Services vs. Products: A Field Guide for Small Business Owners

Every small business owner asks themselves the same question at some point. “Should I sell services or should I sell products?” The battle of services vs. products has no clear victor. In this article, we will discuss the advantages and disadvantages of both options so that you can make an informed decision.

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What is a product?

A short while ago, we wrote a post called What is a Product that talked about why this is such a complicated, nuanced question. For the purposes of this article, though, we are going to assume the simplest possible definition.

A product is an item offered for sale, either physical or virtual. Successful businesses often sell more than one product and spend a considerable amount of time creating new ones.

What is a service?

Services, on the other hand, do not involve physical goods. When you buy a service, you buy access to someone else’s “resources, skill, ingenuity, and experience.”

The line between product and service is blurry

Regular readers of this blog knew it couldn’t be so simple. Marketing is more than meets the eye, after all.

We discuss this point at length in What is a Product, but it bears repeating here as well. Products and services are closely intertwined these days, and for many businesses, it is hard to meaningfully separate the two.

The best way to illustrate this is to talk about the concept of “levels of product.” To quote What is a Product:

The core product is the feeling that customers are buying. A wealthy man buying a Lexus may actually be buying status. A hungry woman buying a meal is buying freedom from hunger. The core product is different for every person and every product. Marketers spend an enormous amount of time, money, and energy figuring out what people are actually buying.

The tangible product is exactly what you think it is. If you buy a bike, the bike is the product. The tangible product covers features, quality, style, and packaging. It’s everything that can be touched, seen, or heard.

The augmented product includes any after-sale service, delivery, or installation. This is your Fitbit’s software updates or your video game’s patches. When Home Depot installs your brand new washer and dryer, that’s a good example, too.

Lastly, you have the promised product, which includes potential trade-in value, dependability, and status. Lumen Learning says it best in this quote:

There is no definite promise that a Mercedes-Benz holds its value better than a BMW. There will always be exceptions. How many parents have installed a swimming pool based on the implied promise that their two teenagers will stay home more or that they will entertain friends more often?

What is a Product?

The point we’re getting at here is that while reading this post, you must remember that reality is messy. Our pros and cons can point you in the right direction, but your understanding of your own business model must always be more nuanced than any cookie-cutter, textbook material you find online.

Pros of Selling Products

Many entrepreneurs feel the lure of creating products. After all, it fits in beautifully with our society’s stereotype of an entrepreneur in the first place. You have a fantastic idea, you turn it into a physical product, and knock on doors until you make a million bucks!

It’s a bit of a fantasy, but there is a kernel of truth at the core. Products give you complete creative control. You can truly express yourself when you create a product. You don’t have to follow any client’s vision. Instead, you follow your own vision on how best to meet the customers’ needs.

Products scale easier than services do. If you are providing nothing but services, you will eventually run out of time to trade for money. This is not the case with products.

Products make money while you sleep, too. They make money while you’re on vacation, while you’re sick, and while you’re having friends over for dinner. The revenues are much steadier.

If you get really sick of selling products, you can always discontinue them. With services, particularly in specialized professions, it can take weeks, months, or even years to disentangle your interests from your clients.

Cons of Selling Products

It’s not all sunshine and roses with product-based business models. There are some serious downsides that absolutely must be considered.

First and foremost, you need upfront capital. Sometimes you even need a lot of this. Clearing the economic threshhold needed to launch a product-based business can be formidable. You could be looking at anything from hundreds to millions of dollars to get started.

Couple this with the fact that product-based business models are risky. It’s hard to estimate demand in advance. Once you get started, it’s hard to change course if something goes wrong. You can’t un– manufacture goods if they fall out of style.

On top of all this, you have to provide at least some level of customer service, too. That means that even a relatively passive business model, a product-driven one, cannot be totally hands-off. For many, this takes away from the promise of a product-based business in the first place!

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Pros of Selling Services

If you want to dip your toe into the waters of starting a business, creating a product might not be the right way to do so. In fact, there are a lot of advantages to selling services that should not be forgotten.

First and foremost, you don’t need much startup capital to sell services. All you really need is know-how and a few critical supplies. That also means the barriers to entry are mercifully low.

Products require a longer time to develop, and even the most run-of-the-mill product requires some amount of explanation. On the other hand, if you sell a service, you can enter right into an existing market without much fanfare.

There are also psychological benefits to getting into the service sector as well. In order to succeed, you will likely need multiple clients. This will keep your responsibilities varied and fresh, where they may grow stale and routine in a product-based business.

