price of pears

The 7 Ps of Marketing: Levers of Power for Your Small Business

The 7 Ps of Marketing is a classic marketing model that helps us understand the “set of marketing tools that a firm uses to pursue its marketing objectives in the target.” You may also hear this referred to as the “marketing mix.” This is no mere academic exercise, though. Each one of the 7 Ps of Marketing represents a lever of power which you can use in your small business.

7 Ps of Marketing

It’s one thing to understand marketing, but it’s another thing entirely to apply it well. Once you set your small business marketing strategy, you need a way to measure your performance. Luckily, the 7 Ps of Marketing gives us a great way to do that.

Before we get started, I’ll point out that we’re using the 7 Ps of Marketing as defined in this Entrepreneur Magazine article. The original Booms and Bitner model from the year 1981 used “Physical Evidence” and “Process.” Don’t worry, hardcore academic Booms and Bitner fans – I’ll be including those at the end as well!

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The 7 Ps of Marketing

  1. Product
  2. Price
  3. Promotion
  4. Place
  5. Packaging
  6. Positioning
  7. People
  8. The Forgotten Ps: Physical Evidence and Process

The 7 Ps of Marketing

Product

Imagine your company from the outside. Your product or service is likely what draws people in. Sometimes the branding or a well-crafted ad is what makes people take interest in you, but let’s be real – it really does come down the product. Of all the 7 Ps of Marketing, this is the most tempting one to spend your time on. To be fair, that instinct is fundamentally right.

Apple devices cell phones

Value is subjective. Ultimately, how your product will be perceived is entirely dependent on the people using it. You want to make sure you have a clearly defined target market and that your product perfectly fits that market’s desires. When you do this, you have achieved product-market fit.

Product-market fit is truly the foundation here. Your target market determines the needs you will be meeting. The product you create to meet those needs determines what product-market fit looks like. Once you’ve identified a way to achieve product-market fit, you can find your niche. From within that niche, you can craft messages that drive the consumer behavior which you’re seeking – which is most likely sales!

Your product must meet certain needs. It does not necessarily have to be the best in a perfectly rational sense. Objectivity is not often a part of consumer decision-making. You need to make a product which is adept at addressing the emotional needs of your target market.

Price

When setting prices for your products, it’s tempting to focus your attention in one of two places. The naive attempt to compete on price, making the lowest-cost products on the marketplace, whether or not that is the right action to take. Alternatively, the overly introspective may intuitively set the price based upon internal costs, but not outside factors. Both of these can be valid pricing strategies, you just need to make sure your reasoning is solid.

price of pears

Price is the most deceptively complicated of the 7 Ps of Marketing. Again, you’ll need to refer to your target market and their expectations. Pay attention to how they make decisions and how you can nudge them toward desired consumer behavior.

The price tag you see on a product conveys an enormous amount of information in a tiny number. Price can give you a rough idea of quality and it can give people expectations – warranted or not – of what the product experience will be like. There is an element of price snobbery in many industries wherein customers actually prefer higher prices!

Of course, you’ll also want to consider price elasticity. The concept of price elasticity helps us find the tipping point where it is no longer worth it to raise or lower the price. If profit is your goal, you want to set your price in such a way that you maximize profits. That doesn’t necessarily mean charging the highest price or having the most customers. Oftentimes, it’s somewhere in the middle.

When you set a price, you need to choose a pricing strategy that most neatly lines up with your customers’ emotional needs. While people do sometimes make rational purchasing decisions, emotions – at the very least – are what initiate the purchasing process in the first place. For that reason, you want to make sure you don’t leave your customers with sticker shock or, alternatively, look so cheap that they write you off entirely.

Promotion

Of all the 7 Ps of Marketing, Promotion is the one most focused on pulling people to your business. Promotion entails how you spread the word about your products or services. Included within that are the ways you gain attention, pique interest, stoke desire, and get people to take action.

limited time offer

To run an effective promotion, you need to understand consumer behavior and decision-making. People don’t necessarily make decisions based on pure reason. Again, as with price and even the product itself, people make decisions based on the promise of solving emotional needs. When running a promotion, you need to find ways to better signal that you can meet those emotional needs.

For example, running a sale can remove concerns about not getting a good deal. It can also create a sense of scarcity that pushes people to take action. Likewise, advertising with a well-crafted headline can get a higher conversion rate, because it’s better at capturing attention than a typical ad would be.

To truly master the art of Promotion, you always need to be experimenting. Play around with different sales and marketing techniques, as well as different products or marketing strategies. Always be gathering data so you can create a feedback loop. With that feedback, you can make changes to your business that will make it more effective at marketing over time.

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Place

Of the 7 Ps of Marketing, Place may seem the most out of place. You may be running an online business and physical presence may not be a factor. However, whether you’re running a business online or offline, Place still matters. It changes the way that customers perceive your products and your brand.

places

Place entails not just where a product is sold, but where communication takes place that informs customers of a product or convinces them to buy it. Again, this could be offline or online. People often make decisions and form opinions based on the experiences they have. The ambiance of your establishment or the user experience of your website can greatly change perceived quality.

Packaging

Just as Place can alter customers’ opinions of your products and your brand, so too can Packaging. Of the 7 Ps of Marketing, this is one that I believe plays an especially important role in the online world. Because the online world is so noisy and fractured, any image or headline, as well as any smartly bundled set of products or services, is necessary to stand out in the crowd.

packaging

Packaging involves visual packaging design, as well as the physical feeling of your product. It also involves art and graphic design. Both of these things can make a huge difference in how customers perceive value. If you don’t believe me, order some samples of wedding stationery and see how different types of material make you feel.

It’s not all surface sheen, though. Packaging also involves how you bundle products or services. Perhaps it would be better, in this respect, to think of Packaging as Presentation. Bundled products or services can provide a better economic value or perhaps simply a better user experience. Either way, it’s an important part of your marketing strategy and must be considered.

Believe it or not, this was not included in the original 1949 model – the 4 Ps of Marketing. At that time, people subscribed to different marketing philosophies than we do now. In the 1940s, the general approach to marketing was more grounded in economic rationality, which doesn’t hold up very well to our current understanding of behavioral economics. The point is: looks matter more than you think.

Positioning

It’s no secret that in order to remain competitive in our gigantic world, you need to have a niche that you occupy better than anyone else. Another way of saying this is that you need to be careful about your marketing Positioning. This is the sixth of the 7 Ps of Marketing.

balancing stones

No matter how you choose to position your small business, you need to make sure you have a clear-eyed idea of what your customers want. You need to create a product with good product-market fit that addresses real emotional needs. Once you do that, you need to position yourself in such a way where it is clear that you can provide tremendous value.

To determine your positioning, consider the following questions:

  1. What does your company represent?
  2. Which qualities set your company apart from the competition?
  3. If there were a single attribute that you would want people to think of when thinking of your company, what would it be?

Once you answer those questions, you will always want to look for ways to improve the clarity of your positioning. There is also the possibility that market needs will shift and you will have to reposition your company around existing market demands. No matter what you do, make sure your branding is always consistent with your positioning. Your logo, name, product offerings, and marketing materials need to be consistent with your desired market position.

People

The last of the 7 Ps of Marketing is People. It’s certainly not the least! No matter how wonderful your product is, no matter how effective your promotions are, and no matter how smart your positioning is, there is one simple truth you cannot escape. People are the ones actually executing your processes.

team brainstorming session

In the 7 Ps of Marketing, People refers not to your customers but rather your internal personnel. They need the skills and the abilities to execute your plans to a satisfactory degree. You need to be able to retain talent and grow your employees. Failure to do so will make it very difficult to make good on even the best plan.

As I see it, there are four landmines which you will need to avoid for People:

  1. Turnover – if this is too high for any reason, you will constantly be spending money onboarding new people and you will never have the most qualified people handling the work.
  2. Incompetence – if your staff are unable to perform their jobs well, you will be stuck receiving 60-70% of what you need, unable to lay them off because that’s slightly worse.
  3. Bad process design – oftentimes, incompetence is nothing more than the symptom of badly designed business processes. You have to make sure your business is designed in such a way where any reasonably competent individual can succeed.
  4. Bad work environment – we’ve all had terrible jobs before. You know that in bad work environments, you are neither productive nor likely to stick around for long.

Likewise, truly exceptional People can be a huge selling point that can set you apart for years to come.

The Forgotten Ps: Physical Evidence and Process

I purposefully chose Entrepreneur Magazine’s interpretation of the 7 Ps of Marketing instead of the 1981 model. The original 1981 model included Physical Evidence and Process, both of which are important and I’ll cover below.

process diagram

Physical evidence involves the physical environment in which a service occurs or a product is sold. It entails the furniture, spatial layout, signage, interior design, and a lot more. I omitted this because it’s between Place and Packaging in my opinion, making it a little bit redundant. What’s more, it’s not inclusive enough to new ways of doing business made possible by the Internet. For online businesses, physical evidence may include a website with a clean layout and glowing testimonials.

Similarly, the 1981 model also included Process. This entails procedures, mechanisms, and the general flow of activities within a business. That includes the choice between standardizing processes or leaning into customization. It also includes diagnosing failure, monitoring and tracking metrics, analysis of resource requirements and allocation. Process entails best practices and documentation.

While Process is very important to how your business performs, I personally see it as a layer underneath marketing. Lean process design is a necessity for small business success, but I wouldn’t go so far as to call it a marketing tool in its own right.


The 7 Ps of Marketing provides a useful framework for small businesses to analyze their marketing strategies. By neatly listing the 7 Ps here, we have an idea of which questions to ask ourselves to move forward.

With all this in mind, what’s the one P that worries you the most right now? Let me know in the comments below!

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chess is a handy stock photo metaphor for small business marketing strategy

How to Craft a Small Business Marketing Strategy That Works

Crafting a small business marketing strategy can seem awfully complicated. Many business owners have to be convinced that marketing is worthwhile in the first place. Among the converts, many more struggle to choose a coherent philosophy of marketing, find a lucrative niche, or even simply understand their customers. Today, we’re going to take much of the theory we’ve discussed from the last several blog posts and talk about how to apply it.

chess is a handy stock photo metaphor for small business marketing strategy

We’re going to split this post into two sections: Prerequisites and Steps. Before you can craft a small business marketing strategy that works, you have to understand your business’s purpose as well as your competition. This requires a mix of self-awareness, empathy, and an understanding of your market.

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Once you understand yourself and your competitors, you can determine how to reach customers and what you want them to do. With this in mind, let’s get right to it! Here is an outline:

5 Prerequisites to Crafting a Small Business Marketing Strategy

  1. Define Your Target Market
  2. Understand Your Niche
  3. Achieve Product-Market Fit
  4. Analyze Your Competition
  5. Set Yourself Apart

6 Steps to Bring Your Small Business Marketing Strategy to Life

  1. Observe Your Target Market in Their Natural Habitat
  2. Understand How Your Target Market Wishes to be Approached
  3. Figure Out What You Want People to Do
  4. There is No Magic Bullet for Lead Generation
  5. Test Different Promotion Strategies
  6. Create a Feedback Loop So You Can Improve Over Time

5 Prerequisites to Crafting a Small Business Marketing Strategy

Define Your Target Market

The world we live in is extremely large and competitive. To attempt to please everyone in this big world at the same time is a fool’s errand. When you’re running a small business, your resources are finite. You can only create products or services for so many people at once. To lose sight of this simple fact will cause you to lose focus and speed toward oblivion.

target

At the root of all business, there are people. Specifically, there are people who need to be served with products or services that make their lives materially better in some way – your potential customers. You don’t produce products and find customers later, but rather the other way around. Find a market and then look for a way to satisfy them. They are your target market.

How you choose a target market is deeply personal. This guide on Inc. does a pretty good job of describing the basics, though. You need to look at your current customers if you have any. Think about the products or services you provide and which emotional needs you’re meeting. Think about your competition and how you wish to set yourself apart from them.

Once you have a sense of what your customers will be like, get specific. Describe their demographic information – age, gender, income level – as well as their psychographic information – their personality, attitudes, values, and so on. Some people even go so far as to create user personas – made up people who stand in for their customers.

Understand Your Niche

Once you have a clear-eyed vision of what your customers are like, you need to determine what makes you different than anyone else on the market. That is your niche. I’ve written about this at length, but I’ll cover the basics below because it relates heavily to crafting a small business marketing strategy.

lemon citrus

The wide variety of media we have available to us – cable TV, the Internet, and so on – dramatically changed the advertising landscape. In order to hold someone’s attention, you could no longer share “good messages for most people.” You had to share “the perfect message for a specific subset of people.” This is the post-network era. It’s where we live now. We’re never going back.

Because we live in a world of fractured, multi-channel media, commanding attention depends upon delivering the perfect message to the right person. If you like, you can think of this as Person-Message Fit instead of Product-Market Fit. You’ve found your niche when you’re able to make very specific products for very specific people with a very specific message.

Sound like pigeonholing? It is, to some extent. However, if you succeed, you can always scale up from there. Starting small makes it easier to succeed from the get-go and you can grow at a natural pace after you achieve a minimum level of market success.

