sign depicting two choices

Consumer Behavior 101: People are Weird, Markets are Weirder

Consumer behavior is the study of why and how people buy things. It’s a mix of psychology and economics, blown up on a massive scale. To understand it is the dream of prophets, wisemen, and hucksters.

We’re going to focus on what consumer behavior is and why it is important to you as a small business owner. You can understand why people don’t always make rational choices. Then you can see why markets tend to show strange qualities on a grand scale.

 

sign depicting two choices

 

In this article, we will go over many topics. We will discuss what consumer behavior is and why it matters. We’ll talk about how it scales from individual people to entire markets. Then we’ll discuss the motivations behind consumer behavior and share examples of what it looks like in real life.

 

The Basics of Consumer Behavior

  1. What is Consumer Behavior?
  2. Why Consumer Behavior is Important to Small Business Marketing
  3. The Importance of Product-Market Fit
  4. The Mental Shortcuts Behind Consumer Behavior – System 1 & System 2
  5. Find the Need, Then Make the Product
  6. The Purchase Decision Process
  7. Examples of Consumer Behavior

 

The Influences Behind Consumer Behavior

  1. Emotion and Motivation
  2. Beliefs and Prior Experiences
  3. Culture and Subculture
  4. Socioeconomic Class
  5. Reference Groups
  6. Situations

 

Consumer Behavior in the Marketplace

  1. How Consumers Perceive Risk
  2. Product Adoption
  3. Switching Brands and Channels
  4. Impulse Buying
  5. Customer Loyalty
  6. Online Consumer Behavior

 

The Basics of Consumer Behavior

 

What is Consumer Behavior?

To understand consumer behavior, you need to understand related fields. Consumer behavior is the intersection of psychology, sociology, and behavioral economics.

 

Consumer Behavior Venn Diagram

 

Like psychology, studying consumer behavior helps us understand why people do what they do. How are they feeling? How do their feelings shape their decisions? Like sociology, consumer behavior helps us understand feelings and behavior on a massive scale. Like economics, consumer behavior helps us understand why people spend money the way they do.

As you can see, this goes deep. Consumer behavior covers everything about purchasing behavior. It starts when a customer decides to buy something. Then it covers the decision-making process (itself big enough for an article). It ends when customers look back and think about their decision.

 

Why Consumer Behavior is Important to Small Business Marketing

As I’ve described it so far, the study of consumer behavior seems stodgy and academic. This is not the case. Small business owners – and any business owner, really – wants to be able to push people through a sales funnel. You want to draw attention, pique interest, stoke desire, and sell products or services. It’s one thing to draw up plans of how you think people will act. It’s another thing entirely to make a system based around how people actually act.

Naturally, you’ll want to collect data, tweak your systems, and learn as you go. That’s how good marketing works. Frankly, the experimentation makes life interesting. Understanding consumer behavior will help you know what to look for, what kind of data to watch, how to interpret the data, and – most importantly – how to apply it for profit.

 

The Importance of Product-Market Fit

It’s just not a Marketing is the Product post if I don’t mention product-market fit (PMF). Value is subjective. It’s made up in your customers’ heads based on their feelings, prior experiences, and rational decision-making. No amount of fancy research can save you if you can’t make a product that fits people’s desire.

 

puzzle pieces connecting

 

Yes, an understanding of consumer behavior can help you to achieve product-market fit. The caveat here is that many people immediately think to apply this knowledge to their sales funnel. They use it to gather leads, run better ads, and so on. Be smart: start with your product or service first, and work from there!

 

The Mental Shortcuts Behind Consumer Behavior – System 1 & System 2

There is a wonderful book by Daniel Kahneman, a Nobel prize-winning psychologist, called Thinking Fast and SlowIn it, Mr. Kahneman describes two modes of thought called System 1 and System 2.

System 1 is brilliant and useful for its speediness and ability to navigate life without conscious, deliberate thought. We use System 1 every single day and life would be unlivable, frustrating, and overwhelming without it.

System 2 is deliberate. It does the calculating, rational, careful thinking you need when you’re planning for retirement, writing a useful blog post for small business owners, or making a purchasing decision. It’s too slow for us to live our life by, but System 2 is a lot smarter and more accurate.

You probably see the problem here. Because life moves faster than the slower, more deliberate System 2 can keep up, we end up making a ton of decisions with System 1. We make snap decisions where rational thought needs to prevail, such as how we spend our money. When making decisions, we tend to fall prey to cognitive biases, or mental shortcuts.

 

left brain right brain

While our brains aren’t exactly split into “left” and “right”, there are definitely two different ways we think.