Cons of Selling Services

As good as the upsides may look, selling services is no cakewalk. Some of the downsides are real doozies and there is no way around them.

When you sell services, you are selling your time. There is no way around this. By its very nature, the service sector is labor intensive and your bills are often based on your hours and not your output. For this reason, it’s also much harder to scale a service-based model.

On top of that, there are other problems. It’s tough to constantly be working for someone else. You will literally depend on your clients, and when one of them drops, your cash flow can rapidly decline. You may find yourself choosing between stifling your creativity or losing money – and that’s a tough choice for many entrepreneurs to make again and again.

Which one is right for your business?

If you must choose between products or services, do so with an understanding that the particulars of your situation will determine the best path for you. If you’re just getting started in business and don’t have a lot of upfront capital, it’s likely easier to start by selling services. However, if you are more experienced and have some capital to spare, selling products will likely put you in a position to scale your business far beyond what a service-driven business could achieve.

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The Product Lifecycle: Why It Matters to Your Small Business

Pet Rocks. Tamagotchis. Fidget spinners. Some products become very successful very quickly, only to fade in prominence after a short period of time. Fads are remarkable because of how quickly this happens, but the simple fact is that all products have a product lifecycle. Understanding this simple truth and all the complicated things it implies is vital for small businesses.

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What is a Product Lifecycle Anyway?

Last week, we talked about how to launch your product. This week, we’re going to follow that up by talking about what happens after your product is launched.

Every product has a lifecycle, just like people do. There’s a whole discipline in business dedicated to this called product lifecycle management. Understanding this is critical to your business’s long term success.

First, let’s go over the stages in a product’s typical life cycle:

  1. Development and introduction
  2. Growth
  3. Maturity
  4. Decline

Each of these stages must be handled in a different way in order to succeed in business. We are going to cover each one in-depth in the sections that follow.

Stage 1: Product Development & Introduction

If there is any stage of the product lifecycle that gets too much attention, it’s this one. Just like what it sounds like, product development and introduction covers the creation of a product and the period of time after its launch.

During this stage, products are first introduced to the market and attention has to be earned. This can be done through advertising and promotion. Businesses must focus on drawing attention and interest in the hopes of getting the first few sales.

During this stage, a few basic principles will apply:

  1. Marketing costs tend to be high because you have not yet built a loyal audience.
  2. It takes time to build sales, so early revenues will probably be low.
  3. Depending on the market, there may or may not be a lot of competition.
  4. You have to create demand or actively seek to fill existing demand.
  5. Finding customers and generating leads is critical.
  6. You have to be very selective about distribution.

If you want to take advantage of the product development and introduction stage, bear in mind two basic principles. First, create a product that is tailor-made for a specific audience’s needs. That is, you want a good product-market fit. Second, promote the product as much as humanly possible. Once you have loyal customers, it’s a lot easier to stay in business, so finding that first handful of customers is mission-critical.

Stage 2: Product Growth

Once you scrap and fight for long enough in the product development and introduction stage, then comes the fun part: product growth. During this stage, people know you exist. You may see an influx of customers who are newly aware of your product and ready to give it a try.

This stage is marked by the following characteristics:

  1. The product is established and perhaps being gradually improved.
  2. Sales revenue increases, as does profitability.
  3. Customers are aware you exist.
  4. You may start seeing more competition.
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Once you reach this stage, your goal is to gain customers and increase revenue. Instead of focusing on drawing attention and stoking interest, you want to focus on getting leads to convert. That is, you want people who know you exist to start taking action and buy your stuff!

Stage 3: Product Maturity

Once your product matures, you won’t see the aggressive sales growth that you used to. After all, even the most well-crafted product cannot grow forever. This is a simple fact of life. Characteristics of this stage include:

  1. Competitors start dropping out of the market.
  2. Prices might start dropping.
  3. Marketing costs less.
  4. Branding becomes much more important as a differentiator.

The goal once your product reaches the maturity stage is to defend your revenue. You want to keep customers coming back for more. You have to make sure that your brand provides a good experience. Maintaining customers becomes more important than generating new leads. At this point, you may also want to look into launching other products or services to shore up your business’s weakness before your product goes into decline.

Stage 4: Product Decline

It’s sad, but every product will get old after a while. It might take a month or it might take 200 years. The point is, once you reach this stage, you will need to find a decent way to phase out your product and move on.

How do you know your product is in decline? Here are a few signs:

  1. The profit margins are becoming very narrow.
  2. Sales figures are dropping.
  3. Prices keep dropping.
  4. People at large are generally losing interest.