Achieve Product-Market Fit

On this blog, you’ll hear the phrase “product-market fit” a lot. It is used to describe when a business perfectly addresses the needs of its audience. Achieving product-market fit is absolutely essential to meeting the needs of your target market. It’s also essential because you need the goods to back up the messaging you will be using to justify the way you’ve positioned yourself in a particular niche.

puzzle pieces connecting

Once you identify your customers, map out their needs, and find a niche to work within, you can start creating products or providing services. You want to try to create a minimum-viable product. This is a product that’s just good enough to whet the appetites of a few early customers. Its main purpose is to help you understand how to improve. Keep refining your product until you have something which is pleasing the vast majority of people within your target market. When you’ve done that, then you have achieved product-market fit.

Analyze Your Competition

Last week, I wrote about competitive analysis. Performing a proper competitive analysis starts with you analyzing your own situation, then looking externally, then back at your own situation. It mostly involves asking a ton of questions and researching a lot on Google.

man looking through binoculars
“Looks like they’re trying some new inbound marketing over there.”

Here are eight questions you need to ask when doing a competitive analysis. Knowing the answers to these eight questions will dramatically improve the thoroughness of your small business marketing strategy.

  1. Who are your competitors?
  2. What do your competitors sell?
  3. How much market share does each competitor hold?
  4. What are your competitors’ past strategies?
  5. What are your competitors’ current strategies?
  6. Which media are they using for marketing?
  7. What are each competitor’s strengths and weaknesses?
  8. What are their niches?
Set Yourself Apart

Once you’ve analyzed your competition, it’s very important to make sure you stand out in the crowd. In a noisy world like the one we work and play in, being forgettable will lead to failure. It’s important to understand your target market and niche. Likewise, understanding your competitors is very important, too. Creating a great product or service that fits the existing market needs is essential.

candy standing out

There has to be something about your business that no one can imitate. Otherwise, the risk of being forgotten is very high, as is the risk of being copied for a slightly lower price. Whether your uniqueness comes from the way you craft your products or services, the community you build, or even your own personality, something has to stand out. This is what Seth Godin would refer to as a purple cow.

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6 Steps to Bring Your Small Business Marketing Strategy to Life

Observe Your Target Market in Their Natural Habitat

Let’s say you’ve done a fantastic job of identifying your target market. Identifying a target market, however, does not a small business marketing strategy make. You need to find out where your target market hangs out – whether it be online or offline. For online communities, use Google to help you get started, but try not to depend too heavily on their search results. Once you find a few major communities, use recommendations by actual members of your target market to find smaller communities. For offline communities, see what local Meetup groups might be relevant in your area.

cute koala

Once you’ve figured out where your target market hangs out, simply listen (or read). Get a feel for what they value and how they talk. Listen not only for words but also emotional needs. Be considerate of their worldview and identify their pain points. Figuring out what causes them frustration creates business opportunities for you. From here, you can either create a minimum viable product – if you haven’t already – or decide you’d like to share your existing product. For simplicity, let’s assume you’ve already followed the five Prerequisites and you have (or are creating) a product that has good product-market fit.

Understand How Your Target Market Wishes to be Approached

Nobody likes the marketer who comes across as a used car salesman. When you approach a community and begin to become a part of it, the easiest way to screw that up is to start pushing your product in the wrong place. For example, I have a background in board game production. If you go to the game store with an elaborately crafted prototype, you will get a bad reaction if you share it at the wrong time. It doesn’t matter how good the game is or how it looks. You approached them the wrong way. Similarly, if I just posted my company’s stuff on Reddit’s /r/boardgames, I’d get downvoted to oblivion for looking like a self-promoting hack.

adorable kitty cat

So how exactly do you approach your audience? Sometimes you can be up-front about your intention to sell products in online or offline communities. Other times, you need to focus on online sales, advertising, and other traditional outreach techniques. Still other times, you need to please a few gatekeepers to get your product on store shelves.

“How do I know which one, Marketing is the Product?” Well, the simple fact is there is no simple answer. A good rule of thumb, though, is you want to look for places where people are being advertised to already. Look for enthusiasm, or at the very least, engagement. If you see eye-rolls, downvotes, or nasty comments, steer clear. If you see kindness or even intelligently delivered negative feedback, you’ve found the right place.

Figure Out What You Want People to Do

Once you’ve figured out your target market, your niche, created the right product, identified the communities, and found a way to reach out to them, then congrats! You have found a way to generate leads. This is really valuable! Yet you don’t want to generate leads until you know what you want them to do.

abstract arrows

There is a famous marketing model called AIDA: Attention, Interest, Desire, and Action. Understanding who to reach out to, what to give them, and how to engage them covers Attention, Interest, and Desire. These are the hardest parts to get right. Yet Action is essential and you can’t overlook it! You need to make sure you have a store-front, mailing list, online community, or something – anything – to which you can send people.

Your Action, and the calls to action that convince people to take the Action, are most likely sales. If that’s the case, you need to have a clean, seamless place for people to make purchases. You may also want to consider bundling products if you think it will make for a better user experience.

There is No Magic Bullet for Lead Generation

This is less of a pragmatic step and more of a necessary statement of fact. No small business marketing strategy is complete without a good way to generate leads. Many claim lead generation is the hardest part of small business marketing strategy in general. Before you go any further, you need to understand that you will probably spend a disproportionate amount of time figuring out how to generate leads. This will likely send you back to Steps 1 and 2, if not the Prerequisites over and over again.

floating card magic trick
Test Different Promotion Strategies

Crafting a finely tuned small business marketing strategy will take a ton of experimentation. You may have heard of the concept of marketing mix – it’s shorthand for all the marketing tools that a small business will be using. You’ll constantly be tweaking your marketing mix, especially when it comes to promotion. Promotion is, after all, largely based upon generating leads.

test tubes and beakers

Every time you run a promotional discount, keep an eye on your sales. When you run an advertisement on Facebook, look for things like cost per click or relevance score. Monitor your web traffic to see if certain posts or pages perform exceptionally well. Google yourself every once in a while to see what people are saying about your latest changes.

You always want to be trying something different because you never know what’s going to work really well. This is especially important early on. Well-designed experiments, combined with a feedback loop so you can implement ideas based on your findings, will lead to a virtuous cycle. Your small business marketing strategy will become ever more adept in serving customer needs.

Create a Feedback Loop So You Can Improve Over Time

In order to make meaningful changes based on testing, you need a feedback loop in place. A feedback loop could be as simple as creating different iterations of a product or service and asking a sample of customers what they think. It could be as complex as a custom-built information technology system that gathers a variety of metrics.

floating light bulb

For the purposes of this article, how you go about creating a feedback loop doesn’t matter. There are good ways and bad ways, but the most important thing you need to do is just find a way to gather information after your experiments. So many businesses fail to experiment and many more fail to use experimental data to improve themselves. My advice to you is simply to start small: customer surveys, one-on-one conversations, perhaps an analysis of your web traffic. If you find great insights by using these methods, roll out more robust methods in the future.


Thankfully, crafting a small business marketing strategy is not terribly complicated. It is a lot of work, yes, but it ultimately comes down to knowing how to answer four questions. Who are you selling to? What are you selling? Why is it special? How do you spread the message? A good small business marketing strategy answers all these questions in the great deal of detail that they deserve.

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competitive analysis is like a game of chess

How to Use Competitive Analysis & Make Your Small Business Richer

No business is an island. Competitive analysis is vital to the success of your small business. If you’re not able to read the competition, a lot of doors start closing. How can you find a niche, craft a strategy, compete on a global scale, or even understand your customers without understanding your competition?

competitive analysis is like a game of chess
“Business is like a game of chess. You must think first before you move.”

The purpose of competitive analysis is to understand what makes your product or brand unique. Once you confirm that you’re meeting the needs of your target audience, competitive analysis will help you determine how to communicate with customers to get the message across. Achieving product-market fit is great and necessary, but you need to be able to say thing right things to get your customer to make a decision. That requires research.

In order to help you know yourself and know your competition, we’ll be covering both SWOT Analysis and Competitive Analysis. Today’s article was inspired partly by this one on Entrepreneur.com, which I used to help give this article shape and form.

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Here is an outline of the topics we’ll go over:

Know Yourself: SWOT Analysis

  1. What’s a SWOT Analysis?
  2. Strengths
  3. Weaknesses
  4. Opportunities
  5. Threats

Know Your Competition: Competitive Analysis

  1. Who are your competitors?
  2. What do your competitors sell?
  3. How much market share does each competitor hold?
  4. Don’t forget about substitutes!
  5. What are your competitors’ past strategies?
  6. What are your competitors’ current strategies?
  7. Which media are they using for marketing?
  8. What are each competitor’s strengths and weaknesses?
  9. What are their niches?
  10. Revisit your opportunities and threats.

Know Yourself: SWOT Analysis

What’s a SWOT Analysis?

Dating back to the 1960s, the SWOT Analysis technique has become a mainstay in strategic business planning. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s laid out in a two-by-two grid, shown below, and it helps you identify positive and negative considerations that lie both inside and outside your business.

Diagram by Xhienne. Licensed under CC BY-SA 2.5. Photo from Wikimedia Commons.

At first glance, it may seem strange to start a discussion about competitive analysis with SWOT Analysis, which is inwardly focused. The simple fact is that it is difficult to know which competitors are even worth analyzing until you know where your small business stands. A SWOT Analysis is another way to analyze your own niche and identify areas for further investigation.

Strengths

In the upper left quadrant, you list strengths. These are characteristics of your business that are uniquely beneficial. These are as diverse as businesses themselves, but let’s go over a few examples.

strengths

Your small business’s strengths could include uniquely competent staff, a great location, or efficient equipment. You could have financial resources such as grants or passive income. The processes your business uses may be uniquely cost-effective or productive. Die-hard fans could be backing you up no matter what. Your company may even have past experiences that provide unique institutional knowledge that no one else can replicate.

Weaknesses

In the upper right quadrant, you list weaknesses. These are qualities of your business that will leave you at a disadvantage if left unchecked. Oftentimes, these are the flipside of the strengths.

broken rusty chain

Weaknesses include poor hires or a bad location. You may be tight on money right now, and not have any to spare for capital investment. You may be working with inefficient processes. The company you’re running may even have a bad reputation, who knows?

Opportunities

The bottom left quadrant of every SWOT Analysis is for opportunities – elements in the environment that your business can take advantage of. Opportunities are external to your business, usually stemming from your community or society at large. Some opportunities are open to all who are in your line of business, and some are uniquely yours to capitalize on.

outstretched hand beach

Business opportunities are like buses, there’s always another one coming. Sometimes opportunities happen on a massive scale. The culture can change to where your entire industry becomes more popular. Alternatively, your niche itself might be more popular. The economy – local or national – may be booming and that gives people more disposable income. You may be able to access new funding sources.

Your target market may be growing larger because of changes in society’s age, race, and gender makeup. Likewise, your part of town could be in the middle of revitalization. You might stand to benefit from some loosened regulations around the products or services you provide. Indeed, you may even be able to pivot into creating another product entirely!

Threats

In the bottom right quadrant, write down threats. These are qualities of the environment that could create trouble for your business. Similarly to opportunities, threats are external to your business and come from your community or society at large. They may affect all who are in your industry, or you alone.

aggressive fist

Threats often look like opportunities in reverse. For example, the culture of our world is changing in such a way where I wouldn’t want to run an oil or coal company right now. If the economy is headed for a recession, you’re probably going to feel it. Funding sources may dry up. Your target market may be aging, forcing you to lose sales or attract young people.

If your business is located in a struggling part of the country or the town, your business will likely suffer. If you’re a farmer and the river runs dry, you won’t be selling many crops. Likewise, new regulations might make your job harder. Changes occurring with your suppliers or service providers can also threaten your business. For example, every time Facebook changes their rules, social media marketers have to adapt.

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Know Your Competition: Competitive Analysis

Who are your competitors?

At the beginning of any good competitive analysis, you need to list several competitors. Get out a piece of paper and start writing. Once you are no longer able to recall competitors, start looking them up on Google and Amazon and see who shows up at the top.

african-descent-american-casual-1446263

If you’re starting up a business for the first time, you don’t want to just focus on the biggest companies out there. If you’re making some kind of unique soft drink, then sure, you’re competing with Coca-Cola and Pepsi. However, your most pressing competition is probably indie soft drink companies that appeal to early adopters in that industry.

That’s why, when looking at competitors, I like to sort them into five categories:

  1. Giants – These are the big companies that run the industry. When people think of your industry, they think of these companies.
  2. Semi-Giants – There are many companies that are nowhere near the size of large organizations, but they nevertheless do very well among indie / early adopters in a certain niche. A good example of this would be Stonemaier Games. The biggest board game companies are ones like Hasbro and Wizards of the Coast, but this particular company has regularly been able to make millions of dollars in revenue with each release in an industry where many struggle to make $20,000 per product.
  3. Peers – This is exactly what it sounds like: organizations roughly the same size as yours.
  4. Hopefuls – These are companies that are trying to get started but haven’t released anything yet. Particularly, these are ones that look like they have a really good chance.
  5. Misfires – These are the companies that try, fail, and close. Pay attention to them, too. You won’t have to compete with a failed business, but you want to make sure you don’t repeat their mistakes.
What do your competitors sell?

