I occasionally ask groups of entrepreneurs why they think their customers buy from them. After an awkward silence some in the group will give answers about product uniqueness, price advantage or better location, or easily copied ones like good quality and better service. At least some entrepreneurs in the group will really not know.
Entrepreneurs who do not know why customers buy take a huge risk of customers drifting away for unknown reasons. The question is even more important for start-ups. Anyone who plans to open a business and does not identify clear reasons why customers would buy, risks opening a business which will make no sales.
Why customers buy
There is a huge body of research about buyer motivations which is good to study. In my view the most important business differentiators are uniqueness or competitiveness.
Uniqueness may mean innovative products or services, but can also be the uniqueness of the business principle.
Products like trousers, perfumes, sporting equipment and coffee bars have thrived due to their association with a famous sports or entertainment star. For the average entrepreneur who is not famous or an inventor there are still options to be unique. Businesses that use a unique pricing model will rent when others sell, offer last minute sales at incredible discounts, or develop other pricing innovations. They will not simply sell at lower prices.
Businesses offering unique points of sale will attempt to get closer to the consumer to make buying from them so much easier than from competitors. Filling station convenience stores and Internet travel bookings are examples but they show the risk of relying on uniqueness to attract and keep buyers. With the exceptions of famous people and patented products anything can be copied, and even those unique terms can be imitated.
Positioning a business which will attract customers by competitive advantage means that an aspect or the total package that the business offers is superior to the offers made by existing suppliers. The business is capable of taking and defending market share from its competitors.
Competitiveness means understanding what the consumer would really like to have and is not getting, and then supplying it. This could be higher quality, better features, lower cost of ownership, ease of purchase, ease of use or any combination of these.
Gaining the trust of customers is a huge competitive advantage and strict ethics, immediate resolution of problems and honest pricing help to develop trust. Being first on a fashion trend can make a business highly competitive. Packaging products in creative ways or including free services will make a business stand out.
All of this is very dependent on the entrepreneur having a deep and current knowledge of the wants and needs of customers, the activities of competitors and trends in the market. Competitors will imitate or counter positioning taken by anyone who threatens them, so staying competitive means having all available market intelligence, keeping up to date and always staying a step ahead.
All this is useless if potential consumers do not know that the business exists or what sets it apart from others. Effective marketing and selling must inform them that the business exists and why they should consider buying for the first time. Then it is up to the products and the buying experience to bring them back and make them loyal customers.
New businesses trying to take customers away from others need to recognise that the potential customer may be thinking:
“I don’t know you, your business or your products, and I don’t know why they should interest me,” or “I have existing suppliers and I am generally happy with them.” The start-up should capitalise on the fact that despite this the potential buyer has unmet or partially met needs, and will usually consider new and interesting products and services.