 

Good marketers know that people aren’t always rational. They use their System 1 far too much to be rational! Great marketers know how to encourage certain types of System 1 thinking to attract and retain customers, while making sure the goods delivered hold up to System 2’s scrutiny later.

 

Find the Need, Then Make the Product

In first world countries, the people who have the disposable income to buy your products or services largely have their basic needs met. If you’ve taken a basic psychology course, you may be familiar with Maslow’s Hierarchy of Needs, posted below. Once basic needs are met, your mind – looking for a problem to solve – turns toward more abstract needs.

 

Maslow's Hierarchy of Needs

 

You have food and enough money to get by, so now it’s time to find love. You have a wife, so now it’s time to achieve something worthwhile. You’re an achiever, so now it’s time to really push yourself to your creative limits.

To a small business marketer who is studying consumer behavior, this is a really valuable framework. When you’re creating products, you want to address a specific need your customers have, in a way they would like for it to be addressed. Those of us with the great fortune of living in the USA, the UK, Western Europe, and other wealthy countries often spend our days chasing abstract needs (or, really, wants). Marketers need to remember this!

 

The Purchase Decision Process

Once people perceive needs, they often seek solutions in the marketplace. This is the purchase decision process, and it’s an important part of consumer behavior that I am going to spend an entire article on in the near future.

For now, let’s go over the basic process:

  1. Problem recognition: your customer figures out what they need or want. They see a gap between their lives now and their life as they wish it to be.
  2. Information search: your customer hunts for knowledge, coming across brands or products which may or may not be associated with you.
  3. Evaluation of alternatives: your customer weighs different factors – rational and irrational – to make a decision.
  4. Purchase decision: your customer is ready to buy.
  5. Post-purchase evaluation: your customer thinks about whether that purchase was a good idea or not.

 

Examples of Consumer Behavior

Let’s leave behind theory for a moment and talk about what consumer behavior looks like in real life. Here are some examples that I’ve made up.

 

tupperware

I needed to store grapes, so I bought Tupperware – consumer behavior!

 

I need to take my lunch to work. This results in me buying plastic Tupperware I see in Walmart because I don’t care about quality. I’m trying to save cash by taking my lunch to work. What’s more, I don’t see a point in glassware.

I play board games because I need an intellectual challenge and an escape from my day-to-day life. This results in me buying Terraforming Mars, which is about exactly what it sounds like.

I love music, but I’m not that price-sensitive. For this reason, I signed up for Spotify because it’s easy-to-use and their Discover feature brings me the novelty of new music every day.

I stopped going to the barbecue restaurant by my house because they cross-contaminated my fiancee’s meal with gluten. As a result, she got sick. Out of petty revenge, I slammed them with a one-star review on Yelp.

As I said, these are all made up, but these are all examples of day-to-day consumer behavior.

 

The Influences Behind Consumer Behavior

 

Emotion and Motivation

We love to believe our decisions are made free from outside influence. Sadly, the facts don’t line up with this belief. The simple fact is that you, me, and everybody you know are subject to a wide variety of forces that steer our decision-making. This goes back to System 1 / System 2 thinking and our responses to our own Hierarchy of Needs.

 

wooden puppet strings

“There are no strings on me.”

 

While System 1 thinking exposes us to forces that sway our decision-making, our greatest pressures often stem from inside. That brings us to purchase motivations. Rossiter and Percy’s Purchase Motivations & Emotions says there are eight purchase motivations – five of which are negative, and three of which are positive. These motivations sway consumer behavior. There is a neat table that steps us through the theory on Wikipedia, so let’s take a look at them.

 

Rossiter and Percy’s Purchase Motivations & Emotions
  • Motivation: Problem Removal
    Emotion: Annoyance to Relief
  • Motivation: Problem Avoidance
    Emotion: Fear to Relaxation
  • Motivation: Incomplete Satisfaction
    Emotion: Disappointment to Optimism
  • Motivation: Mixed Approach-Avoidance
    Emotion: Conflict to Peace-of-Mind
  • Motivation: Normal Depletion
    Emotion: Mild Annoyance to Convenience
  • Motivation: Sensory Gratification
    Emotion: Dull/Neutral to Sensory Anticipation
  • Motivation: Intellectual Stimulation
    Emotion: Bored (or Neutral) to Excited
  • Motivation: Social Approval/Conformity
    Emotion: Apprehensive/Ashamed to Flattered/Proud

All these feelings drive us to make choices. For example, I hate the musty smell of my basement (Annoyance) so I bought a dehumidifier (Relief). The small fry order was truer to its name than I expected (Disappointment), so I bought a second order (Optimism). The Pixies are playing the Ryman Auditorium in Nashville, so I bought tickets (Neutral to Sensory Anticipation).

