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Business success: The Ideal Customer

Since the inception of businesses, one question has perplexed most owners: Who is my ideal customer? This query has existed long before AI, the internet, and even electricity.

An article in the NZ Herald from June 2024, titled “Big Red: What Went Wrong for The Warehouse,” highlighted the struggles of one of New Zealand’s most famous retail brands, The Warehouse. A senior analyst at Forsyth Barr posed the question, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on.” Greg Smith of Devon Funds Management added, “They need to recalibrate what is the value proposition.” The Warehouse, which has traditionally relied on bargain prices as its core attraction, now faces competitors like Kmart redefining what constitutes a bargain for its customers.

Despite The Warehouse being a large, complex business in a highly competitive market, its challenges are relevant to SMEs. Regardless of business size, the principles of success remain the same. Understanding who you are selling to, why they should buy from you, and how much they are willing to pay are foundational to the success of both global conglomerates and small enterprises. These questions are interconnected; once you answer the first two, the third becomes significantly easier.

Who is my ideal customer – target audience?

Advertising legend David Ogilvy spoke of “man’s unchanging needs,” suggesting that consumer needs remain constant over time. For example, the beauty industry focuses on youthfulness, the automotive industry on safety and style, the beverage industry on refreshment, and banks on security. Some of Ogilvy’s advertisements, created in the 1950s, remain relevant today.

It’s crucial to remember that demographics alone never bought anything—people do. Understanding your target audience as individuals is vital to effectively pitching your product or service to them.

While gender, age, and class are components of your customer profile, they do not provide the complete picture. A buyer’s attitude towards your sector and the circumstances leading them to consider your product or service are essential first steps in building a customer profile.

Think of your ideal customer as a detailed character in a novel. Describe their appearance, lifestyle, vehicle, and attire. More importantly, consider why these attributes matter to them. Then, determine how your product fits into their world and why. Do they change when they purchase your product? Do they exhibit different attitudes and values?

Your typical customers might not be represented by a single profile. You may have both a primary and secondary audience. Write these profiles separately, determine which group constitutes a larger portion of your business, and assign a rough percentage to their representation. Bring these profiles to life. Make them real to you. Name them. Live with them in your mind for a few days. Imagine their lives and how they would decide to purchase a product or service from you. When making business decisions, reference these customer portraits and consider their likely reactions.

While this exercise might seem reminiscent of a high school project, it is a valuable tool for business owners. Great brands have grown using this technique—why shouldn’t it work for you? If you are struggling to answer these questions or want to step back from daily operations to reflect on them, this exercise is beneficial. If a publicly listed company like The Warehouse is grappling with these questions, you are not alone. View this as an opportunity to ensure your business is grounded in the fundamentals of success.

Graham Burfield
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