Know your mar­ket

Finweek English Edition - - ENTREPRENEUR - BY JACO VISSER

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

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