Know your market
Textbook notions of a target market can be overrated, says director of the Rhodes Business Shool, Prof. Owen Skae. He told how entrepreneurs should study their target markets.
Potential entrepreneurs who have identified a gap in the market – whether it i s a product or service they wish to deliver – need to know how to deal with different types of customers.
Broadly speaking, three t ypes of potential customers can be identified: private individuals, other businesses and government. Having a sol i d understanding of these groups could boost the entrepreneur’s chances at start-up, but the fundamental issues of customer service and commitment to quality will loom large.
“Often too much is made about the textbook notion of a target market,” says Prof. Owen Skae, director of the Rhodes Business School in Grahamstown. “While it i s i mpor t a nt understand customer groupings and market segments, the c ommon denominator will always be an absolute commitment to customer making a prof it while service.” not generating enough
A further challenge when cash, according to Skae. dealing with the government Problems then arise when or big businesses is that excellent the business owner realises customer service alone will not boost they can no longer afford to pay the entrepreneur’s chances of success. their suppliers. On the other hand, if With these t wo t ypes of customers, only one debtor fails to pay what they according to Skae, the small-business owe, that could be the f irm’s death owners may have to go t hrough a blow . tendering process. W hen potential entrepreneurs seek
“South Africa still has a long way new business, they need to be wary of to go in terms of government and over-promising and under-delivering, big businesses buying from smaller he says. businesses,” says Skae. In Japan, for “Impeccable service is paramount example, government is obliged to when selling to individual customers pay smaller companies ahead of other as word-of-mouth advertising is very suppliers and with a tighter timeframe, important,” says Skae. he says. “Tendering in South Africa can The internet has reduced the cost of be intimidating and costly.” traditional market research, according
Delivering a promised or contracted to him. In addition to utilising the product or service could be critical in web to do research, observing other securing a long-term relationship with businesses in action is another powerful either government or big businesses. tool in scouring the market. Finding the correct pricing of the goods “Observing people making their and services to be sold is also essential, purchases, how they compare prices and according to him. decide to purchase could be valuable to
“It is very important for the potential your market research,” he says. He adds entrepreneur to familiarise him or that trade publications, covering each herself with the quantity of products or different sector of the economy, are services that a customer wants and to often a valuable source of information. get the ballpark value that will lead to a Skae advises that every potential competitive price,” says Skae. “Getting entrepreneur should have a strategy, this right could be the big break you especially a business and marketing want or, if you get it wrong, it could be plan. These plans should be used as a your demise.” guide for the entrepreneur, especially in
One of the main reasons why smaller difficult times and not necessarily as a companies go bust is that they overtrade. tool to get bank funding. These companies tend to grow too fast,
to Director of the Rhodes Business School