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Redefining Your Market Strategy
Redefining Your Strategy as the Market Evolves
Anyone that has been in this business for more than five years has learned several lessons about business management, if they did not know them when they first started. That is one of the unique things about owning and managing a business; if you are going to continue to be in business, you are going to have to continually learn about this business and the many outside factors that affect your business.
In addition to understanding financials, staff management, and merchandising, the long term businesses have a strategy as a part of this list. Strategy first comes into play when these people say, "Is there a market for gift baskets in my trade area?"
It does not matter at this point that you are good at creating a gift basket, but will this trade area support such a business? The answer to this question may be "No". This could be because there are already several similar businesses in the area, or that there is little commercial business that will support your endeavor. Perhaps, advertising costs are such that the necessary effort to reach consumers is prohibitive.
This does not mean that being good at creating gift baskets is an unnecessary quality for the business. It just means that it cannot be the major basis for deciding to open the business, whether it be home based, store front, or in a commercial setting.
Failing to put the new business through questions such as these, can spell failure for the business even before you have rung up your first transaction.
If the person going through this exercise is determined to have a gift basket business, the most likely solution would be to look for another community in which to place their business. While this may not be an answer that someone is wanting to consider, it beats the alternative of trying to force a business into a situation where it cannot thrive or even survive.
Returning to the businesses that have been in existence for a longer period of time, their need to look at the strategy comes from other reasons. Imagine the gift basket business that began as a home based way for someone to create some additional income for themselves without becoming a full time job.
Over a short period of years, the business outgrew the room, basement, garage, and even the house that it was started in. The owner decides to add gift and food items as well as greeting cards to the mix. Now with the storefront operation, the business continues to grow and grow. Life would be good if this would be the way that it would go for anyone that decides to start a business.
Along the way, someone else (and so often it is a customer) is going to take notice of this shop and the amount of business they are doing. This person decides they are going to open a shop and frequently with the thought, "I can do the same thing, but I can do it for less".
Perhaps it is a gift shop, florist or card shop in town that decides to look for new opportunities. Gift baskets seem like a natural addition for them, and so they enter the market. Another possibility could be the local chain store grocery adding the service. After all, twenty years ago who would have thought of a grocery store selling cut flowers, filling prescriptions and selling Starbucks coffee?
Other possible entries into the market of this business could be catalogs and the Internet. All of a sudden, someone in a small town, somewhere in America could find themselves flooded with competition.
Looking again at the business, when competition first appears on the horizon, it is time for an examination of the new competing business.
From there, is a series of questions that our business needs to ask itself as they review their strategy? Here are some examples. Is the new business targeting consumer or commercial customers? What price range are they targeting? How are they working to reach the customers? Are these the same customers that the first business has been serving?
With this information, our business needs to decide if there is enough room in this market place for two businesses serving the same group of customers. If not, we should ask if this is a group of customers that is worth fighting for with regard to the amount of profit we get from these customers.
In some cases, these customers do not produce enough sales or contribute enough profit to warrant our efforts to retain them. We would rather have the new business find out, (the hard way) that this is a too small or too unprofitable group of customers on which to base a business.
If this group of customers is a mainstay of our business, how can we retain this customer base? Hopefully, the business can do so by maintaining contact with these customers and not by reducing prices. If reducing prices is a necessary step, can we maintain these lower prices and still remain profitable? For how long will our business have to reduce prices?
Perhaps, our business will take another direction by deciding to add other products or services. By examining what part of our business has provided us the most profit, we can take a look at ways of doing more business with the customers that have produced for us the most profit.
While this exercise may seem to be strenuous and time consuming, it is necessary for any business to perform so that they can survive for years to come. The alternative is looking in the yellow pages of the phone book one day and finding ten more shops listed under gift baskets - all of which will gladly take the business that has been yours.
This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 1577, St. Petersburg, Fl. 33731. Phone 727-464-2182. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.
Profits Plus Solutions, Inc.