When performing a competitive analysis, the next thing you will need to consider is your competitors’ products and services. Think about specifically what they sell. You’ll want to list out their products and services, and describe them while doing so. Make sure to make a note of which niche they are marketing to.

selling baked goods

Having a list of what your competitors sell is handy in its own right. However, if you want to really perform a thorough competitive analysis, you need to go one step deeper. What needs are they meeting and which emotions are they catering to? What specific consumer behavior are they trying to evoke and how are they hoping consumers arrive at decisions?

When you start thinking on that level, consider whether their methods work or not. Are they successful in meeting emotional needs and convincing customers to make decisions? Are they meeting the same needs you’re trying to meet? If so, what makes your business different?

How much market share does each competitor hold?

It’s never a bad idea to figure out who’s the top dog in your business. You’ll clearly want to know who the biggest power players are and write down their market share, even if it’s only an approximation. At this point, be sure to revisit the five category model I’d listed above. You don’t just want to think about the top dogs. You need to consider the people operating at, slightly above, and below your level too.

slices of blueberry pie
How big are their slices of the pie?

The purpose of analyzing market share, especially when you’re just starting a small business, is to find an angle in. If you’re not sure exactly how to do that, find a semi-giant company that you can imagine turning yours into within a few years. Analyze their processes and mix that with a niche that you believe is currently unserved.

Don’t forget about substitutes!

When performing competitive analysis, it’s easy to commit the fallacy of believing only people who sell products or services like yours are your competition. Substitutes can be a real threat, too. Competition is based on market needs for a given demographic. Customers don’t care about products, they care about meeting needs through whatever means is most convenient. You might sell the highest quality cassette tapes in the land, but they’re not going to make me cancel my Spotify subscription!

What are your competitors’ past strategies?

When researching your competitors, make sure you look into their old marketing strategies. Consider how they were pitching themselves ten years ago, five years ago, or even a year ago. Once you figure out what has worked in the past, that leaves you with three distinct advantages.

marketing strategy

First, once you know what used to work in your niche, you will have an increased understanding of the context and history of the business you’re in. That can tell you how some long-time customers formed their current beliefs. This can help you to understand schisms in the community you’re catering to.

Second, you have a chance to contrast what is currently working with what used to work. You can map out how needs have changed over time. By watching how strategies change to meet needs, you can potentially predict what customers will need in the future.

Last and most importantly, bigger companies change slowly. There are risks as well as organizational factors that prevent large companies from turning on a dime. Your small business is likely different. You have the opportunity to try a new marketing strategy while everyone else is sleeping!

What are your competitors’ current strategies?

Marketing is a fluid, dynamic discipline. It’s always changing. That’s why you want to pay attention to the marketing strategies your competition are currently using. This is one of the most important parts of competitive analysis. You can copy what works for others while dropping what doesn’t. Sometimes, there is no need to recreate the wheel.

current marketing strategy

When you see marketing strategies work for your competitors, ask yourself “why?” Which consumer needs are being addressed? How is this being communicated to customers? Analyze not only success and the degree to which your competitors achieve success. Analyze the reasons as well, and this will allow you to see which way the market is headed.

Which media are they using for marketing?

Naturally, marketers need to become adept in various forms of media. Consider online and offline media. Are your competitors using TV, billboards, and newspapers? Are they using Facebook, Twitter, Instagram, Snapchat, Periscope, and LinkedIn? Do some analysis to see where your competition has currently set up shop.

apps on phone

Once you figure out where your competition has established a presence, consider which media appear to be working. If your competitors have especially great engagement on Twitter, it’s worth asking why that may be the case. Which needs are each media channel addressing for customers? Which messages are resonating with your competitors’ audiences and why?

What are each competitor’s strengths and weaknesses?

Having completed your own SWOT Analysis, consider doing a partial one for your competitors too. All the research you have done so far by answering the questions above and thinking deeply about the underlying reasons should help a lot. How does your company compare to your competitors?

What are their niches?

Last but not least, it’s important to figure out exactly which niche your competitors are serving. The best way I know to do this is to become a customer yourself. This will allow you to see which specific needs they are meeting. You can analyze their strengths and weakness up close and look for opportunities for yourself.

dartboard

Scanning your competitors’ media is a good way to analyze them, but you should take one step deeper if you really want to understand their niche. Try the following:

  • Get on their mailing list.
  • Follow their blog and social media.
  • Browse their store – look for product recommendations.
  • Buy something from them.
  • Pay attention to the postpurchase experience.
Revisit your opportunities and threats.

Now that you’ve sized up your competition, revisit your own SWOT Analysis. You have likely uncovered new threats and opportunities that are worth listing.


Competitive analysis is an important part of seeing where your business fits in. By paying attention to what your competitors are doing, you can learn about your customers and find a unique way to serve their needs.

Who’s your biggest competitor? What are they doing right and wrong? Let me know in the comments below, I’d love to hear from you 🙂

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man looking through binoculars

How to Find a Niche & Make Your Small Business Memorable

For many small business owners, finding a niche is a daunting task. For many of us, our small businesses are a form of self-expression, and focusing on small business marketing forces us to answer two deceptively complicated questions. Who is our target audience? How are we meeting their needs?

man looking through binoculars
“I’m looking for my niche.”

If you’ve been reading this blog for a little while, you’ve probably seen the phrase “product-market fit” or PMF. Achieving PMF is very important because it means you are meeting your target audience’s needs with products that feel tailor-made for them. Once you achieve PMF, you can begin to specialize in high-PMF products and narrow down the scope of your marketing messages on the people who care the most. In other words, once you find a unique way to meet an existing need, you can begin to define your niche.

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Clear as mud? That’s okay. In this post, I’ll be talking about what niches are, why they matter, and how you can find yours. Here is an outline:

Why Your Small Business Needs a Niche
  1. Welcome to the Post-Network Era
  2. What’s a Niche?
  3. Why Your Niche Matters
Finding Your Niche
  1. Finding Your Niche
  2. Consumer Behavior & Your Niche
  3. Consumer Decisions & Your Niche
  4. Culture, Subculture, & Your Niche
  5. Perfectionist Niche
  6. Image-Conscious Niche
  7. Hedonist Niche
  8. Frugal Niche
  9. Novelty Seeker Niche
  10. Impulse Shopper Niche
  11. Simplicity Niche

Why Your Small Business Needs a Niche

Welcome to the Post-Network Era
post-network era two men on couch holding tvs

To understand why niches are important, you need to understand a little bit of history. Between the 1950s and the mid-1980s, everyone lived in the network era. The vast majority of advertising – at least the way we remember – ran through three companies. They were ABC, CBS, and NBC. The television had to cater to very large audiences, so they didn’t have to focus on niches. ABC, CBS, and NBC needed to run programs that appealed to as many people as possible so they could take market share from one another.

Now yes, we always had papers, small businesses, and other forms of communication. However, the wide variety of media we have available to us – cable TV, the Internet, and so on – dramatically changed the advertising landscape. In order to hold someone’s attention, you could no longer share “good messages for most people.” You had to share “the perfect message for a specific subset of people.” This is the post-network era. It’s where we live now. We’re never going back.

What’s a Niche?
flowers in a wooden niche
While you’re not looking for a literal niche, you will need a unique space to occupy in the market.

Because we live in a world of fractured, multi-channel media, commanding attention depends upon delivering the perfect message to the right person. If you like, you can think of this as Person-Message Fit instead of Product-Market Fit. You’ve found your niche when you’re able to make very specific products for very specific people with a very specific message.

Sound like pigeonholing? It is, to some extent. However, if you succeed, you can always scale up from there. Starting small makes it easier to succeed from the get-go and you can grow at a natural pace after you achieve a minimum level of market success.

Why Your Niche Matters

Because attention is the truly scarce resource in the post-network era, your messages have to be really appealing. “Everybody’s second choice” doesn’t work in 2019 unless you’re a politician (and even then, you’ll likely lose the primary by being “everybody’s second favorite”). Attention is hard to get and keep in a social media world saturated with banal posts (Instagramming your lunch, corporations trying to be cool on Twitter, etc.)

Even if it weren’t for the trouble with getting and keeping attention, finding a niche would still have other benefits as well. For one, your start-up budget tends to be lower if you’re making very specific sorts of products. This especially good if you’re starting a business for the first time. It’s not uncommon to fail for a few years until you figure out what you’re doing. By having a small niche and a small budget, you can fail fast, fail cheap, and keep going!

Small niches are also easier from a logistics standpoint too. This is an especially salient point if you’re running a one-person operation. When you find a high-PMF niche, you can keep selling to the same customers over and over again. You don’t have to spend time generating new leads all the time – you can keep working the same old ones.

Finding Your Niche

Finding Your Niche
adult in winter forest with compass

I’m not going to sugarcoat it for you. Finding your niche is hard. You need a strong understanding of the industry you’re going into, consumer behavior and decision-making processes, and marketing in general. Furthermore, you need to realize that if you’re competing on the internet, you’re competing with the rest of the world. Globalization can be a game-changing force for better or worse in your business.

If you’re not sure where to even start, ask yourself a few questions and write down the answers.

  • What obscure niches am I a part of? Why?
  • What do I do with my spare time – hobbies and interests?
  • If I could start any business – cost not a factor – what would it be?
  • What marketable skills do I already have?

By assessing your skills an interests, you at least have a direction to go in. From there, you can imagine multiple different niches. Then you can Google them to see if other people would be interested in that niche.

Here’s where it gets really tricky. You’re very unlikely to find a profitable niche the first time. However, if you start with a niche in mind and really lean into it, you’ll receive feedback and you’ll have a chance to observe the way people react. Then you can pivot to a related niche. Rinse and repeat until you finally have a profitable niche. It can take years of hard work, but it’s the best method I know.

Consumer Behavior & Your Niche

Niches are based on people’s interests, and people’s interests based upon their needs. People are driven to take actions based on their needs – this is the core assumption we make when studying consumer behavior. To understand consumer behavior, and therefore find a profitable niche, you’ll need to be an avid people-watcher and a student of psychology, sociology, and behavioral economics. To be clear: the whole purpose of studying consumer behavior is to observe how and why people actually make purchasing decisions, as opposed to our expectations.

The diagram you see above is called Maslow’s Hierarchy of Needs. Our minds are problem-solving machines, and once we solve the problems at the base of the pyramid, we continue to work our way up. Your product needs to meet one or more of your audience’s needs.

Once you figure out exactly whose needs you’re addressing and which needs you’re meeting, you can try different things to see whether or not you’re doing a good job of that. you can refine your product until you meet the product-market fit of that very specific niche. Once the basic product is correct, meeting the needs of just the right audience, then you can focus on messaging. That is, getting people to buy your product.

Consumer Decisions & Your Niche
sign depicting two choices

People are not perfectly rational decision makers, so even if your product is perfectly tailor-made to meet specific needs, you still need to convince people to buy it. The way you do this will ultimately depend on sending people messages that make them subconsciously think “this will meet my need.”

This is easier said than done because people tend to make decisions based on heuristics and not a clear-eyed evaluation of all facts at once. That’s no insult, by the way, I do myself! The simple fact is that our world demands so much of our attention that we have to take mental shortcuts in order to get through our day-to-day.

When it comes to consumer decision-making as it relates to your niche, you have five main objectives:

  1. Get your customers to realize that they have a need which you can address. In other words, raise awareness in places where folks interested in your niche would see.
  2. Make information available to those who seek it so they can make decisions.
  3. Study the actual behavior of your customers so you can make sure your niche is a) meeting their real need and b) that the message of “I can fix your problems” is coming through loud and clear.
  4. Use a clear call to action to convince people to purchase your product or try your service.
  5. Ensure that the post-purchase experience is good. If you’re focusing on a small niche and you intend to sell to the same customers more than once, this is especially important.
Culture, Subculture, & Your Niche

The subjects of culture and subculture could easily make up an entire post – and they probably will someday! What you need to understand for now is that by finding a small niche and seeking to fill specific needs, you will be focusing likely on a fraction of a subculture. That means you need to understand the values, beliefs, and assumptions that your customers come to you with. Read their communication online and try to understand how they work. Become a part of their communities and begin to learn what they value.

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Perfectionist Niche

In an article on decision-making styles, I covered the same seven concepts that I am about to cover below. However, this time, I’m going to focus on how each decision-making style actually creates room for a unique niche that you can satisfy. Each decision-making style entails a different mentality that customers will bring – consciously or unconsciously – to the purchasing process. Let’s start with the perfectionist.

perfectionism dart board bullseye

Perfectionists are trying to make the perfect bullseye decision. They hem and haw, thinking about everything that goes into the product and how they will use it. In other words, they are the rare rational customer.

If you want to appeal to perfectionists, you need to make an extremely high-quality product or provide a high-quality service. The entire experience needs to feel seamless. They will likely come to you with a lot of questions. You need to know how to answer them.

Oftentimes, mass-market products are just not that great. It’s a reality of having a quirky need and nobody around to adequately fill it. While perfectionists are tough to please, they can be very loyal shoppers once you win them over. Anything that’s billed as “bespoke” or “artisanal” is intended to win over perfectionists.

Image-Conscious Niche
narcissist with a mirror

In the modern age, consumerism plays a really big role in the way we see ourselves. The philosopher Jean Baudrillard says that consumption is not just a product but “a piece of a ‘language’ that creates a sense of who we are…Our purchases reflect our innermost desires so that consumption is caught up with our psychological production of self.