Naturally, all this happens to different degrees, so you can be really annoyed or just slightly annoyed. You can be really afraid or just slightly afraid. Plus, you really end up mixing and matching a lot of these emotions and motivations in many purchases. I bought a house because I don’t like paying landlords (Problem Removal), I didn’t feel like the space was truly my own (Incomplete Satisfaction), and because – to be perfectly blunt – society expected me to by a house in my 20s (Social Approval/Conformity).

 

Beliefs and Prior Experiences

If we used our System 2 thinking all the time, our heads would glow red hot from all the thinking. As a result, we fall back on our beliefs and prior experiences very often. This changes our perception of products, services, and brands we interact with, and alters our consumer behavior.

 

optical illusion

You have beliefs about how geometry works. They run pretty deep, so you take shortcuts that don’t apply to this image.

 

Here are some examples of how our tricky perceptions can mess with our decision-making:

  • Selective exposure: you decide how much you want to learn in the first place. Your level of ignorance or intelligence changes the whole interaction.
  • Selective attention: sometimes you pay attention, sometimes you don’t. According to my loved ones, I’m the king at this.
  • Confirmation bias: you interpret new information in a way that ultimately reinforces your own preconceived beliefs. You learn but do not change your mind.
  • Selective retention: you remember some things and not others.

Your consumers will fall back on beliefs and prior experiences a lot. Honestly, you can’t judge them for it either. It’s pure human nature, and as a small business owner and marketer, you will have to respond to it.

 

Culture and Subculture

Defining culture is a Sisyphean task that I’d prefer to leave to the anthropologists. In fact, I will – here is their definition from Dictionary.com:

[Culture is] the sum total of ways of living built up by a group of human beings and transmitted from one generation to another.

For you, as a small business owner interested in applying your knowledge of consumer behavior, here is what you need to know. Life in the US, UK, or Australia is very different from China or India. Indeed, life in California is very different from life in Tennessee. Because we make so many decisions on an automatic System 1 basis, culture is really important. It sets our default behaviors.

Subcultures are exactly what they sound like. Small cultures within cultures formed around shared interests. Want to see subcultures at work? Watch the Breakfast Club. In it, “the Athlete”, “the Brain”, “the Princess”, “the Criminal”, and “the Basket Case” share a detention room and engage in very Generation X conversation. Every high school stereotype is a subculture, as is every fanbase, and every club or organization.

 

Socioeconomic Class

For better or worse, most societies have a noticeable class system. In the US, for example, you have the rich (i.e. the 1%), the upper middle class, the regular middle class, the lower middle class, and the poor.

As you go through each class motivations and emotions differ. Of course, each socioeconomic class will have different purchasing needs and wants too. You’re not going to sell first-class plane tickets to the poor. The 1% does not want to go to Walmart.

 

50 percent off

Not exactly a bat signal for the uber-wealthy.

 

Family is a big part of social groups too. Even now, family provides the strongest social ties most of us have and it impacts our purchasing decisions as well. If my wife doesn’t like the house I’m looking at, you can bet I won’t buy it!

 

Reference Groups

We don’t always refer to our own subculture when making decisions. As an example, if you’re in the market for some great headphones, you may turn to “audiophiles” online. Reference groups can include family and friends, clubs, sports teams, political parties, and religions. Any group you aspire to be a part of or aspire not to be a part of can be a reference group.

 

Situations

The time and place you’re thinking about purchasing something can also swing your decision. For example, there is some evidence that the hot summer in 2018 is making people more likely to believe in man-made climate change. Regardless of how you feel about climate change and humanity’s level of contribution to it, you can see the silliness of this. We put CO2 into the air at all times of the year by driving cars and heating our homes.

 

coal fired power plant

“I’m worried about climate change, but there’s frost on the ground, so…”

 

If I’m frustrated about my job and it’s raining outside, you’ll have a tough time selling me a Honda Accord on the lot. Let’s say I got a phone call that my brother is in the emergency room. I probably won’t buy that Colgate toothpaste. On a more optimistic note, if I’m hungry, I’ll buy more at the grocery store. In essence, situational factors drive our consumer behavior in lots of subtle ways.

 

Consumer Behavior in the Marketplace

 

At this point, I’d like to help you see how individual consumer quirks look when scaled to the marketplace level. You can already imagine it to some extent by seeing how individuals draw from culture, subculture, and reference groups – and in turn, contribute back to all of them. To further refine our understanding, we’ll go over some examples and talk about how folks like you and me act in groups.

