Chapter Three - Business Planning AAU 2016 - Alemayehu.pdf

The more precise your description of the customers

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The more precise your description of the customers, the better able you will be to, among other things: a. Determine the type and mix of products to sell. There is likely to be a big difference in the styles and prices of clothing that 25 year old men and 45 year-old women buy. b. Determine the best location for your store. You want a location that is likely to draw those people who are your potential customers. c. Determine your advertising strategy. The more you know about your customers, the better able you will be to design appropriate advertising, to select the proper media, and to decide when to advertise.
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Entrepreneurship and Enterprise Development 2016 Chapter Three: Business Planning | AAU| Department of Management Compiled by Alemayehu.M. P a g e 3 2 While you need to know who your potential customers are, it is useful to also know how much each individual target group will contribute to your business. Determining relative importance, however is not an easy task. What determines how important a customer, or group of customers, is? Certainly profits is the final determinant. Unfortunately, estimating your profits for each customer, or group of customers, is a difficult task in most cases. It is difficult because it requires not only a determination of the amounts that a particular category of customers are likely to spend but also an estimate of the mix of products or services that they will spend the money on. It is quite possible that those who buy the greatest amount of merchandise will not be your most profitable customers, if they tend to buy items that carry low mark ups. If you can make estimates about the importance of customers in terms of profits, then do so. Often, though, this will not be practical. Instead, you may have to use estimated sales as your basis for the ranking. Certainly, the more you know about your potential customers the better off you will be . We suggest that, at a minimum, you determine and provide in your business plan the following: 1. Who your customers are likely to be. Determine, in as much detail as you think appropriate, the income, sex, ethnicity, age, education, etc. Characteristics of your potential customers. 2. What the potential customers think of your products and/or services. What do they perceive as the strong points of your products and/or services? What do they see as the weak points? What do they see as the weak points? Can you use this information to make your products and/or services more appealing to potential customers? 3. The outlook for your business. Based upon your customer research, does it look as if you could expect enough customers to make your business profitable? If so would it require changes in your product services and/or business operating? Note: Because customers are only one factor in determining business success, you can not say, at this point, that the business will be successful just because your customer research is encouraging. That decision can be made only after consideration of many other factors. However, if the answer to this question is negative, then you may be able to say that the proposed business is not worth pursuing further.
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  • Fall '15
  • Elias
  • Marketing, enterprise development, Department of Management

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