Bear with me – I know that bringing in a postmodern philosopher is an awfully heady thing to do. The point is really important and you can see it at work in anyone who is proud of their Mercedes or their Lexus. You can see in anyone who takes pride in purchasing from the farmer’s market instead of Walmart. For that matter, you can see it in anyone who purchases from Whole Foods (at a great cost premium) instead of Aldi (which has very comparable quality food because it’s basically a German Trader Joe’s).

The image-conscious person isn’t necessarily “rational” in the pursuit of the “best quality” product. They are meeting a desire to build a sense of self through consumption. This is really good for small businesses because people like supporting them. Purchasing from a small business makes people say “I am the kind of person who purchases items from small businesses.” This is not even getting into the specifics of your product, which can also signal classiness and style if done right.

Hedonist Niche
party

The hedonist shopper just wants to have fun. They aren’t concerned with facts and figures, long-term quality, or anything else like that. For hedonists, decisions are made based on how fun the anticipated experience is going to be.

When you’re crafting your niche around hedonism, you need to understand that user experience is really important. It needs to be seamless and fun, and it can’t seem like work. Your product or service doesn’t have to be the most utilitarian one, just one that feels fun.

If you decide to pursue this particular niche, you need to do some research on what people find the most fun about your particular industry. You don’t want to come across as overly serious, so your branding will need to communicate a certain levity. When it comes time to test your product, you want to make sure that people are smiling and laughing when they use it.

Frugal Niche
wallet in a vice

This is precisely what it sounds like. Frugal shoppers are driven entirely by cost. I don’t think a small business should compete on cost 99% of the time. Here is a post I like from Marketing Donut that goes into more detail of why that is.

The frugal are driven by saving money. That could either mean upfront by buying the absolute cheapest thing that’s available, or a more sophisticated version where they buy for value-over-time. That is, they won’t buy the $20 shirt because they know it will tear up in two months. They’ll go the next step up because they know it will last. The former example, you want to avoid entirely unless your small business is positioned to make particular things very cheaply. The latter example, you may have a chance.

Novelty Seeker Niche
adventurer and novelty seeker on the mountains hiking

Novelty seekers are great for small businesses. They are the ones who are always looking to start something new. They are the innovators and the early adopters. They’re primarily motivated by staying on top of trends and by the love of exploration.

To appeal to novelty seekers, there are two things you can do. The first is that you can simply be brand new to them. Oftentimes, novelty seekers are a subset of people within a subculture who will try anything once – good or bad. Other times, novelty seekers are looking for trends because they always want to know what’s going to be next. To appeal to those sorts of novelty seekers, you’ll need to constantly be researching your industry online and figuring out what is going to be the next big thing.

That first subset – appealing to people who have never seen you before. That’s relatively easy. They are the “superbackers” on Kickstarter, the collectors, and so on. The second subset are trickier because figuring out what’s “trendy” in any given community is a difficult task. Google Trends and social media have made it easier, but it’s really easy to fail nonetheless and look like a tryhard business that wants to be cool but is painfully inept at it.

Impulse Shopper Niche
impulse shopper on a black friday sale

Impulse shoppers are also driven by novelty but in a different way than novelty seekers. Being picked up by an impulse shopper will ultimately come down to pricing, packaging, and distribution. You want to be seen and have a price that’s agreeable to somebody without them having to think twice. That’s the magic of the impulse shopper – they don’t think twice.

Impulse shoppers can be a valid niche if you’re trying to make something inexpensive. For example, I’ve noticed that board games priced at $19 or less tend to sell really well among the hobby communities. This is because spending less than $20 is a no-brainer for the sorts of people who collect 300 or more board games. They have little to lose, and for all they know, it might be a blast. Worst case scenario: it’s just decoration for their shelf.

Simplicity Niche
minimalist apartment

Last but not least, our ever-growing consumer-driven society demands our attention all the time. We can’t fully understand messages because of how many messages are being lobbed at us anytime we walk into a mall or turn on the television. Many buyers end up confused and unable to make decisions. In a state of confusion, someone who speaks clearly and is able to break down complicated concepts is a godsend. Brands that seem simple and minimalistic become awfully appealing.

I love writing how-to guides for beginners because it’s a huge value add. All too often, complicated concepts are not explained well online, such as with marketing. Through channels like this blog, I try to break down these concepts into digestible pieces so that people can fully understand them without removing the complex elements that need to be understood.

If you enter into an industry that’s not user-friendly, this could be a great opportunity for you. You could bring wallflowers off the wall by creating an easy-to-use product. That can very easily become your niche, in the right circumstance.


Finding a niche is a difficult but necessary part of doing business in the modern age. To find the perfect niche, you need to understand your abilities and interests, as well as the needs of your target audience. Once you understand that, you’ll be able to comprehend their consumer behavior and decision-making process. That will allow you to speak their language and make sales!

With that, I have just one question for you. What’s a niche market that you’re part of and why does it appeal to you? Let me know in the comments below!

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Globalization: Your Small Business vs. the World

Globalization is one of the defining forces of our era. As the world becomes more connected, we find our small businesses competing in a bigger arena than ten or twenty years ago. In some ways, this is thrilling. In others, it’s terrifying. No matter how you feel about globalization, it’s so big that you can’t ignore it. That’s why we plan ahead.

We all have a hand in globalization

Globalization comes with a lot of ups and a lot of downs. We find ourselves competing with more people and scrapping for attention in loud markets. We find ourselves losing the local touch while being priced out of markets by countries where the cost of living is low. If that weren’t enough, we run into all sorts of language and culture barriers, as well as strange laws.

At the same time, though, we gain access to global markets. We have more suppliers and a larger labor market to draw from. We can compete directly with big companies and find strategic partners with a few emails. And if all else fails, a bigger world means more small niches to work our way into.

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We’re going to cover all these subjects and more in this article about globalization. Here is an outline:

How Globalization Makes Small Business Harder

  1. Increased Competition
  2. The Scramble for Attention
  3. Loss of Local Greatness
  4. The Threat of Cheaper Alternatives
  5. Language and Cultural Barriers
  6. International Laws

How Globalization Makes Small Business Easier

  1. Access to Global Markets
  2. Remote Workers
  3. Ability to Compete with Big Companies
  4. Access to More Suppliers
  5. Easier to Find Strategic Partners
  6. Mass Customization and the Flourishing of Tiny Niches

How Globalization Makes Small Business Harder

Increased Competition

Let’s start with the bad news first. In fact, let’s start with the worst of the bad news. When the whole world is in your market, then you’re competing with the whole world. You might be the best underwater basket weaver in Omaha, but are you the best in the world?

arm wrestling

As you can imagine, this aspect of globalization is the one that causes deep insecurity for a lot of people. You cannot simply will yourself into being the best X in the world. It’s very rare that you will ever meet somebody who is the best at anything in the world. The world is huge. There are almost 8 billion people in it.

How then, does one compete when they can’t be the best? There are a few ways, and they’re not mutually exclusive. First, you can accept that people don’t generally make rational decisions. They rely on heuristics and can’t reliably tell the difference between “good” and “best.” Even for those who can, that distinction is often irrelevant.

Second, marketing is about crafting the right experiences for the right people and selling them in the right way. Every instance of the word “right” in that previous sentence means a slightly different niche. With a bigger world, there are more niches you can occupy, giving you a fighting chance to differentiate your small business from others.

Lastly, a bigger world means more potential collaborators. You can find suppliers and strategic partners more easily, letting you act like you’re running a bigger organization than you really are.

The Scramble for Attention

You have to fight for the best listing on Amazon. It’s tough to get the top result on Google. Even having a highly engaged post on Facebook seems difficult. In a world with so many choices, consumers are having to rely on mental shortcuts to make simple decisions. There are nearly 2 billion websites on the Internet right now, so getting and keeping attention is very hard. It can feel like screaming into the void!

screaming for attention

Globalization forces us to cope with the truly enormous size of our world. You would need Carl Sagan to do a TV show to help you really understand how many websites 2 billion is. Turns out, we don’t just compete for money. We compete for attention. Sensory overload is one of the defining issues of our time. It used to be that TV, radio, print, and billboards were the primary means of advertising. It was easier to tell ads from non-ads. Now that’s not true. The internet kicked that down like the Koolaid man kicks down walls. (Oh yeah!)

Thankfully, the internet threw us one very important lifeline in this respect: targeted advertising. Instead of broadcasting to massive audiences like in the old days of advertising, we can target only customers who might like our products or services through Facebook, Twitter, etc. It’s cheaper, more effective, less annoying, and I’d argue good for society (when not being used for misdeeds).

Loss of Local Greatness

There was a time when the vast majority of businesses could either be some variation of: “the best in town”, “the fastest in town”, or “the cheapest in town.” I was born in 1993. When it comes to buying things, my town is the entire world. The percentage of sales being made online compared to brick-and-mortar retail stores has been growing steadily for years. I don’t imagine this trend reversing any time soon.

A lot of old-school marketers mourn the loss of “in town” as a valuable part of their niche. To be fair, local businesses are still needed for auto repair, haircuts, groceries, and much more. There is something deeply uncomfortable about dealing with competitors in China, India, Australia, the UK, Brazil, and so on. This doesn’t eliminate the value of a niche, nor does it negate the value of product-market fit. Rather, it simply means that location is becoming less of a selling point.

The Threat of Cheaper Alternatives

Have you noticed how our toys keep getting cheaper while food, housing, healthcare, and tuition keep going up? Foreign countries can’t compete with the essentials I just listed because they’re so location-centric. However, TVs and smartphones? China says “game on!”

goods on sale

Just like you can’t compete as easily on location, you can’t compete as easily on price. In my opinion, this is a more acceptable loss to traditional marketers. In small business, competing on price is not usually the best way to operate. It never really has been. It’s too easy for your big-shot competitors to come in and use economies of scale to deliver goods cheaper than you can.

What’s changed now is that a small business owner in a low cost of living country like India can compete with an American megacorporation. If anything, this is good for you because scrappy startups in foreign countries can sling rocks at domestic industry Goliaths you couldn’t otherwise take on.

Language and Cultural Barriers
welcome in different languages

As if changes to the amount of competition, pricing strategies, and the loss of location as a differentiator weren’t enough to make you uncomfortable, your new customers are speaking Spanish. Or Mandarin. Or French. If you run a small business, you’ve probably shipped to foreign countries. That means your customers might not be great English speakers, which makes your job – to provide good products and good customer service – even trickier.

A good deal of people overseas are fluent in English, though, so perhaps there isn’t a language barrier. Even still, there are often subtle cultural differences you need to be aware of when your customers are overseas. Depending on your line of business, it may be very useful to know that the Japanese value punctuality or that the French expect you to say “bonjour.” Every culture has different events that shaped it. We can’t understand all the context of our own culture, let alone someone else’s. Yet here we are, in the thrust of globalization, required to at least try.

International Laws
justice is blindfolded statue

Last but not least, international law can be confusing. As an example, look at this Wikipedia index page for European Union regulations alone. When we do business in foreign countries or with foreign customers, we often fall under the jurisdiction of their laws. The legal systems of the world powers right now were not conceived for the level of connectivity we enjoy today. That causes some weird effects, like marketers mistakenly tossing out perfectly well-made email lists to comply with GDPR – an email regulation that is binding when you contact residents of the European Union.

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How Globalization Makes Small Business Easier

Access to Global Markets

The flip side of a more competitive world is that everybody has to deal with it. Yes, for a small business marketer, finding a competitive niche in a big world is daunting, to put it lightly. However, the same applies to your suppliers and everyone you purchase from. You can cut costs to the bone and save it for the value-adding parts of your business.

global market

It gets even better. You don’t necessarily have to make a product for people who live in your country. You can sell to Belgium, Argentina, Egypt, or Iran. As long as they’re willing to pay shipping costs, you can spread your small business’s handiwork across the globe. You can provide online services to anyone without having to think twice about location.

Remote Workers
remote work from cafe

Products can be shipped and services can be delivered remotely. That statement applies not just to what you sell, but also to the labor market. In a world where valuable labor can be digitized, your small business can take advantage in a number of ways. You can hire stay-at-home mothers in your own community for data entry, programmers in developing countries where the cost of living is lower, and even set up around-the-clock customer service.

Afraid of hiring people for ridiculously low wages in developing countries on moral grounds? You ought to be – that’s a very good consideration. However, don’t overlook purchasing power parity. Currencies aren’t necessarily valued relative to their power.

A US Dollar is worth 71 Indian Rupees at the time that I’m writing this article. However, it costs about 17 Rupees to buy goods in India which would cost $1 in the United States. That means your dollar goes about four times farther in India. In China, a dollar goes about twice as far. This effect goes the other way around too – a US dollar won’t go as far in Denmark or Luxembourg.

Ability to Compete with Big Companies

“On the Internet, nobody knows you’re a dog.” One of the beautiful things about being a small business in a globalized world is that you can appear to be a polished, large business without necessarily being one. Small mom-and-pop hardware stores can never look like Home Depot in physical space. Online, sharp branding, a user-friendly website, and a good selection of products goes a long way. That is to say, it’s easier to look big than it ever has been.

coca-cola signs

One might say “that’s more of a consequence of the internet than of globalization.” That may be true, but without a steady stream of affordable supplies and a wider labor market, it would be a lot harder.

