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ECONOMIC SOUL |
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If you can understand the following 2-step process then you can understand the basics of creating an effective business model. Business is the process of:
Determining what the customers want This step in the process involves executing a marketing strategy. The typical marketing approach that business owners take is that they develop their marketing materials (brochures, flyers, websites, etc.) first, then push those materials out to the customers. The owners then expect the customers to get excited about their business and start buying the business’s products and services. Not once do the owners consider asking the potential customers what they want from the business before the business opens. It really makes no sense! A better approach is as follows:
You can ask many more questions to get more detailed customer requirements. However, you should remain conscious of the customers’ time. Surveys and phone interviews should take no more than 20 minutes and focus groups shouldn’t exceed 30 minutes. The goal is to discover in detail, what the customer wants from your product (service), when they want it, where they want to receive it, why they want it and how they want it delivered. There are very little costs, if any, associated with gathering customer requirements. Yet, gathering the customer requirements is what separates getting big profits from getting little to no profits. Once you can confidently answer these questions, you will be ready to open the business and successfully sell products (services) to the customers. Giving the customers what they want Once the customer requirements have been identified, it’s time to give the customers exactly what they asked for. This involves developing the business and products (services). Use the answers to the marketing questions as a guide. For instance, the answers to, “What do you want my product to look (feel, smell, taste) like?” can determine the make up of your product (i.e. ingredients, parts, size, shape, etc.) and how the packaging should look. Answers to, “How often should my product (service) be delivered?” determine the shipping schedule, supply purchasing schedule and hours of operation. Answers to, “How much would you pay for my product (service)?” determine the desired cost of your product (service) and how much you should pay in material and labor costs to make a profit. Answers to, “What’s the best way to access my product (service)?” determine the need for a store front, website or some other access portal. These answers also help you construct the proper legal contracts, disclaimers and security processes. Finally, descriptions of ideal experiences when interacting with someone from your business should give you hints on how to greet your customers upon entering your business, your customer service process, the return policy and the personality and strategy of your sales team. There are many more questions that you can ask in step 1 that will further define how your business should operate. After the business is set up according to the customer requirements, start creating the marketing materials. Creating the marketing materials becomes relatively easy because all you are doing is telling the customers that you have exactly what they asked for. In conclusion, business models can make or break a business. If a business owner develops a sound business based off of customer requirements, then regardless of what the final business model looks like, the business owner can be confident that the business and its products and services will be exactly what the customer wants and is willing to pay for. About the Author: Dr. Otis D. Jones is a management consultant specializing in organizational development, human resources and project management. Dr. Jones has worked with Fortune 500 companies and small companies in both service and manufacturing industries. He can be reached at joneso@hiseconsulting.com or www.hiseconsulting.com.
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