 

How Consumers Perceive Risk

So many of our fears and anxieties, as well as our hesitations to purchase, are based on how we view risk. This could be as concrete as the risk of losing money or getting hurt. Likewise, this can be as abstract as the risk of embarrassment or loss of self-esteem.

I used to work at a company that sold disability insurance. People buy disability insurance to protect their income when they get hurt. People are motivated to purchase when their perceived risk of injury goes up. Enrollment rates or group policy enrollment was entirely driven by how our consumers perceived risk. Nobody buys disability insurance on a lark.

It’s not always about buying products or services to reduce risk. Often, consumers seek to reduce risk by researching things before buying or by playing it safe in the store. That includes comparison shopping, sticking with known brands or stores, reading reviews, trying before buying, looking for money-back guarantees, and asking around for referrals.

 

Product Adoption

 

 

If I knew the secret to getting people to adopt products quickly, I would live on a private island in the Pacific. As it turns out, we all respond at least a little to monkey-see, monkey-do when it comes to unknown products or services. The first person you knew with an iPad was weird. Now you might very well have one along with a broken one in your household.

As a small business owner, you probably know quite well that successful businesses tend to snowball. You work, work, work and then eventually it pays off and pays off really well and shockingly quickly. A lot of that is because you’re convincing innovators and early adopters to buy your product, which can be very difficult because they are the enthusiasts. Enthusiasts have high standards.

 

Switching Brands and Channels

Convincing people to change their mind is no easy task! People tend to buy from the same brands and the same channels (brick-and-mortar stores, the internet, etc.). People like familiarity because it requires only System 1 thinking and because confirmation bias is very strong when making decisions.

I’ve heard people say Apple products aren’t giving them the same thrill they used to. Some say the software is getting glitchy. On the other hand, some people hate the hardware changes, such as the “notch” introduced at the top of the screen on the iPhone X. Yet they continue to use iPhones.

 

iPhone X

 

Sometimes their friends are using it and they want to keep using iMessage. Other times, they simply don’t want to learn new software. Therefore, a smartphone manufacturer would need to provide a sleeker experience to pick up these potential customers.

A lot of people I know still go to department stores, especially those in older generations. They were really sad to see Sears go bankrupt. Some people switched to online channels like Amazon because they valued the “all in one place” benefit of department stores. Others have simply switched to remaining department stores like JC Penney and Macy’s because they value “physical experience” instead.

 

Impulse Buying

You ever walk into a store, buy something, leave, and say “why did I buy that?” I sure have. When something is cheap, on sale, bright and shiny, or popular, it’s a lot easier to do.

Think back to the year 2017 for a moment. Fidget spinners were all the rage. It seemed like you couldn’t go into a gas station without seeing those silly toys at the checkout counter. Even today, I probably still have five of those goofy things sitting around.

 

fidget spinner

 

Customer Loyalty

Remember how I talked about how it was tough to get people to switch brands or channels? As it turns out, it’s tough to get people to become loyal customers too. In general, people have default opinions and behaviors. We, as marketers, only have a limited ability to influence consumer behavior.

There are loyalty marketing programs built around the idea that getting new customers is expensive. As a small business owner, that’s no surprise to you. I’m currently sitting on a Delta SkyMiles card because their flights are good and they have a hub near me in Atlanta. Delta wants me to use that card so I can rack up SkyMiles to spend on their flights. Thus, I become their loyal customer.

If Delta’s flights go downhill, I might still be loyal to use up my SkyMiles, but I would start looking at other airlines. That’s called “spurious loyalty”, instead of “true loyalty.” Once I found a better airline and switched, that would mean I no longer have loyalty toward them.

 

Delta airline airplane

 

Let’s say that even with my SkyMiles card, I still like Hawaiian Airlines. I can only fly with them when going to Hawaii. Because I’m not a Rockefeller, I don’t go to Hawaii often. As a result, my loyalty for Hawaiian Airlines would be limited but still present. This is sometimes called “latent loyalty.”

 

Online Consumer Behavior

Last but not least, consumer behavior becomes really interesting once you see it online. Social media and sites like Kickstarter give us great insight. They allow us to see people’s motivations and decision-making processes in ways we’ve never seen before. All you have to do is read. It differs greatly by industry.

My caution to you is simple. When using online resources to identify the consumer behavior of your target audience, consider two sources of information. First, consider what people say. Customers are reasonably good at describing what they need and want.

However, don’t take customers purely at face value. The second thing you need to consider is what people actually do. Watch how people spend their money on crowdfunding campaigns or on Amazon. Take out some Facebook ads and see what gets attention. Perform some tests and see what people truly respond to in real life. Ultimately, you don’t want your decisions to be made based on what some online loudmouths say. That would be availability bias!