Here is an example. My friend, Sean Fallon, runs Smunchy Games. He’s making a variety of tabletop games, one of which we’re working on together. Many people mistake his organization for being larger than it is. This is because he’s coordinating a team across the US and across the globe to gather great artwork, write great stories, test his games with players, and maintain an online presence. You take away the global market, and he wouldn’t be able to do all this. It would be out of his grasp.

Access to More Suppliers
woman business owner using laptop

You may not be able to compete on price or location as easily anymore, but you can still compete on niche and operational excellence. Strangely, a lot of organizations simply do not understand how to leverage the global marketplace. Globalization allows you to find the most skilled workers anywhere to work on specific tasks. Meanwhile, everything that’s not core to your business can be done in an incredibly cost-efficient way because of increased competition.

Easier to Find Strategic Partners

Globalization makes the world simultaneously a lot smaller and a lot bigger. As a consequence, it becomes a lot harder to compete alone. Big companies have been undergoing a lot of mergers and acquisitions. They know that by combining their resources, they have a better shot of success in the global market. Small businesses can do the same thing, but without losing their independence.

handshake

Strategic partnerships make it easier to succeed in the marketplace. Maybe a good partnership reduces shipping costs. Perhaps it allows you to acquire a material you need at a reduced cost because the supplier knows you will keep them in business. No matter how or why a strategic partnership is a good thing for your small business, the fact is that globalization makes it easier to team up.

Right now, I can go on Twitter and find businesses from all over the world. I can create communities of small business owners and creators, finding specific people I would like to work with. It’s no secret that teamwork makes the dream work. Globalization makes it easier to create an incredible team.

Mass Customization and the Flourishing of Tiny Niches

Globalization has connected more people than ever before. It has broken down the barriers to doing business across nations. As a result, there are more needs to fill than ever before. In 1980, if you wanted to make a product that only appealed to 5,000 people in the world, you were probably out of luck. The business idea was not viable. Now, however, you actually can sell that good because you can reach those 5,000 people scattered across the globe.

man painting ceramic vase

Naturally, no matter what you sell, it will ultimately need to fill a need. You will ultimately need to achieve product-market fit if you want to succeed. The beauty of globalization is that you can reach more markets, and therefore, more products become viable for business. As complex and frightening as competing on a global scale may be, it’s offset by opening up possibilities that wouldn’t have existed thirty years ago.


Globalization is here to stay. As small business owners, we have to prepare for the challenges and opportunities that globalization brings. We may have more competition and problems to solve, but the beauty is that we have more options too.

How is your small business dealing with globalization? Let me know in the comments below!

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The Thinker Statue considers which of the five marketing philosophies to use

I Think, Therefore I Sell: 5 Marketing Philosophies for Small Businesses

Marketing philosophies change how we approach marketing as a whole. No matter which one you subscribe to, marketing is all about crafting the right experiences for the right people. This objective is deceptive in its simplicity, though, and raises many questions. How do you define the “right” experience? How about the “right” people? Even if you do define both, how do you know when you’ve succeeded in crafting the right experiences for the right people?

The Thinker Statue considers which of the five marketing philosophies to use
“Which of the five marketing philosophies should I use for my small business?”

Whether marketing is an art or a science depends on who you ask. I tend to lean a little more toward the science side myself because I have a background in information systems – a data-driven field. The fact that this is a question means there are different schools of thought on how to characterize marketing as a discipline. It’s a fundamental question in the field.

Just as surely as we can doubt the nature of marketing itself, we can ask ourselves what success looks like in marketing. Are we trying to sell to the most customers? Should we try to make the best product instead? Is marketing about making the most sales?

Maybe all those questions are wrong-headed and too company-focused. Should we instead focus on filling customer needs? Or, better yet, do we need to focus on the well-being of society at large?

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If your head is spinning, then I don’t blame you. The truth is, there is no right or wrong answer. (Welcome to philosophy!) What you’ll need to do in lieu of finding absolute moral truth in marketing is choose the philosophy that works for your business. That’s what we’ll be talking about today. I’ve provided an outline below for you:

The 5 Marketing Philosophies

  1. Production Philosophy
  2. Product Philosophy
  3. Selling Philosophy
  4. Marketing Philosophy
  5. Societal Marketing Philosophy
  6. Which of these marketing philosophies is right for my small business?

The 5 Marketing Philosophies

Production Philosophy

The production marketing philosophy hails from a bygone era in which consumers could be counted on to prefer products which were widely available. The idea is that customers like cheap stuff that’s easy to get. Consumers are motivated by low costs and convenience. If you run a company based on this idea, you want to produce efficiently, cut costs, and distribute widely.

Volkswagen assembly line
Photo by Alden Jewell, posted to Flickr under CC BY 2.0 license.

You’ve probably noticed that I’m talking about the production philosophy as if it’s a throwback. That’s because it is. The roots of this concept come from the early twentieth century when we’d reached the heights of what industrialization could provide. However, as we’ve talked about in the consumer behavior and consumer decisions articles, people are not automatons concerned with only price and availability. People buy expensive items all the time, and from obscure places, too. Whether it be the Sears-Roebuck catalog or Amazon Prime, we’ve been buying expensive items from far away for a long time.

R.I.P. Production Philosophy?

So…the production philosophy is dead, right? No, not at all. The US industrialized in the early 1900s. Henry Ford created the Model T on a very smartly optimized assembly line, cranking out identical cars at a pace nobody had ever seen before. The assembly line was so optimized that the cars came in “any color as long as it’s black” because that color paint dried fastest. The production concept put the Ford Motor Company on the map in the early 1900s. This same technique is being used in developing countries right now, where it makes sense.

Look, I’ll level with you. If you’re running a small business, this probably isn’t the marketing philosophy for you. I just want you to know it exists so you understand history, context, and other businesses.

Product Philosophy

The product marketing philosophy stands in stark contrast the production philosophy. It doesn’t assume customers make decisions based on what’s available and what’s cheap. Rather, it assumes customers make rational decisions based on product features and quality. One of the benefits of this belief is that businesses end up making really well-crafted products.

artist

As well all know, though, people are not rational. When you assume that customers will always make rational decisions based on product features, you miss a lot of what drives people to make decisions in the real world. The risk is that you end up making the wrong product – one without actual product-market fit. Some call this the “better-mousetrap” fallacy. “A better mousetrap will bring people to our door.”

While this is a much better philosophy for a small business to follow than the production philosophy, it’s still pretty flawed. You need to find market needs and make something to address them, instead of making something first and finding people who want it later. Failing to do so is one of the biggest strategic mistakes a business can make. In fact, I made that mistake myself in 2018.

Don’t get me wrong, though, in many established businesses, this philosophy can still work. This is the approach automakers like Toyota and Honda take. They make the same basic cars, but with slight improvements to safety, fuel economy, and style every year. They are not revolutionaries like Tesla, but they don’t have to be. A car is a commodity and a big purchase, so “people make decisions based on quality” is an unusually accurate assumption in their line of business.

Selling Philosophy

The other two marketing philosophies we’ve talked about are focused on the product. What if we flip the script and focus on a real-world metric of success? Let’s talk about sales. Let’s assume more sales mean the business is doing better, all else equal.

handshake in front of falling money

The selling philosophy is the most short-term of all the marketing philosophies. When you subscribe to it, your goal is to sell whatever you’ve got, without considering what the market wants.

This is really risky. You have to assume that customers will cave when sold to. If disappointed, you assume that they forget that and buy again later. It assumes you have vast marketing and promotion resources at your disposal.

Can this work? Yes, surprisingly. If you’re making a really cheap commodity like $5 earphones, chapstick, or gag gifts, you don’t have to care about quality or repeat purchases. You simply have to crank out goods and sell them quickly. For this reason, your small business can actually operate based on the selling philosophy.

Think twice about what you’re selling if you choose to travel this path, though. If you make a product where quality is an important factor, you shouldn’t go this way. If you need repeat purchases to survive, you run into the same problem. Your goods have to be cheap, interchangeable, and your new customer acquisition cost needs to be really low.

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Marketing Philosophy

The three previous marketing philosophies, as you can imagine, have their roots in the 1800s and early 1900s. In the 1950s, a new marketing philosophy came into vogue, and it’s one you probably recognize. The central tenet of the marketing philosophy is that success comes from creating the right products for the right people. This is the philosophy behind Marketing is the Product.

advertisements on buildings

The marketing philosophy is the first of the four marketing philosophies we’ve discussed that addresses the customer. It can be broken into four parts:

  1. Target Market
  2. Customer Needs
  3. Integrated Marketing
  4. Profitability
Target Market

In the marketing philosophy, you immediately put people first. You choose a group of people who you would like to serve. You may choose your audience based on size, relative lack of competition, or a personal affinity for them. The point is, you always start with people first.

Customer Needs

Once you choose your target market, you identify their needs and seek ways to fill them. Needs vary far and wide by different audiences. No matter what, this philosophy remains fixed on their needs and how they perceive them. If they need a Ferrari to fit in with their neighborhood, we still consider that a need.

Integrated Marketing

Once you’ve found a market and created a product to meet their needs, you have achieved product-market fit. This is at the core of the marketing philosophy. After you achieve product-market fit, it’s time to communicate and deliver value to your customers. This is the part where you let people know you exist, convince them to go through your sales funnel, and make that sweet, sweet money.

Profitability

The marketing philosophy ultimately measures success in terms of profitability. While customer satisfaction is the vector by which you achieve profitability, customer satisfaction is not the end goal. We assume that customers are smart enough to buy what fills their needs. We assume that profitability is the natural outcome of achieving product-market fit and building an effective sales funnel.

The Marketing Philosophy in Use

Any product or service that you really enjoy is probably using the marketing philosophy. We tend to forget about commodities like milk or iPhone charging cables. Those products can be sold through the production, product, or selling philosophies.

For example, I really love Spotify’s service. It has nearly all the music you could possibly want to listen to alongside wonderful features that generate custom playlists for you. They identified a need in the world – a need for an easy-to-use music listening service – and created a nearly perfect service around it. After they provided a service which fit their market of young music listeners, they effectively spread the word. This led to their fantastic success by following the marketing philosophy.

The Marketing Philosophy’s Dark Side

Clearly, the marketing philosophy is the most enlightened of the four marketing philosophies I’ve listed so far. Yet it still has problems that we will all collectively have to reckon with at some point in the near future. Namely, the marketing philosophy does not address externalities.

An externality is a cost or benefit that affects someone not involved in a transaction. Sometimes this can be good. If people around you get a flu shot, but you choose not to, your odds of getting the flu shrink due to herd immunity. Likewise, if my home is uphill of yours and I have the lawn regraded to prevent my basement from flooding, the water may then fall on to your lot and flood your basement instead!

Air and water pollution, climate change, spam, antibiotic resistance, and traffic congestion are all negative externalities that can arise from our purchasing habits. As the world becomes more interconnected, we will still want to maintain our ability to make meaningful choices about our lives. At some point, businesses will have to either voluntarily address externalities or have their hand forced by the government.

Societal Marketing Philosophy

Focusing strictly on the business and the customer leaves behind the bystanders. Obviously, this is bad. The societal marketing philosophy is the newest of the marketing philosophies. It seeks to address externalities.

Societal marketing is concerned with society’s well-being as a whole. Success is measured not only in company profitability and customer satisfaction, but also society’s well-being. Under this philosophy, companies are compelled to take care of the environment, reduce poverty, teach people how to read, and more.

green hand holding plant

The societal marketing philosophy sounds like a utopia, but it comes with a downside too. Namely, society might not be ready for it. Getting companies to take the first steps is hard. It’s rarely in a company’s best short-term economic interest to reduce negative externalities on society.

How do we move forward then? I see it going one of two ways. Consumers could become much more conscious, changing their buying habits and perhaps even protesting bad behavior. Banks such as Aspiration are already looking for ways to promote conscious consumerism. Alternatively, large governments such as the United States or European Union could drop the hammer on big businesses. They could hit them with regulations, taxes, and laws that protect society from bad behavior.

No matter how this happens, it’s going to happen. Companies need to be ready for the right time to move from the marketing philosophy to the societal marketing philosophy. My recommendation is to start small – make small choices that are better for society and slowly move toward social marketing over the next couple of decades. Tiny changes over a long period of time add up, and yes, it’s often better than doing a complete 180.

Which of these marketing philosophies is right for my small business?

Having exposed you a whole bunch of marketing philosophies, I’d be remiss if I didn’t provide a little direction on how to proceed. At some point – whether you mean to or not – you will choose to follow one of these philosophies. Here is what each one would look like in a small business:

Production Philosophy: We make whatever we can make most efficiently and we sell it. End of story. If you can crank out stuff cheaply, quickly, and get it shelved in a lot of stores, follow this philosophy.

Product Philosophy: We already know what we make, and we keep making it better. If you have learned a trade where things don’t change often, this is fine. Continually improving your skills and maintaining your existing customers is probably enough to succeed.

Selling Philosophy: If you have a lot of inventory, a low customer acquisition cost, and don’t need repeat purchases, then this philosophy could be right for you.

Marketing Philosophy: For the vast majority of small businesses – especially ones just starting out – this is the philosophy you will need to follow. You need to find a market, identify needs, fill the needs, tell the market you can fill their needs, and sell at a profit.

