In a recent customer survey, the objective was to rate the product attributes in terms of value, and secondly, to assess how the company performed for each attribute. The higher the value assigned to a particular attribute the greater the focus should be on the performance. In some situations a significant gap can exist between what customers value most and how a business performs in that area. For example, not meeting customer expectations in something that is valued as a 10 (most important) indicates an opportunity/problem that must be immediately addressed.

In a recent customer value survey, customers rated product quality as the most important value (a score of 10), however, customers indicated that the company did not meet their expectations. Conversely, the company exceeded expectations for online ordering; however, customers placed less value on it (a score of 6).

Once the performance gaps are identified, action plans can be created that will close those gaps over time. Gaps that fail to be closed will eventually lead to customers taking their business away. Finding out what customers’ value most is an integral part of measuring performance gaps.

Businesses should never assume they know what customers value most; if they do, they may be spending their limited resources on things of minimal value to customers. We recall a situation where a company invested a significant amount of capital in order to streamline a process thought important to customers, not knowing that the customer cared little about the assumed benefits. Rather, the company would have been better off broadening the product selection which is what customers really wanted.

Performing a customer value survey provides a systematic and customer focused approach to allocating resources more effectively.

A new book written by Michael Phillips and Salli Raspberry entitled “Marketing without Advertising” provides valuable lessons on how to ensure the success of your business by inspiring customers to rave about it.
The book’s basic premise is that promoting personal recommendation is a superior, yet often overlooked, strategy to attract and keep customers. The authors contend that advertising, which they define as “broadcasting your message to many uninterested members of the public,” doesn’t work. Its expense often does not compensate for the results; and the customers that are lured by advertisements are often not loyal.
Instead, Phillips and Raspberry argue that a crucial element in any good marketing plan is based on customer trust. Personal recommendations are what works, and not advertising. Other people’s recommendation is a very powerful factor that could improve the profitability of your business. Plus, they are more cost-effective than advertising as the customer who is referred comes to you at a lower cost.
The authors recommend 10 steps to help you develop successful, low-cost marketing plan that is not based on advertising:

Book Review by Power HomeBiz

For business to business sales, most companies must rely on calculating their own market shares since the information is not readily reported as it is for consumer products, e.g. food products purchased in grocery stores. Market share analysis usually begins with a market survey of purchasers of a particular product. The market survey requires responses from a representative sample of purchasers in order to provide accurate analysis. Asking which products they purchase on an annual basis or what makes up their current inventory is a good way of acquiring the data for the analysis. Other information acquired through a market survey that is useful for strategy formulation are identifying shifts in purchasing behavior (and the reasons) from one supplier’s products to another.

An example of a feasibility study process is presented below. Although this example is for an assisted living facility, the process is similar for most projects. Since Strategic Performance Group LLC (SPG) has conducted hundreds of market feasibility studies we have developed a model and methodology that has been tried and proven. When reviewing the feasibility for an assisted living facility there are four components that are critical to the study.

1. Industry Overview
Factors that we look for within the industry overview include growth trends in the industry, the market size of the industry, an overview of long term care including the profile of a typical resident (age, gender, etc.) in an assisted living facility and their average length of stay. Other industry data may include average revenue generated, gross and net profit margins and operating ratios.

2. Demographics of the target market area.
The target market can be defined as a specific radius of the proposed facility. Depending on the market, that area can range from as little as 5 miles up to 30 miles or more. Demographics that are critical for analyzing the feasibility of an assisted living facility are the number of people in the target market that are over a certain age, e.g. 75, the mix of males vs. females, household income, one person households, etc. It is not only critical to acquire current year demographic statistics but also a 5 year projection so that future market potential is also taken into consideration.

3. Competitor overview
A competitor analysis is critical in ascertaining the current demand for assisted living facilities. Once all the assisted living facilities in the market area are identified then it is important to interview the management staff at each facility. The market survey includes information on each facility including age of facility, number of beds or units, type of units, i..e. 1 bedroom, 2 bedroom, studio, private, semi-private, etc., size of each unit in terms of square footage, monthly fee charged per unit, occupancy rates, waiting lists, initiation fees and specialized care such as Alzheimer’s and dementia.

Analysis and Recommendations
Once the industry overview, demographics identified and competitive analysis are completed, the next step is to analyze the information gained in the market place. The analysis will consider demand – current and potential, demographics, competition, etc. to determine whether an additional assisted living facility has sufficient demand to support it. As part of the analysis, revenue potential is projected based on number of units in the facility. Income is then projected based on number of units and expected fees per unit.

As a result of the feasibility study, a GO / NO GO recommendation is made by SPG based on a thorough review and analysis of the market. The client can then use the professionally prepared report to make a final decision or to meet with lenders, investors, etc. for financing, knowing that they have received an objective and independent assessment of the feasibility for developing the project.

Knowing the demographics of the population residing in the target market area is critical to assessing market potential. Population and 5 year growth trends, household income, population by age group, etc. are key components to establish a demographic profile. A summary of business establishments and employees in the specified trade area and the spending habits of consumers residing in the area can be useful to making a sound business decision before you invest large sums of capital in your new business venture. Identifying the following components can be useful in determining market feasibility.

