business are the base that will determine its growth, and therefore winning them over is a very significant milestone. Their association gives the business much needed credibility when doubt presides in the early stages, and for as easy as it may sound, acquiring them is also a major challenge. Google faced them. Nike faced them. Apple faced them. And so will you. In the early stages, the market doesn’t care about you; customers don’t trust you, competitors are determined not to let you see the light of day, and it is ultimately a brutal place to be. While you are trying to establish the grounds for your business, it is vital that you first understand the consumer behavior in the market. This will ultimately help you plan the marketing strategies appropriately and avoid the pitfall that has captured many.
Understanding the Market
A simple definition of a market is a ‘combination of actual and potential customers for a given product/service, with a set of similar needs and wants, and who reference each other when making a purchase decision’. In most text-book definitions, the ‘referencing’ part is often neglected; however is the one part that holds keys to the success of your marketing plan. Human beings are pack animals by nature, and the decisions that we make, from small ones such as what clothes to wear, to more complex ones such as acquiring real estate, are highly influenced by other people around us. That subconscious conditioning is called social proof.
The definition of a market whereby consumers reference each other when making purchase decisions is backed by the force of social proof. If two people buy the same product/service, but have no basis of communication, then they are not necessarily part of the same market. For example, in the market of sport shoes, a 22 year old university student in Africa who owns pair of Nike sport shoes cannot be considered to be in the same market as a 45 year old doctor in Asia, who also owns a pair of Nike sport shoes.
An ideal market contains people that are within the same location, are of similar demographics, and have the same intended use for the subjected product. While setting up the marketing strategies for your new business, it would be unwise to assume that all your prospective customers are part of the same market, despite their mutual interest in the product or service. A separate plan would be required when approaching each segment. In the sport shoes example, Nike would require a different approach when targeting the 45 year old doctor in Asia, to the approach when targeting the 22 year old student in Africa. The consumer behavior in the market is more influenced by other customer’s responses towards the products, than it is with advertising purely. As mentioned earlier, humans are pack animals and we heavily rely on other people’s feedback before making our own decisions.
A customer would be more likely to purchase from you – a relatively unknown company, if your services have been referred to them by other customers who are already using them. A reference is a nod of approval, a very credible one for that matter. A market becomes ‘referenceable’ when the prospective customers are concentrated within a particular area, meet occasionally to exchange their views, and have the same use for the products that you are selling. The next question is how to go about with establishing such an environment for your business.
Market segmentation is simply breaking down the market into smaller chunks of isolable markets, and then focusing all efforts and resources towards owning the segment. Segmentation is the most important step when creating a referenceable market, because then it becomes much easier for word to get around; whereas your marketing messages would get diluted in the broader market. And since not many companies can afford to market directly to every individual in its broader market, the most successful marketing programs often rely on the on-going chain reaction as customers within the segment talk to each other about the product or service.
Let’s take an example for clarity. Uber are very commonly known to focus all their growth and marketing efforts to city by city growth. Only after the successful acquisition of one city will they move on to the next, then the next; until eventually dominating the entire country. Now, if you ask yourself where you first heard about Uber, it was most likely through a reference from another person, and not from a paid advertisement. That is the magic of word of mouth and referencing – zero marketing costs. Word of mouth is without a doubt the most powerful form of marketing, and by focusing on one segment at a time, the likelihood of breaking into the mainstream market becomes significantly enhanced. The mainstream market is where the growth and profits lie, however the consumers within it are highly reference based.
To conclude this discussion, remember that establishing your marketing strategies while implementing the notions of ‘referencing’ and ‘social proof’ enhances the probabilities of appealing to your first set of customers, as they are typically the most difficult to acquire. Understanding the consumer behavior in the market is a fundamental step in the customer acquisition process. Creating a ‘referenceable’ environment for your business makes the process much easier and cheaper, and paves the way for the word of mouth momentum.
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