Societal Marketing Philosophy: As time goes on, we will all need to be more aware of how our actions affect others in the world. Start by making considerate and sustainable choices in small ways and build from there. Society will slowly adopt this marketing philosophy. This should only be your primarily marketing philosophy if your business is branded as eco-friendly, sustainable, fair trade, or something else like that.


Marketing philosophies change how we approach business from the top to the bottom. How we craft the right experiences for the right people comes down says a lot about how we run our business.

Which of these marketing philosophies does your small business subscribe to?

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art balloons

7 Market Forces That Shape Small Business

As small business owners, we like to imagine ourselves immune to market forces. After all, we have the willpower to run the show. Why should we have to answer to anyone else? The truth, as always, is more complicated than that. We’re captains of ships in choppy waters, skilled and determined but at the mercy of our environments.

Boat in a Storm - Metaphor for Market Forces

Mercifully, when it comes to small business marketing, the forces that act upon us are not like the ones faced by our distant ancestors. We don’t face great storms, famines, or the capricious whims of gods. We do, however, subject ourselves to several market forces when we go into business. It’s up to us to respond to these forces in sensible ways, adapting our marketing strategies around reality and not how wish reality was.

Below, I’ve outlined seven market forces that will affect the way you market your small business. We’ll talk about each one in depth in the paragraphs to come.

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The Seven Market Forces

  1. Social Market Forces
  2. Demographic Market Forces
  3. Cultural Market Market Forces
  4. Economic Market Forces
  5. Technological Market Forces
  6. Political and Legal Market Forces
  7. Competitive Market Forces
What is a Market Force Anyway?

Let’s borrow the definition of market force from the Business Dictionary:

Forces of demand and supply representing the aggregate influence of self-interested buyers and sellers on price and quantity of the goods and services offered in a market. In general, excess demand causes prices and quantity of supply to rise, and excess supply causes them to fall.

Rolls right off the tongue. In laymen’s terms, a market force is something that tweaks supply or demand. Anytime supply or demand is tweaked, you need to be concerned about that as a small business marketer. One way to address changes in the market is to stick to the same basic message, but deliver it in a different way. Sometimes you need to change up your message, but keep selling the same products or services. Still other times, you need to sell something else entirely.

As I see it, there are seven major market forces that can change your life as a small business marketer. Let’s talk about them.

Social Market Forces

Ask any old-timer and they’ll tell you. “Times sure have changed.” They may be talking about technology developing at a prodigious rate. More likely, they are referring to the ways people and the ways we interact have changed. In the last eighty years in the USA alone, we’ve gone from World War II to mass interconnectedness. The world Baby Boomers grew up in is a lot different than the one Millenials like me grew up in. You can see that on a grand scale in generational attitudes!

People - social market forces

If you want to sell stuff, you have to be able to read the room. Social market forces are all about our collective beliefs, attitudes, and experiences. You need to have a sense of how people are reacting to the world they live in. Turn on the radio, listen to podcasts, watch some TV & movies, and talk to people! You don’t want to be a couch potato, but you need to be able to see the trends happening. You need to understand that you are in the middle of history – not the beginning nor the end.

Examples of Social Market Forces

Here are a few examples that are hot right now, as I write this, in January 2019.

Demographic Market Forces

Defining demographics is a big part of marketing. Demography helps us sort people by age, gender, nationality, religion, education, and ethnicity. Creating distinctions between different groups with different tastes can provide us with a useful framework for evaluating products or for testing our marketing strategies.

crowd

As the overall demography of your customer base or industry changes, you may need to try different techniques to engage them. I’ll use one of my favorite marketing case studies of all time to illustrate. Old Spice – up until 2010, an “old man’s brand” – engaged then-young Millenial audiences with advertising campaigns about the Old Spice Man. This was known as “The Man Your Man Could Smell Like” and it is a surrealistic masterpiece of an ad. It is genuinely hilarious. Old Spice was losing their market because they were aging. That campaign helped them reach out to a younger audience who would be keeping their armpits dry for decades to come.

Likewise, the nationality, gender, religion, education, and ethnicity of your demographic will change the way you communicate. Whether you’re trying to reach out to a target audience or keep existing customers engaged, keep in mind that much of consumer behavior is driven by communication. It’s not enough to make the right product for the right people. You need to speak to the right people in the right way, too. Understanding demographic forces helps a lot in that respect.

Cultural Market Forces

Social market forces and cultural market forces have a lot of overlap. Society is shaped by culture, and culture by society. However, when I refer to culture, I refer to globalization in the marketplace. If you’re a resident of the USA like me, you’re not just shopping from your fellow Americans. You’re also shopping from Europe, China, and other distant lands.

art balloons

The way Americans experience life is different than the way Russians, Australians, Brits, Colombians, Zimbabweans, and the Chinese experience life. Our basic values, attitudes, and perceptions are different. In the US, we value democracy, freedom, working hard, and a uniquely American form of extroversion. In Japan, it’s a much more collectivist society, with everybody focusing on pitching in and doing their part, often leaving individualistic desires unexpressed. Neither of these ways of life are inherently good or bad. They’re just different, and marketers – crafters of messages – have to know about these ways of life so the messages can be well-received.

It’s not just about nationality, though. These market forces run deep into subcultures. Subcultures can be as large as religions or racial groups, but they can also be really granular, too. There is a subculture of people who are competitive yo-yoers. There is another subculture within that subculture of people who prefer a certain type of bearing in their yo-yos. Understanding how subcultures break down and interact is also very important to your small business.

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Economic Market Forces

At the time that I’m writing this article, the DOW and S&P recently dropped by a lot. The S&P 500, in particular, fell by about 16%. I haven’t seen that since my teens. It wasn’t bad enough to raise unemployment rates, but the headlines sure were bleak. It freaked out a lot of people, including me when I looked at my 401(k) balance! Needless to say, changes to the stock market, unemployment rate, and income distribution can have dramatic impacts on business.

stock market chart

During lean times, customers may not be as eager to spend money on luxury products or services. The opposite is true during boom times. Not everything works on a grand global scale, though. Changes in local taxes or tariffs can change what you need to charge. You might be forced to market a more expensive product, or alternatively, fight off competitors who created a cheaper product!

Also worth remembering is that economic factors can affect entire generations. For example, the Millenial generation is the first one in a long time to be poorer than their parents. While you can argue different reasons for that, many attribute that to the Great Recession. When you see economic factors changing people’s basic values and attitudes, it ceases to be simply an economic factor. It ascends to being a social factor, and when the generation begins to hold elected office, a political factor.

Technological Market Forces

Augmented reality, 3D printing, smart homes, data mining, the blockchain, solar panels, artificial intelligence, and wireless power. These are just a few of the cutting-edge technologies that are either in the works or being researched at the time I am writing this article. The pace at which technology changes is very fast. Though cliche, it bears repeating because we have been experiencing a non-stop change in technology since the Industrial Revolution.

Mars robot

Technology giveth and technology taketh away. Many products and services that exist now would not have existed a few years ago. Marketers often have the challenge of teaching people how to use new products or services. They have to reach out to early adopters.

On the flip side, you have old technologies that are fighting obsolescence. For example, I bet the Uber CEO stays up at night wondering what he’s going to do when Elon Musk – or whoever – finally perfects the self-driving car. Will the company buy a self-driving fleet? Or will they have to exit the market or be acquired? The way technology develops often determines how markets move.

Technology isn’t all about computers and stuff that sounds like it came out of Star Trek. It’s also a way of thinking. Process improvements are also technology. Traditional cab drivers still exist, but Uber made the user experience better and pushed a lot of cab companies out of existence. Toyota wrecked the American automotive market share by merit of just-in-time manufacturing and savvy automation.

Political and Legal Market Forces

Who doesn’t love politics? Every law – federal, state, or local – was developed by a political body of some sort. The same is true for regulations. Some examples include discrimination laws, consumer laws, antitrust laws, employment laws, and health and safety laws.

American I Voted Stickers

Like it or not, you have to follow laws and regulations. Many of you are familiar with the labor laws you need to keep up with to make sure you’re paying people in the right way. You’re probably also familiar with basic tax and accounting laws. Naturally, you know that as a marketer you can’t outright lie or fabricate reviews. This is all very straightforward. Antitrust laws, on the other hand, probably seem awfully abstract. I’d like for you to consider two points.

The Odd Intersections of Marketing and Law

First, you probably have at least one big competitor. It could even be Amazon. The point is, somebody in your industry is probably big enough to get in serious legal trouble – far beyond what you can imagine a mom-and-pop shop getting into. They may have political clout and may be held accountable for things much bigger than you. Remember that when you’re reading into your bigger competitors’ market moves. The context is crucial!

Second, you’d be surprised how many regulations apply to your business. That’s why marketers need to research before they put together packaging and other public-facing materials! For example, I’ve made some board games. Turns out, if you put an age under 14+ on the box, you need to have product safety testing done. That costs a lot of money, but you need it to be compliant with EN 71 and ASTM F963 – child safety regulations for the European Union the United States. You also have to put required warnings on the box, and do so in a way that doesn’t look ugly for marketing purposes!

Competitive Market Forces

Last but not least, you can’t control what your competition does. Yet their actions have a large influence on you. The other forces above are very important, but this is probably the force you’ll research the most.

chessboard checkmate

Your competition can affect you in a multitude of ways, to such an extent that it would be impossible to list them all here. I will provide a few examples here below:

Products and Services

The products your competition provides can change your strategy in a few profound ways. If they’re really similar to yours, it might be hard to differentiate yourself from them. Likewise, if their products are really unlike yours, the market as a whole might be moving in a different direction. The quality of the products provided affects you too. If the quality of your competitors’ products is bad, you’ve got a chance to do better. In the opposite scenario, you’ve got big shoes to fill and need to find another way to compete.

Pricing

Pricing is also a big factor. People will compare your prices to others whether you’d like for them to or not. If you’re a small business competing against a larger one, it’s unlikely that you’ll be able to produce similar products for a lower price, so you’ll have to compete on something else. That’s where marketing and user experience become really important. In a crowded field with many competitors, you need to decide whether it’s most useful to price lower, higher, or roughly the same as your competition.

Entry and Exit Barriers & Overall Market Growth

If there are major barriers to entry, you won’t see much new competition. The pace of innovation is likely to be slow. Likewise, if there are major barriers to exit, some competitors will stay in the business longer than they ought to. In business, things often superficially look fine – because of marketing and public relations – right up until the moment they are not. It helps to be able to see past that.

Additionally, overall market growth changes the dynamics of competition too. If the market is growing quickly, there are a lot of new customers who don’t necessarily have a brand loyalty yet. Perhaps existing customers are spending more money! Either one can be a good thing if you play your cards right. On the flip side, sluggish market growth or even a market decline can lead to a long, drawn-out war for market share between companies.

New Entrants, Substitutes, and Complements

New companies have a way of shaking up business, and especially marketing. Keep an eye on not only the products and services of new entrants but the number of new entrants as well. Though a glut of new entrants can be frightening, it’s also a good sign that you’re in a booming market. When there are tons and tons of new entrants, you can stand out among the crowd by making products or services with an excellent product-market fit.

Substitute products can be a real pain if you’re used to doing things a certain way. They can also be an opportunity if you can either start creating the substitutes or conclusively show that your products are definitely better than the substitutes. More cheerily, complementary products can help an industry grow. For example, smartphone manufacturers can also make a little money selling chargers, earphones, and cases.


There are several market forces that will affect your small business. We can’t control everything that happens to us or our businesses, but we can be astute observers and create plans nonetheless. By reviewing these market forces on a regular basis, you can be more prepared to make effective strategic marketing decisions.

What’s the biggest market force acting on your small business? Let me know in the comments below!

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compass

Decision-Making Styles: Read Your Small Business Customers’ Minds

Decision-making styles are different for every customer. Understanding why customers arrive at their decisions is crucial for your small business’s success. To know why someone makes a choice empowers you to create beautiful experiences for them. Crafting the right experiences for the right people, after all, is one of the goals of marketing.

compass, decision-making styles
Looking for a sense of direction?

I touched on many of the factors that determine consumer decision-making styles in prior posts. If you haven’t had a chance to read them, Consumer Behavior 101: People are Weird, Markets are Weirder will introduce you to many of the concepts I’ll be reviewing below. When you complete that, I Choose You: How Consumer Decisions Work in Small Business zeroes in on the elements of the decision-making process.

Today’s goal is simple: talk about different consumer decision-making styles. We’ll talk about the elements that lead a customer to specific decision-making styles. We’ll also talk about what decision-making styles look like in practice and how you can respond to them.

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Before we start, here is an outline of this article’s content:

Influences on Purchase Decisions

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

Decision-Making Styles

  1. The Perfectionist
  2. The Image-Conscious
  3. The Hedonist
  4. The Frugal
  5. The Novelty Seeker
  6. The Impulse Shopper
  7. The Confused
  8. The Loyal

Influences on Purchase Decisions

Emotion and Motivation

In Consumer Behavior 101, I first shared Maslow’s Hierarchy of Needs. Shown below, it’s a well-known framework in psychology, showing how people perceive their needs. The bottom needs are the basest of human needs and need to be met before you can start to worry about financial security, long-term health, friends and family, and especially self-actualization. Because you, like most people reading this post, probably live in a wealthy industrialized nation, most needs you will be meeting will be in the top three parts of this pyramid.

