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Big technology firms and small enterprises often grapple with similar fundamental challenges, such as gaining insights into their customer base, managing expenditures, and staying ahead of the competition. Nevertheless, tech giants typically utilize sophisticated methods that small businesses may overlook.
With years of experience in both sectors, I’ve identified five key practices from the tech world that can be effectively applied by small businesses. These practices do not necessitate expensive software or large teams; rather, they demand consistent effort.
Deepening Customer Understanding with Personas and Jobs-to-be-Done
Successful tech companies prioritize an in-depth comprehension of their customer base, transcending simplistic demographics like “young professionals” or “local residents.”
Consider Starbucks as a prime example. They don’t merely cater to coffee enthusiasts; they have developed detailed customer personas such as the busy morning commuter, who seeks quick service, the remote worker who occupies tables for extended periods, and the social group that views café spaces as social hubs for gatherings. Each persona influences the design and operation of their stores.
The crucial insight lies in understanding the “job” that your customers are contracting you to fulfill. For instance, consumers don’t purchase quarter-inch drills out of mere interest; they aim to create quarter-inch holes. This could represent various tasks, from first-time homeowners setting up shelves to hobbyists crafting intricate birdhouses. Such distinctions reflect the jobs-to-be-done framework established by Clayton M. Christensen.
This approach explains why Apple markets not just “smartphones with excellent cameras” but rather the capability to vividly capture cherished familial moments. The real need is not simply “owning technology,” but rather the desire to “preserve memories.”
Determine what task your customers are hiring you to accomplish, and you may uncover opportunities that your competitors are overlooking.
Identifying Customer Attrition
Retention is a major focus for product managers in the tech sector. If customers fail to return, it may indicate a lack of perceived value in your product or service, suggesting that your business has not achieved product-market fit. High customer acquisition will not compensate for failure to retain existing clients, leading to potential market demise.
A sophisticated system isn’t necessary—simply create a spreadsheet to track retention rates. How many customers from last year remain loyal? If the figures make you uncomfortable, it’s a sign of a retention issue.
Your spreadsheet should monitor individual customer purchasing trends. When do they typically disengage? Is it after a few purchases, or around three months? Investigate the causes—did they lose interest in your offerings, find more appealing alternatives, or simply forget about your business? A few conversations via email or calls can yield significant insights.
Your existing customers took a chance on you; understanding their perspectives can transform them into staunch advocates.
Related: 3 Pillars of Client Retention Every Brand Needs to Implement
Understanding Your Cost Structure
Mastering unit economics enables companies to scale effectively and become profitable. While many small businesses keep track of their overall expenses, they often fail to associate these costs with specific products or services.
For example, if the local bakery that supplies a neighborhood sandwich shop raises its prices by 10%, what does this mean for the profitability of each sandwich? Is the shop still making a profit, and if so, by how much?
While it may be labor-intensive, monitoring cost details is crucial. This involves not only ingredient costs but also labor, transaction fees, packaging, and more. Neglecting to track these expenses can lead to significant financial oversights, where some products might be underperforming while others prop them up. Furthermore, an apparent “bestseller” might be draining resources while a less popular item could be generating the majority of profits.
Create a comprehensive spreadsheet detailing every product and related costs, updating it as changes arise. You may encounter unexpected findings that could influence product offerings or pricing strategies.
Glean Insights from Rivals
Take the time to visit and experience competitors’ establishments. If you’re in a new area, explore similar businesses in the vicinity. Pay for their products and assess what works and what doesn’t, including their service and overall experience.
This practice exposes you to innovative strategies and helps identify pitfalls to avoid. Foster a culture of continuous learning amongst your team by maintaining a shared document for recording insights and best practices regularly.
Assemble Your Advisory Network
In Silicon Valley, startups frequently establish advisory boards comprised of experienced industry veterans and knowledgeable entrepreneurs. In contrast, many small business owners often navigate challenges solo, occasionally consulting overwhelmed accountants.
Your advisors should be more than just friendly supporters; you need those who can provide constructive criticisms, highlight blind spots, and connect you with new opportunities. Seek individuals who possess expertise beyond your own.
You don’t need to offer equity like tech startups; many professionals are willing to share their knowledge for reasonable fees. Some retired or seasoned experts may even offer their insights for the intellectual stimulation of tackling new challenges. Remember to formalize these relationships and maintain regular contact.
Related: How to Build an Advisory Board That Drives Startup Success
Each of these strategies emphasizes the importance of blending instinctual insights with structured procedures. Your instincts hold value because of your familiarity with the business, but systematic methods can highlight what may be overlooked.
As a small business owner, you possess the agility that larger companies lack. By integrating these systematic practices into your operations, you can gain a strategic advantage.
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