 


 

To understand consumer behavior is to understand ourselves and others. We use different forms of thinking in different situations. In addition to that, our emotions and motivations, as well as other factors, are unique who we are and the situations we are in.

Your job as a small business marketer is to find a group of people with similar needs. Understand their behavior – why do they do what they do? When you know the answer to that question, share your work and watch the magic happen.

Do you have questions about consumer behavior? I’d love to see them in the comments below 🙂

Small Business Marketing 101: What is Marketing and Why Does it Matter?

Learning small business marketing is hard. In fact, running a small business, in general, is hard. Oftentimes it takes years of hard work and dedication before you even seen a dime in profit. You’re constantly learning new skills. With rapid learning comes discomfort, especially in areas we know little about. For many people, marketing is the worst. It doesn’t have to be.

 

lemonade stand

 

“Isn’t it enough to simply create beautiful products and provide delightful services?” Regrettably, the answer to that is no. This is where marketing comes in: it includes everything that makes people care about you and your business.

Marketing covers a wide variety of activities that convince people to buy your products or use your services. More poetically, marketing is an ongoing process that breathes life into everything you do as a small business owner. It begins from the moment you conceive an idea, carries you through manufacturing, and continues with sales and fulfillment.

I think about marketing, especially small business marketing, a lot. I’ve graduated with my MBA, I’m a published researcher in the subject of online viral marketing. I even created and continue to run a blog about the board gaming business (especially for first-timers). Yet I still learn something new every day. Marketing is a big discipline and I’m always looking to expand my knowledge.

We have a lot of ground to cover. So let’s take this piece by piece. Here is an outline of today’s post:

 

Why should I care about small business marketing?
  1. The Objectives of Small Business Marketing
  2. Customer Satisfaction
  3. Demand Generation
  4. Profit Generation
  5. Market Share Growth
  6. Branding and Public Image

 

What goes into small business marketing?
  1. Targeting
  2. AIDA: Attention, Interest, Desire, and Action
  3. Product
  4. Product-Market Fit (PMF)
  5. Niche (or Place)
  6. Price
  7. Process & Logistics
  8. Core Concepts of Promotion
  9. Outreach
  10. Product Reviews
  11. Crowdfunding
  12.  Advertising

Why should I care about small business marketing?

 

social media keyboard

 

The Objectives of Small Business Marketing

When you see marketing as merely a synonym for words like “advertising” or “promotion”, you miss the forest for the trees. Marketing can help us achieve many objectives through the use of many more tools. Some of the objectives we’ll discuss below include satisfying customers, generating demand, generating profit, growing market share, and managing your brand or public image. Everything that we’ll cover on this blog will ultimately seek to achieve one or more of these or similar objectives.

 

Customer Satisfaction

Ultimately, as a marketer, you create experiences for people. As a good marketer, you make sure you create the right kinds of experiences for the right kinds of people. You create products and provide services to make people feel a certain way. The entire process is seamless – from fulfillment, to the post-purchase experience, to customer service. Even the way you share the knowledge of your existence – basic outreach – is part of the experience.

When these experiences match up with your customers’ truest desires, then they are satisfied and you’re likely to have a repeat customer. Good job! That is why the most proficient small business marketers start here – satisfying customers by creating the right experiences for the right people.

 

Demand Generation

You can make the most perfect product in the world, but if no one sees it, you’re out of business. If a tree falls in the forest and nobody is around to hear it, hire a new marketing analyst. If you have a beautifully created product or service that is truly perfect for its intended audience, you still need to draw attention and pique interest. You’ll often hear this concept referred to as lead generation.

 

Profit Generation

Everybody likes money, right? Once you’ve made a great product or started providing a great service and have started generating leads, you need to close the sale! Smart marketing techniques can help us to generate profit by generating more leads, or – better yet – convincing more leads to convert to sales.

 

Market Share Growth

In the infant stage of the life of a business, you don’t really have to think about market share. You have to think about making great products, generating leads, and your ability to generate profit. As time goes on, though, you will find yourself wanting or needing a bigger piece of the market’s pie. At this point, you need to change your marketing techniques so that you grow at a faster rate than your competition.

 

Branding and Public Image

Marketing is ultimately about the experiences people have with us and the ideas that we spread. There is no place where this is more visible than branding and the maintenance of public image. Early on, branding and public image are about signaling to early adopters that your business is worth their trust and sales. As time passes and your business grows, your brand becomes more important even than your product or service. People don’t just think of what your business does, but rather your business itself. When that time comes, you want to leave them with the right impressions!

 

What goes into small business marketing?

 

dartboard

 

Targeting

There is no perfect product. There is no perfect audience. Making something for everyone is the surest way to make something for no one.