Business boils down to fulfilling needs. If you don’t fulfill someone’s need, you go out of business. Marketing helps us communicate with people that we understand their needs and have what they require to fulfill their needs.

When you have a need, it alters your emotional state and you are motivated either positively or negatively. If motivated positively, you want to go from a state of boredom to stimulation or something similar. If motivated negatively, you want to make an annoyance, fear, disappointment, or conflict go away. Keep in mind your customers’ emotional states – they change the entire shopping process!

Beliefs and Prior Experiences

If your customer has preconceived notions about what your product, service, brand, or industry, that will change their decision-making style. Sometimes, your customer has a good reason to believe what they do – prior experience. Sometimes, they act from prejudice or hearsay – an unfounded belief. Still other times, they have notions formed by research they found through friends or on the internet, which may or may not be accurate.

tin can telephone
“You’ll never believe what I heard from my friends!”

This is all to say that what your customers see and hear changes their decision-making style. What’s more, what they pay attention to and what they remember also changes their decision-making style. Often, we tend to find evidence to fit a pre-existing belief, instead of the other way around. This is called confirmation bias, and it is the mother of all cognitive biases.

The takeaway for you is that customers are not a blank slate. Customers come with all kinds of ideas – right and wrong – loaded into their heads.

Culture and Subculture

There’s no pressure quite like peer pressure. The country you live in, as well as the people you associate with, will greatly impact your decisions whether or not you intend for that to happen. This is also the case with your customers. Your decision-making styles that your customers use will at least partly be determined by where they live and who they’re friends with.

If you live in Manhattan and you work in the high finance industry, you will be expected to have a nice car. It’s just a part of the subculture. A Ferrari has no additional value over a Honda in a purely utilitarian sense, but the need to keep up with your peers would be pretty immense. (No judgment here – social ostracism is very bad for you).

Ferrari

Likewise, if you take that very same car and give it to someone in a low-income rural area, it would create an uncomfortable amount of attention. Yes, the Ferrari would be very fun for a short time, but ostentatious displays of wealth in places where that is not the custom will make people treat you strangely. In some subcultures, like the high finance industry, you buy in a brand-conscious way. In other subcultures, you buy strictly for utility – point A to point B.

As a small business owner, realize that people from different backgrounds see the world in different ways. If you want to see this in stark relief, go to an international airport and talk to some strangers. You’ll see lots of different attitudes toward unexpected conversation, a good deal of which has to do with culture.

Socioeconomic Class

The previous example touches on this, but it bears further explanation. Your socioeconomic class changes your needs. People living in poverty need to get by. People living in the middle class need to live within their means while having a certain level of comfort. Lastly, people living in the upper-class need to protect their investments, live comfortably, and – possibly – meet the needs of their social stratum.

You may say “impressing other people isn’t a need.” It isn’t, at least not strictly speaking. In marketing, however, impressing others or fitting in is considered a need. It’s just a different kind of need, higher up on Maslow’s Hierarchy.

holding money
“I need someone to hold all my money.”

When you are selling as a small business owner, understand that people have different needs based on their incomes. People with lower incomes feel constantly squeezed and have to consider utility more than others. People with higher incomes feel different pressures, which may seem odd if you’re not a part of their social class, but it’s very real to them!

Reference Groups

A reference group is a group of people that customers look to when making a decision about a purchase. Some reference groups are aspirational – experts or thought leaders who the customer wants to be more like. On the other hand, some reference groups are to be avoided. “I don’t want to be like them!”

Like it or not, people compare themselves to others. This changes customers’ decision-making styles and you need to be aware of it when selling things for your small business.

Situations

Last but not least, you have no idea what kind of day your customer is having. If their basement flooded, they probably don’t want to buy tickets to the water park. If they had a bad day at work, your subpar chocolates might be just the pick-me-up they need. Bear this in mind when you’re a small business owner. There are some situations you cannot control.

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Decision-Making Styles

Decision-making styles are different approaches that customers can take toward making choices. You can make choices based on a variety of different factors, such as price, brand, quality, your emotional state, and simple habits.

In the following sections, I’ll be drawing from A Methodology for Profiling Consumers’ Decision-Making Styles by George B. Sprotles and Elizabeth L. Kendall. You know, light reading! Their research has been around since the mid-1980s and it remains relevant.

The Perfectionist

The Perfectionist is very careful and deliberate in their purchasing decision. Of all the decision-making styles, this is the one that most values quality. We like to imagine the Perfectionist as the most common kind of shopper, though they probably aren’t. They systematically search for new information and make very deliberate choices. They act almost purely with System 2 thinking.

After going to ten different dealerships, sitting in dozens of cars, and test-driving at least six, the Perfectionist is ready to make a purchase. She buys a 2015 Honda Accord with 40,000 miles on it for $16,900. Every detail is perfect, from the fuel economy to the interior space. Furthermore, the Perfectionist chose to buy this gently-used four-year-old car because it knocked about 25% off the MSRP but far less than that in terms of the actual life of the vehicle. Well done, Perfectionist!

2015 Honda Accord
By EurovisionNim – CC BY-SA 4.0 (Source)

If you want to appeal to the Perfectionist, that’s going to be tough. Everything about your product, service, and the experience around it needs to scream “quality.” Otherwise, this customer will turn and leave.

The Image-Conscious

The Image-Conscious shopper is buying to impress people, whether they admit it or not. He can be a bit of a price snob, and he believes “no matter what they say, the higher priced stuff is usually better.” He wants to turn heads and he has a lot of friends he wants to impress.

He doesn’t care about the fuel economy or the comfort. It’s purely about brand name and the image that it evokes. He goes to the dealership and buys a brand new Jaguar XJ. Perhaps he should have bought two, so he could always drive his Jaguar while the other is in the shop being repaired.

Jaguar XJ Mark 4
By Steinfeld-feld – CC BY-SA 4.0 (Source)

You don’t necessarily have to have a big brand to capture the interest of the Image-Conscious. If you can create an experience that feels luxurious, many Image-Conscious people will purchase from your small business. This is because helping small businesses is trendy. All you have to do is look the part!

The Hedonist

The Hedonist is in it for the thrill. She doesn’t care about the cost, or honestly, what anyone thinks! She wants a fun, fast, hot car. You see, she doesn’t think, she simply does. Anybody who doesn’t like it can back off. Would that the naysayers only had the recreation-conscious joie de vivre that she possesses!

She bought a Ford Mustang GT. Yes, some people will balk and say this is a classic move for someone who just came into money. Many of her wealthy friends will snort because she bought a large Hot Wheels car. She doesn’t care. She’s having fun.

If you want to appeal to the Hedonist, you need to make your purchasing process easy. The Hedonist wants joy out of life and too much work would spoil that. Above all, your product or service will need to be an absolute blast to experience.

The Frugal

The Frugal is a customer whose decision-making style is based on price and value. He is willing to search exhaustively for lower prices. He is motivated by the possibility of a great deal. The Frugal may be acting this way because he has a poor financial situation. It could also be that he feels like he should spend his money wisely. For this example, we won’t make a distinction, but you may need to if you want to understand your customers.

After exhaustively searching Craigslist for used cars, the Frugal finds a 1990 Toyota Camry with only 80,000 miles on it. That’s only a third of its life expectancy! Granted, one of the brake rotors needs replacing and the sunroof is leaking, but that’s fixable with a junkyard part and some silicone. The chipped taillight can be fixed with $2 taillight tape. The fading paint and crumpled back bumper aren’t a big deal – it’s only cosmetic. That smell can be covered up with Febreeze. Overall, it’s a great find for $550!

The Frugal speak only one language: dollar signs. It’s usually pretty dangerous for small businesses to compete on price since larger competitors can win by economy of scale.  If you wish to win over the Frugal as a small business owner, make sure you communicate that your product or service is a great value. More sophisticated Frugal shoppers understand that sometimes you save the most money by buying something nicer in the first place.

The Novelty Seeker

The Novelty Seeker is always up for something new. She gets a great thrill out of trying something she’s never experienced before. This disposition of hers extends so far that she is excited to try a vehicle from the automotive startup company, Rivian. She buys the Rivian R1T, a pickup truck that runs on an electric engine and can go very, very fast. It’s expensive and it’s not well-known, but it may very well be the future!

Rivian R1T
By Richard Truesdell – CC BY-SA 4.0 (Source)

If you want to reach out to novelty seekers as a small business owner, you are in a good place. For one, your small business may not be well known, which is appealing to the Novelty Seeker. She is willing to take a risk on you and finds the thrill of discovery exciting. Novelty Seekers are especially important if you’re making a really unusual product or providing a really unusual service. To a lesser extent, this remains true even if you’re just carving out a weird niche in an existing category.

The Impulse Shopper

The Impulse Shopper just drove home with a brand new Cadillac today. I don’t what he was thinking, or if he was at all. Impulsive Shoppers don’t engage with products or services in a thoughtful or even emotional level. They just make a pure snap judgment and stick to it.

Brand new Cadillac
By M 93 – CC BY-SA 3.0 (Source)

To engage the Impulse Shopper, all you really need are two things. You need an amicable price that doesn’t make the Impulse Shopper think twice. The other thing you need is a clear call-to-action. It could be a big red button on your website next to a gorgeous picture. It could be a sale. There are a lot of options.

The Confused

Car shopping is really hard. There is an enormous amount of metrics to consider and the choices are overabundant. With so much to choose from, the Confused is having a hard time making a decision. Unable to fully process everything that goes into purchasing a car, the Confused falls back on a safe assumption – buy a gently used Honda Civic. You can’t go wrong with a Honda Civic, she says!

If your industry confuses people, you could be a breath of fresh air! This is such a huge opportunity. One of the biggest value-adds I have ever found is simply explaining something complicated in a thorough but approachable way. This is my intention with Marketing is the Product, in fact.

One more thing: if your business itself causes people to swap decision-making styles to the Confused from any other category, then you have an issue. You will need to correct the user experience if you wish to gain more sales. Basically, if you’re doing this, you’re leaving money on the table.

The Loyal

In a way, the Loyal is a cousin to the Confused. They go with simple decisions simply because it’s exhausting to consider all the factors. The Loyal says to himself that “it’s worked before, so it should work again.”

The Loyal has been driving a Ford Focus for as long as he could remember. Since college, in fact, and now he’s married with kids. He knows it’s a pretty good car and he realizes there are probably better choices out there. However, he finds comfort in going with something he already recognizes. As a result, he buys the same car again, just a few years newer.

Ford Focus
By M 93 – CC BY-SA 3.0 (Source)

For the small business owner, Loyal customers are among the best! You want as many people as possible using a Loyal decision-making style when purchasing your products or services. If you wish to attain customers like this, though, you’re going to have to work hard to win them over. After that, you’ll have to work hard to retain them. Your relationships will count for a lot!


There are several decision-making styles which your small business customers can use. In order to win people over, you need to make sure you understand which decision-making styles your customers are using and why. Through better understanding your customers, you can hope to generate new leads and retain loyal customers.

What was the last purchase you made? Which decision-making styles applied to you during that process? Let me know in the comments below!

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I Choose You: How Consumer Decisions Work in Small Business

Consumer decisions can seem mysterious. Last week, I wrote at length about consumer behavior. How do we understand why consumers do what they do? Nowhere is consumer behavior more important than the decision-making process itself. After all, knowing how people make decisions will make your small business thrive!

brick with arrow sign

The very first post on this blog was Small Business Marketing 101: What is Marketing and Why Does it Matter? In it, I describe the AIDA model, which stands for Attention, Interest, Desire, and Action. It describes the states of mind that your potential customers go through when pondering various consumer decisions. For marketers, we talk about lead generation, opt-in incentives, and other neat buzzwords. We don’t often enough talk about the experience as the customers feel it.

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That’s why today, we’ll be talking about the consumer decision process at length, following this outline:

The Context Around Consumer Decisions

  1. Consumer Decision Factors: the Ones Customers Realize & the Ones They Don’t
  2. Are People Really Rational?
  3. Roles in the Decision-Making Process
  4. What Does This Mean for Product-Market Fit?

The Consumer Decision Process

  1. The First Step is Realizing You Have a Problem
  2. The Hunt Begins: Seeking Information
  3. Evaluating Alternatives
  4. The Moment You’ve Been Waiting For: The Consumer Decision
  5. Pride and Regret: The Post-Purchase Evaluation

Customer Affect, or How Our Emotions Make Consumer Decisions for Us

  1. The Information Search Experience
  2. Choice: Powerlessness vs. Confusion
  3. Customer Experience
  4. Customer Satisfaction
  5. Advertising

The Context Around Consumer Decisions

Consumer Decision Factors: the Ones Customers Realize & the Ones They Don’t

When talking about consumer behavior last week, I borrowed from a book I really liked –  Thinking Fast and Slow. The book, by Nobel-prize winner, Daniel Kahneman, explains how we use two modes of thought. He describes them as System 1 and System 2. To greatly simplify, System 1 is fast, automatic, and instinctual. Likewise, System 2 is slow, deliberate, and rational. You need both to make it in this world. We use both to make decisions.

As a marketer, you need to be able to communicate on two levels. You need to talk to System 2 by making a great product. People want to be proud of their consumer decision. You don’t want them to regret buying your product. Don’t discount System 1, though. Speak to your users by using the right packaging, the right price point, the right website layout, the right writing, and other “unimportant” details.