Demographics
Through various databases, demographic information containing the profile of residents within a trade area can be useful. Understanding household size, number of housing units, household income, population by age, gender, educational attainment, etc. for the current year and a 5 year projection is critical to profiling your customer potential. In addition to the demographics, the psychographics are equally important. The clustering of lifestyles can be identified based on similar purchasing habits among residents.

Business Summary
Business summaries by either SIC or NAICS reveals the types of businesses within the trade area. Further detail highlights the actual number of businesses by type along with the number of employees. Assessing the number of competitors in your proposed trade territory must always be considered. Coupling Dun and Bradstreet reports with interviews from key managers can be insightful for understanding sales volume, trends, etc.

Market Potential
In addition to current and 5 year projected population and household income, the market potential is based on the likelihood of the adults in the specified trade area are to exhibit certain consumer behavior or purchasing patterns compared to the U.S. average. In other words, what is an average household expected to spend on specific consumer goods and services, nor only for the current year but a 5 year projection.

Analysis and Conclusions
Once all of the information about the specified trade area is compiled, the challenge becomes one of sorting through a detailed analysis of trends, opportunities, purchasing habits, etc. At the completion of the analysis, a GO / NO GO decision can be made with the confidence of knowing that a thorough evaluation of your business opportunity is based on the most reliable data available.

This worthwhile effort explores the way good organizations can be turned into ones that produce great, sustained results. To find the keys to greatness, Collins’s 21-person research team read and coded 6,000 articles, generated more than 2,000 pages of interview transcripts, and created 384 megabytes of computer data in a five-year project.

After establishing a definition of a good-to-great transition that involves a 10-year fallow period followed by 15 years of increased profits, Collins’s crew combed through every company that has made the Fortune 500 (approximately 1,400) and found 11 that met their criteria.

While some of the overall findings are counterintuitive (e.g., the most effective leaders are humble and strong-willed rather than outgoing), many of Collins’s perspectives on running a business are amazingly simple and commonsense. This is not to suggest, however, that executives at all levels wouldn’t benefit from reading this book; after all, only 11 companies managed to figure out how to change their B grade to an A on their own.

Editorial Review – Cahners Business Information

Another objective in addition to the importance and performance rankings compared to competitors, was to assess the recognition of our client’s name in an unaided response. How many times was our client mentioned vs. other companies when asked to name vendors that come to mind. Coupled with the awareness level, we wanted to learn potential customer perceptions of our client – both strengths and weaknesses.

The client wanted to use the findings to formulate strategy during their strategic planning process. Armed with this information and with our assistance, the general manager was able to translate the information gained in the marketplace into clear and actionable plans. The bottom line in any market research on vendor selection is the ability to gain competitive advantage and thus lead to increased sales and profits, something increasingly important during these adverse economic times.

The first stage, development, starts when the product is first seriously considered and continues until it is ready for selling and distribution. Most activities in this stage are in research and development and product design.

The relatively short period in which a product is introduced is the introduction stage. The product pipeline is being filled and positioning and brand image are being established and the target markets are being confirmed.

Once distribution has begun and brand awareness is established, the product enters the growth stage. The growth period is the time when a product can dominate its category. Profit per unit usually runs high because there are few competitors. To ensure that the product can compete with new products coming into the market,, product improvements are important in this stage.

The period during which the sales curve begins leveling off is called the maturity stage. Maturity is generally the longest of all stages. Most potential customers have already been identified and competitors established. Brands with significant shares are now getting repeat purchases. Profit margins may be high at established firms that have refined their operations to lower production, distribution, and selling expenses, or they may be reduced in an effort to compete on the basis of price.

The decline stage is the reverse of the growth period – sales begin to decline. A category or a brand can decline for many reasons, including technological changes, changes in consumer wants, or changes in economic conditions. As category sales decline, competitors drop out.

As a product category continues to decline, each brand in the category needs to decide when production and marketing activities should terminate, the final stage of the cycle. Note that a product category at one stage of the life cycle in one country may be at a very different stage in other countries. In addition, according to Warren Keegan, co-author of Marketing, product categories and specific brands each have their own life cycles. It is not unusual for each of these to be at a different life cycle stage at the same time.

The methodology for conducting the surveys is primarily telephone surveys supplemented with some on-line and mail surveys. Feedback ranges from companies with as few as 50 customers to those with over 5,000 customers. A typical survey consists of approximately 25 questions using a scale of one to ten with one representing extremely dissatisfied and ten representing extremely satisfied. For more information about our proprietary database, please send e-mail to info@spg-consulting.com

Customer Satisfaction Index (CSI): SPG High 9.2; SPG Average 7.9; SPG Low 7.1

Sales Process: SPG High 9.1; SPG Average 8.0; SPG Low 7.4

Product / Service Quality: SPG High 9.2; SPG Average 7.8; SPG Low 6.9

Customer Service: SPG High 9.2; SPG Average 8.0; SPG Low 7.3

Administration: SPG High 9.3; SPG Average 8.1; SPG Low 7.5