Because beauty truly is in the eye of the beholder, this has two major impacts on your business. First and foremost, you have to make a product for a specific community. It doesn’t matter which industry you’re in – it’s not a hive mind. Your industry – whether it be soft drinks, board games, or insurance – is made up of a whole bunch of tiny communities with interests that roughly line up.

 

xkcd comic

XKCD – image licensed under CC BY-NC 2.5.

 

The purpose of marketing ultimately boils down to making money by sharing your message. When you’re the little guy, though, you have to have something to offer that the big guys don’t. You need to scratch a very specific itch. Everything about your product needs to be made to appeal to a very, very specific audience. That includes the way you use it, the font on the box, and the way you convince people to try it.

Don’t broadcast. Narrowcast instead.

 

AIDA: Attention, Interest, Desire, and Action

If you took a marketing class in college, you’re probably familiar with the acronym AIDA. It stands for Attention, Interest, Desire, and Action. You might also hear the term sales funnel used to describe the implementation of the AIDA concept in real life.

 

AIDA model

 

It goes a little something like this. Before you can sell your product or service, people need to know you exist – so you get their Attention. In order to continue the interaction, you need to pique their Interest, or else they’ll get bored and leave. Once you have someone’s attention and interest, congratulations – you’ve generated a lead! If you’ve got a great product or service to begin with, one of the hardest marketing tasks remaining is generating leads.

In order for somebody to spend money on your products or services, they have to want it. They have to Desire what you have to offer. Once you have their attention, interest, and desire, you need them to take Action. At this point, you want to take it to the next step. This could be buying something, booking an appointment, signing up for your mailing list, or something else.

 

AIDA Example

Here is an example of AIDA at work on the board game development blog I run:

  • Attention: create keyword rich content to pull in readers from Google. I also gain traffic through Twitter, Facebook, Instagram, and a Discord chat server that I run for board game developers.
  • Interest: create compelling content that makes people want to read more. This took a lot of practice!
  • Desire: each of my posts, as well as the index pages, contain contrasting blue sections. They say, “Need help on your board game? Join my community of over 1200 game developers, artists, and passionate creators.” People want to be a part of the community and they want to take the next step.
  • Action: in order to gain access to the community, I require an email address. People then click the bright red button and fill out the form.

While the Action here is simply to gain email signups, the same concept can be applied to sales, subscribers, Facebook group members, and just about anything else you want people to do.

 

Product

Very nearly any product you can imagine exists. There are luxury doghouses, $500 board games, sprays for your toilet with beautifully intricate bottle labels, and vintage T-shirts emblazoned with a phrase Speaker of the House Mitch McConnell said about Senator Elizabeth Warren. Say what you will about our economy at large, but it’s exceptionally good at making products for every kind of person you can think of.

 

antique double entrance dog house Amazon listing

Yeah, sure, why not?

 

Don’t lose sight of the importance of creating a valuable product in small business marketing. There is a truly head-spinning amount of different products out there, as well as equally unbelievable services. The ones that stay in business do so by knowing exactly who they’re trying to serve, figuring out how to do so, and by implementing that plan.

Learn how to describe your product and see who it appeals to. Read the social media posts, forum threads, and product reviews of the people who purchase products or services in your industry. Know how they talk and what to say to them. This will help you narrow down your niche, identify a need, and then create a product.

 

Product-Market Fit (PMF)

Here’s the rub: your product actually needs to address a need or want. Very rarely will someone buy things they don’t need or want. The exception, perhaps, is when buying gifts but even then gifts are intended to address someone else’s needs or wants.

Because value is so subjective, it ultimately comes down to your product, your target market, and how well they line up. This is product-market fit, or PMF. You will read these two phrases on this blog so often that your spouse will say to you next morning “I am worried about you because you kept saying ‘PMF’ in your sleep.”

The First Law of Business is to create something with good product-market fit. You really cannot escape this. This will take a lot of research and development, trial and error, and a constant feedback loop between you and your customers.

 

Niche (or Place)

Achieving product-market fit is substantial on its own, but if you want to take off like a rocket ship, you need to achieve better product-market fit than anyone else in your area. When you do that, you’ve found your niche. When you’ve got a working sales funnel powered by the AIDA concept, that’s how you turn a niche into cash.

On that note, for businesses that have a brick and mortar location, there is another element to this: place. If you do business in a physical location, the part of town you’re in and the space you occupy are a large part of how you market yourself too. If you don’t believe me try an H&R Block in the nice part of town and an H&R Block in the not-so-nice part of town.