Are People Really Rational?

No. People are not rational, no matter what economists tell you.

A lot of researchers, academics, and well-read folks like to imagine the world as full of people who make decisions based on reason. The truth is that a lot of people use System 1 to make big decisions about cars, houses, and other major expenses when they ought to use System 2. So it goes.

Hey, we can’t judge, either! You can’t always make the perfectly rational decision all the time. It would take too much time. You’d never get anything done.

Roles in the Decision-Making Process

In this research paper written by John R. Rossiter and Larry Percy in1985, Rossiter and Percy posit that there are five roles that go into consumer decisions. In the decision-making process, you can be one or more of the following:

  1. You could be the initiator, or the person who suggests a brand or product. I could say “have you thought about T-Mobile lately?” That’s neither a positive nor negative statement, but simply one that mentions T-Mobile.
  2. Instead, you may be the influencer, a person who recommends a brand or product.  If your friend said to you, “hey, you should really check out this great blog called Marketing is the Product,” they are the influencer. They are also a great friend.
  3. The decider is the one who chooses to make the purchase. If a teenager says to their dad, “I really want the new Samsung phone – can I buy it?” Then the dad is the decision maker.
  4. The one holding the wallet is the purchaser. If the teenager then goes to the nearest Best Buy and buys the phone, he or she is the purchaser.
  5. Lastly, the user is the one ultimately using the product. Your company decides which computers to buy, the purchaser places the order, and you are the user.
man with fake mustache and beard
Okay “now when I put on this ‘stache and glasses, I’m the decider.”

When you make a decision entirely on your own, you may be all five roles simultaneously. You may look online for reviews for a gift, making you the decider-purchaser but not the user, initiator, or influencer.

What Does This Mean for Product-Market Fit?

Because people are not truly rational in the consumer decision process and because people play multiple roles, this impacts how product-market fit works too. You may imagine the perfect product for a certain target market as one which has the most utility. After all, the most useful products are sure to ultimately come out on top in the end in the market.

Unfortunately, this is not the case. You need to be able to speak to people the way they wish to be spoken to in order for them to make a consumer decision which favors you and your small business.

The principle of “speak to people the way they wish to be spoken to” is further complicated by the presence of decision-making roles. The decider-purchaser is making a choice based on what a different user will want, based on the recommendation of an influencer, and at the behest of an initiator.

The decider-purchaser is guessing and assuming a lot! if you want to see an example of how this can play out unexpectedly, go to a family Christmas where someone gets a disappointing gift. Think about how that consumer decision, despite disappointing the user, achieved some baseline level of product-market fit in order to be purchased.

The Consumer Decision Process

The First Step is Realizing You Have a Problem

When marketers think about why consumer decisions are made, we think in terms of problems and solutions. Consumers identify problems and we help them fix them with solutions from the marketplace. Until a consumer becomes aware of a problem, we can’t sell them anything. It’s like trying to sell ice in the Arctic. There’s no need.

polar bear
“Excuse me, sir, can I interest you in some ice?”

Sometimes consumers solve problems using careful deliberation. This involves doing research and using all their System 2 faculties to make the best decision. A lot of times, this is what people do for expensive purchases. Other times, consumers make snap judgments or buy something they already have – a purely System 1 decision.

Problem Recognition

How do consumers become aware of their problems? Wikipedia does a really good job of spelling out the common possibilities, which I’ll paraphrase here:

  1. A consumer runs out-of-stock and needs to buy more of what they already have. I did that when I ran out of milk today.
  2. A consumer makes a regular purchase and doesn’t put a lot of thought into it. For a period of 9 months or so, I did this every morning in the cafeteria of a place I worked. I needed my 20 oz. fresh coffee!
  3. Dissatisfaction sets in and a consumer decides they need something new. After years of driving a beater Ford Escort, a friend of mine bought a new car. His ’96 Ford Escort still worked…but it was a ’96 Ford Escort.
  4. new need or want surfaces and a consumer’s lifestyle changes. Many college students experience this for the first time when it’s time to buy textbooks!
  5. You might buy a related product. A couple of years ago I installed a new car radio. I later bought an iPhone cable so I could charge my phone while driving, where that wouldn’t have previously been possible.
  6. Then there’s market-induced problem recognition. Someone is exposed to marketing materials, and they become convinced they have a problem that needs to be solved. When you’re starting your business and initiating contact with people, you’ll be causing this to happen.
  7. Lastly, innovative new products or categories can cause people to realize they have an unmet need or a better way of filling a need.

For a small business to survive, you need to be addressing the specific problems of a specific market. This means achieving the fabled product-market fit I keep talking about. You also need to speak to people the way they wish to be spoken to. As you can see from problem recognition, you need to use your communication to make them realize they have a problem you can fix.

A Caution on Inventing Problems

To be extra clear, when I say “make them realize they have a problem,” you can also use that to mean “make them realize something can be better.” Sleazy marketers invent problems where none exist. Great marketers listen attentively and find ways to make life better for their customer before the customer even knows how to articulate their needs.

The Hunt Begins: Seeking Information
man looking through binoculars for information on his consumer decisions
“Look, a billboard!”

When you’re looking to make a major purchase, you often start by doing some research. This is called the information search. The information found during the search makes a big difference in the ultimate consumer decision.

Often, before even searching for more data, a consumer will think about brands or products that they already know about. The brands and products remembered without any help are called the evoked set. It’s usually not more than five. Consumers who seek to make serious decisions supplement their evoked set by doing research online or by asking other people.

Information used to be harder to get a hold of than it is now. Thank you, Internet! What this means for you as a marketer is that the evoked set usually isn’t as important as the consideration set, or the number of brands consumers are interested in after research. Yet to get into that consideration set, you still need to be very active in making sure you’re visible online and – if applicable to your business or industry – offline.

If you want to get a sense of how brands and products are added to the evoked set, look at the diagram below. Every dot represents a way you – or someone you work(ed) with – can reach out to the customer. This is what moves brands from the unknown to the consideration set, and – if your product is really great – the evoked set for future purchases.

Consumer decision journey
By Nick Nijhuis. CC BY-SA 4.0. Source.
Evaluating Alternatives

After people gather information and before they make their ultimate consumer decision, people evaluate different alternatives. Mentally, your customers are doing various cost-benefit analyses, even if they wouldn’t exactly say those words.

There are two kinds of benefits your product, service, and/or brand can provide. There are functional benefits and psycho-social benefits. To understand these, recall System 1 and System 2 thinking. System 1 is intuitive and snappy, whereas System 2 is careful and calculating. System 2 is concerned with functional benefits and System 1 is concerned with psycho-social benefits.

Functional benefits, for lack of a better word, are “real” benefits. My Toyota Camry can get me from point A to point B without burning a lot of gas. The trunk has a lot of space, so I can put groceries in it. The color is white so it won’t get so hot when I park it directly in the sunlight.

If I bought a Lexus ES300, though, I’d receive essentially the same car. Yes, it’s true that the Lexus ES300 is a great and reliable car with lots of good features. However, it doesn’t necessarily have a functional value of nearly $16,000 greater than the humbler Toyota Camry. I’d feel cool and people would treat me differently if I drove the Lexus, though, so there is a psycho-social benefit. For many people, that is well worth $16,000 and often more. Brand image is very powerful like that!

lexus
Hit me up, Lexus of Chattanooga.
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The Moment You’ve Been Waiting For: The Consumer Decision

After searching for information and evaluating the benefits and costs of different brands, one is finally ready to make their consumer decision. At this point, you’ve got two really important concepts that you need to understand: purchase intent and purchase.

Think back to the AIDA (Attention, Interest, Desire, Action) model for a moment. Purchase intent is desire. The consumer says “I want to buy this.” Maybe they don’t have the money, maybe they’re holding back because they are a financial ascetic like Mr. Money Mustache. Or maybe, just maybe, they truly are ready to buy, your product/service would be tremendously helpful to their day-to-day life, and they just need your help.

Creating desire is hard, so closing the sale at this point is a downhill run. That doesn’t mean you can slack off, though. You need to incentivize them to purchase somehow. That can involve using a call-to-action – a strong message intended to get people to do something you want them to do.* Those asinine department store sales where everything is 40% off from the moment it comes off the truck? That is also incentivization – that’s called “scarcity attraction.”

Pride and Regret: The Post-Purchase Evaluation

Once you make the sale, you’re not off the hook! For one, you probably have a returns process and you probably provide customer service. Even if you didn’t, though, you want people to make return purchases. That’s why the post-purchase evaluation needs to work in your favor.

Thinking back to the department store example, the “40% off the moment it’s off the truck” is also an insurance policy against buyer’s remorse. You know how the cashier takes your receipt and says you saved $101.95 on two T-shirts and a pack of socks? It’s a subtle way of telling you that you’re smart and your decisions were well made. (Though I use it as an example, I don’t endorse “40% off the moment it’s off the truck” followed by “you saved this much.” I think it’s deceptive.)

limited time offer
“Engage with this scarcity attraction to reduce your post-purchase dissonance!”

In most situations, though, nobody immediately addresses your post-purchase feelings. You may experience post-decision dissonance next time you buy something. That’s an MBA phrase that refers to when you feel anxious and doubt yourself after buying something. Consumers in this situation may ask their friends if it was a good decision. Of course, you as the marketer, may also be able to help through various post-purchase communications.

Customer Affect, or How Our Emotions Make Consumer Decisions for Us

This is likely no surprise to you, but our consumer decisions are often made emotionally. You can’t entirely eliminate System 1 thinking from your decision-making process. Nor, frankly, would you want to. Marketers use the phrase customer affect to describe the way people feel when they’re going through the consumer decision-making process. Let’s talk about the various things that can alter customer affect.

The Information Search Experience

People are better at researching when they’re feeling excited. I am excited when I write these posts, which makes going through Google Scholar and Wikipedia much easier. If I didn’t care, it would be harder. Likewise, after getting off the phone with an unnamed cell phone company, I was so frustrated that I couldn’t compel myself to write because research felt too hard.

On top of that, people in a good mood tend to interpret information in a more Pollyanna way. People in a bad mood tend to think people are out to screw them over. This, combined with the ability to do research in the first place, is really important for you as a small business marketer. You likely rely on new leads, so you need people to be in a good mood when searching for information.

Sadly, as you are not an empath, you cannot change people’s emotions directly. You can, however, make sure that your part in the information search experience is a good one. Don’t make the information search itself hard! Your website needs to be easy to use, and you need to do whatever is in your ability to rank well where it counts. That could mean Google or an industry-specific forum. When talking to people in person, you need to be very clear, honest, and open.

People aren’t rational, but they’re not dumb. People very reasonably get frustrated when an information search is too hard. Frankly, it’s reasonable to interpret it as a warning sign that the information found would not be favorable to your business.

Choice: Powerlessness vs. Confusion

Customer affect changes the way we make choices, too. As you might expect, happier people tend to make more impulse buys than sad people. The opposite can also be true depending on the product. For example, when your willpower is depleted and you’re in a bad mood, you’re more likely to eat sweets.

Woman in winter clothes looking happy around Christmas
“I spent $1,500 on Christmas ornaments because I’m happy!”

There is another important take away here: decision fatigue. Too many choices is really frustrating. When we have to make too many choices or choices between too many alternatives, we get sloppy. Even judges become inconsistent in their sentencing when they get tired. Yikes!

Have you ever gone to the store and seen 20 types of shampoo and had no idea what to buy? That’s because the sheer amount of decision-making you have to do to buy shampoo is overwhelming. It’s too much stimulation! This is such an important issue that high achievers like Barack Obama, Mark Zuckerberg, and Steve Jobs streamlined their wardrobes so their minds would be free for bigger decisions later in the day.

You, as a small business marketer, should take away from this one simple thing. Reduce the number of decisions your customers have to make when shopping with you. If you have a whole bunch of products and services, present recommendations before you give them the full menu. If they really feel like doing all the homework and going beyond your recommendations, then more power to them!

Customer Experience

It’s no surprise to anyone who’s ever worked in a call center, but customers in a bad mood are harder to please. That’s why call center folks are so relentlessly polite no matter how abusive you are to them. Their bosses know that the customer experience changes the bottom line because it turns consumer decision-making against the business!

Customer Satisfaction

It goes one step deeper. If customer affect changes the way that people view the information search, make choices, and perceive their customer experience; that all adds up to one conclusion. People’s moods from the very beginning affect how satisfied they are with the product or service. You’re not fully in control. You just do what you can to make the experience a pleasant one.

Advertising

Naturally, the way that people feel before they see an advertisement can affect how they perceive the advertisement. That ultimately may change their consumer decision. Remember: people make decisions primarily on how they feel, not on facts and figures. If you are a small business marketer, understand that if you can put people in a good mood through advertising, then do it!


Understanding how consumers make decisions is a complex discipline. Our emotions and our context directly affect our decisions before we even make them. When we’re making decisions, we consciously and unconsciously consume information in a wide variety of ways. The more you understand the decision-making process and why people do what they do, the more effective your marketing will be.

Do you have a question about consumer decisions? Ask below in the comments 🙂

*The blue box below this footnote is a call-to-action for a community I run for small business owners and marketers like you. It’s helpful, it doesn’t cost money, and you should check it out!

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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.

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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.

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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 🙂

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