 

map of somewhere in Germany

 

There is a delightful Thai restaurant in beautiful Chattanooga, Tennessee where I reside. Do Thai restaurants that I would like more exist in this world? Yes – but they’re not the best in Chattanooga. Thus the restaurant ten minutes from my home has a niche that works.

 

Price

One could write an entire book on how exactly pricing works. Actually, a cursory search of Amazon reveals that somebody already has. I’ll cover the specifics in a later post, but there are three really important considerations you need to make whenever you set a price.

First, consider demand elasticity. That’s an MBA way of saying “know how many people will leave you if you raise the price by $1.”

Second, consider what price says about your product’s value. Low prices can signal low-quality products and high prices can signal high-quality products. There are also certain “magic numbers” that change the way people view a product entirely, and these are different in every industry. As an example, in board games, anything under $20 is generally considered to be “lightweight” or an “impulse buy.” And anything $100 or more is considered “heavyweight” or “for serious gamers only.”

 

wallet

 

Third, look at what your competitors are doing. People will inevitably compare your prices to your competitors. People make decisions based on a number of cognitive biases. One of the most prevalent cognitive biases is anchoring. It happens when people fixate on the first number they see and assume that’s “normal.” If the first runner you see is a marathoner, you’d think my 10-mile run was lackluster. If the first home you saw on Zillow was $500,000, you’d (at least briefly) think the one down the street for $430,000 was a steal – whether it was or wasn’t.

 

Process & Logistics

How you get your product or service to people is a part of marketing, too. After all, marketing is about crafting the right experiences for the right people. That experience includes the timeliness of your shipping, the demeanor of your sales representative, the usability of your website, and much more. Eventually, all these little elements will add up and people will begin to associate their experiences with your brand.

 

Four Processes that Influence Customer Perception

That raises the question of “how does a business control people’s perceptions of the brand?” That’s done through four specific processes*:

  1. The sales process. Everything about how you approach people affects your brand. From the language you use, the venues you reach out to people through, and the entire process by which you persuade people to buy your product falls under the sales process.
  2. The buying or pre-order process. The website or offline sales channels you use to facilitate buying or pre-ordering affect how people see you. You want purchasing to be as seamless as possible so you appear professional.
  3. The fulfillment process. You need to fulfill [orders] as efficiently and cost-effectively as possible. You want people to think of you as someone who keeps their promises.
  4. The returns process. If people decide they don’t like your [product], you need to have a seamless return process. People who return your [prodcuts] but have a good experience returning the [product] will have a more positive view of your brand. They might choose to buy from you later.

Your business processes and logistics may seem unrelated to marketing. They aren’t though, because value is subjective and determined by your customers based on how they experience your brand and its products and services. In short, marketing is the product.

 

Core Concepts of Promotion

Promotion is an umbrella term that covers every method of communication that marketers use to inform people about their product. It is how you spread the word about your business. Naturally, when you’re starting your small business, promotion is critical to your success. You need to be able to draw attention and garner interest in order to generate enough leads to stay in business. Promotion is pivotal to small business marketing.

Promotion covers a lot of different concepts, including outreach, product reviews, crowdfunding, advertising, and much more. The most valuable promotional tool for your business depends heavily on your industry, and you will probably need to experiment until you find one that works. Remember: the goal of promotion is to generate demand. We’re already assuming you can satisfy customers, because if you can’t do that, no amount of promotion will save your business.

 

fish going after hook

Promotion is bait. What’s your hook?

 

Promotion is often time-consuming and/or expensive. Once you experiment and find techniques that work for your business, you can quickly optimize and improve your promotional processes, but even still, you’ll need to spend at least time or money on promotion. Leads are life in business, and you need to generate them.

Let’s assume your product is truly fantastic. You may see the word begin to spread automatically as customers recruit other customers on your behalf. That takes time, and you almost always have to make the first move before you reach this point.

 

Outreach

There are innumerable different outreach techniques you can use to find people to care about your business and its products and services. Outreach is how you find your target market, tell them about your product, and slowly carve out a niche when your product fits the market.

You can use social media, go to offline networking events such as conventions and seminars, write email newsletters, start online communities, advertise, or even blog like yours very truly. Some methods are more effective than others, and naturally, your industry will largely determine which method of outreach is most effective. For now, simply pick one or two forms of outreach that you like and stick to it. If it works, that’s fantastic – optimize your processes and keep going! If it doesn’t, that’s okay – keep what works, scrap what doesn’t, and pivot. Experimentation is what makes small business marketing fun!

No matter how you choose to reach out to customers, you can be sure that outreach rewards creativity and hard work. Always start with your target audience in mind. Go where they are, speak to them how they wish to be spoken to, stay organized and systematic, and change your approach as you learn more.

 

A Brief Note on Social Media

I mentioned social media a moment ago, so let’s cover that a little more in depth. Social media includes Facebook, Twitter, Instagram, Snapchat, Pinterest, Periscope, Twitch, YouTube, and other websites that probably popped up while I was writing this article. Social media has been hot for the last decade and people tend to see it as a panacea for many marketing ills. It’s not and mastering social media is time-consuming. I personally see social media sites as useful for market research, lead generation, advertising, and community building. I don’t necessarily see them as the best sales tools.

 

Product Reviews

There are two types of reviews – the ones you request and the ones you don’t. When you send your product to a popular reviewer in exchange for a fair and honest review**, this is a form of outreach. You convince them to use their existing channel(s) to showcase your product. Even if you receive a bad review, you might still generate some leads in the process. You can use social media as well as sites like Reddit and industry-specific online communities to find reviewers to reach out to. People often want to see the opinion of an impartial third party before they spend their hard-earned cash.

 

reviews

Everyone’s a critic.

 

The reviews you don’t request are the most interesting. Ultimately, all you can do to influence these reviews is make a great product or service while making sure the overall experience is great. Sometimes you can respond to bad reviews online with a professional response, but that depends on the social norms of your industry.

I cannot stress enough how much the overall experience affects how your business is perceived. People don’t make decisions on a strictly rational basis. They make them at least partly on how they feel. If your artisanal kombucha gives me a stomachache, but you were nice to me, I might assume that something else gave me the stomachache or that it was a fluke. Then I won’t slam you on Amazon or Yelp with a one-star review.

 

Crowdfunding

Crowdfunding allows large amounts of people to send small amounts of money to businesses to help them bring their ideas to life. In 2009, Kickstarter went live and got the crowdfunding ball rolling. Now, 10 years in the future, multiple sites operate on the same basic model of crowdfunding. Some simple examples include Kickstarter, IndieGoGo, and Patreon. This is no mere flash in the pan either: Kickstarter keeps growing and large quantities of small donations may even push political candidates into office in the near future.

 

Kickstarter screenshot

A sample project on Kickstarter. Joseph Staggs is using Kickstarter to raise money for materials.

 

Crowdfunding can be seen as the Action part of AIDA. It’s not a magic money machine – you still have to get people to pay attention and you still have to earn their interest and desire. That said, sites like Kickstarter have active communities and if you started a good campaign there, perhaps 30 or 40% of your funding could come from people who found you through Kickstarter. In that sense, it’s another form of outreach.

 

The Hidden Benefit of Crowdfunding

Crowdfunding sites are great research tools and great market testing tools. You can look at campaigns – both failed and successful – and see what works and what doesn’t in your industry. If you look enough, you will get a sense of what people are willing to pay for. Once you’ve got a product or service in mind that you’d like to bring to life, crowdfunding can help you with certain start-up costs like manufacturing and it can help you estimate demand more accurately. If you fail? That’s okay – crowdfunding makes it a little safer to fail.

 

Advertising

People have complicated feelings about the idea of advertising for a number of reasons. Our culture is oversaturated with a mix of annoying and interruptive advertisements and creepily targeted ones. Additionally, small business owners often recoil at the idea of spending money on something intangible like advertising. As if that weren’t enough, it’s also super easy to get burned on advertising by doing it poorly.

Don’t dismiss ads. They can save you a ton of time and money. They can generate attention and interest easily, and online ads have built-in calls to action too. You can push people through your entire sales funnel with a well-designed ad.

When in doubt, start with Facebook. Their ad system is the best I’ve ever seen for small business marketing. Even better, the analytics are robust and useful and you can start with a really small amount of money like $5.

 

game dev advertisement on Facebook

 

The Advertising Mindset

Approach advertising like a scientist, especially when working with the tight budget constraints associated with small business marketing. Come up with a well-defined target market, use a sharp image or video, and some compelling copywriting to grab attention. Make sure you direct people to the right page – whether it be your shopping site or an opt-in form for your mailing list. You need people to both interact with your ad and with the page you send people to. Start with your end goal in mind and work backward. Tweak until your advertising is delivering a lot of value for your money.

 


 

Learning small business marketing for the first time can be very tricky. This article was created so that you, a small business owner, can understand the many concepts and tasks associated with marketing. By providing a high-level overview, my hope is that you’ll be more able to share your ideas with the world.

Use this guide to ask more questions, run more tests, and get started. If you have any questions or comments about small business marketing, I encourage you to comment below 🙂

 

* I’ve taken this verbatim from an old post on the board game development blog that inspired this one.
** Read up on sponsorship and disclosure. You want to behave ethically when your product is reviewed.