At this point, you have three broad options for moving on:

  1. Rejuvenate the product to try to extend its lifespan.
  2. Narrow down your market and sell to a smaller niche.
  3. Drop the product entirely and liquidate your inventory.

How to Extend the Product Lifecycle

As you might imagine, a business wants to keep its products in the growth and maturity stages for as long as possible. Both the introductory and decline stages are perilous, although for different reasons.

Fortunately, there are loads of different ways that you can extend the product lifecycle.

Advertising

One of the easiest ways to extend a product’s natural lifecycle is to advertise. This can increase audience size and gain potential customers, keeping a product in either the growth or the maturity stage for longer than would otherwise be possible.

However, advertising will receive diminishing returns as a campaign drags on. Even the best advertising campaigns will reach a point of saturation. In our experience, this happens faster than you would expect, too. So you can’t rely solely on advertising to keep a product alive.

Diversify your business

Launching new products is important for businesses in order to succeed in the long run. The greatest insurance your company can have against become a one-hit wonder is to make multiple hits!

That is to say, you may want to expand into new markets. With a little marketing research, you can identify latent customer needs and meet them.

Cut price

If you want to get attention quickly, cutting the price of your goods is one very aggressive way to do so. It’s quick and dirty and sometimes it works. However, the problems with this method are clear: you cut into your profit margins.

Improve the product

There’s a reason Apple comes out with new iPhones every year. They are always making incremental changes so that they do not fall behind the competition. As such, they are perpetually adding value to the product in order to manage the lifecycle.

Give the product a facelift

Sometimes you don’t need a fancy technological change, though. Deodorant, for example, hasn’t changed for a long time. However, Old Spice knew that their aging audience wouldn’t be buying deodorant forever, so they created a bizarre, surreal series of commercials that were famously targeted at millenials in the early 2010s. Their sales figures skyrocketed.

You don’t even have to go to this extreme either. Even simple changes to packaging can go a long way.

Run a special promotion

Sometimes all you need to make a product feel fresh is run a simple promotion. It could be “refer a friend” or “buy one, get one free.” For example, Subway didn’t even the sandwich, but they did invent the five dollar footlong.

Final Thoughts

Understanding that products have a natural lifecycle allows you to make important strategic decisions for your business. It helps you know what kind of products to pursue and how long you can reasonably expect to profit from them.

There are a few simple ways you can extend a product’s lifecycle, and you shouldn’t be shy about using them. But our advice to you is simple. Remember: all things pass, including products. Be prepared for that!

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How to Develop New Products: A Guide for Small Business Owners

Businesses develop new products to grow and thrive. That means developing new products well is one of the most important things a business can do. Fortunately, no matter what business you’re in, the process of creating new products is pretty similar, even if the outcomes are different.

Wikipedia even has a term for this process: new product development. “In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market.

In this post, we are going to walk you through the steps of new product development. By the end of this post, you will have a much better idea of how you can develop new products.

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Developing New Products is Surprisingly Similar for Different Kinds of Businesses

Regardless of what business you run, or what product you are looking to create, the process of development looks fairly similar for everyone. Different businesses naturally create different kinds of products, but the overarching themes of product development remain the same.

Knowing which steps in the new product development process apply to you is critical. As similar as the product development process is across different businesses, some steps will naturally not be relevant for every business’s goals. Above all, keep your plan in mind and head into product development with a complete understanding of what you are looking to achieve.

We have broken down new product development into six phases. Almost every business will go through these six phases when developing new products, though specific steps may differ. These six phases are:

  1. Idea generation
  2. Idea evaluation
  3. Research
  4. Development
  5. Testing
  6. Product launch

Phase 1: Idea Generation – Where Do We Begin?

Idea generation is an iterative process that all businesses engage in from time to time. Businesses generate ideas to solve various challenges faced by their customers.

Idea generation includes both coming up with ideas and choosing criteria to select the best idea. As you can imagine, this process is varies quite a bit from business to business. In short, this is where you come up with potential ideas for your product.

Start by brainstorming potential ideas for products. This can be done by identifying the needs and wants within a specific market and evaluating potential opportunities you have.

Make sure when you are brainstorming potential products, you cast your net wide. Come up with several ideas. The more ideas, the better! Not every product you come up with will work out, so by coming up with lots of ideas, you have a greater chance of one of them working out!

Phase 2: Idea Evaluation – Making the Right Products for Your Audience

At this point, you want a list of ideas. You want to evaluate your ideas and determine which ones to research further.

Like we said earlier, not all of your ideas will make it to development. Most of them won’t even make it to the detailed research stage! Knowing which product ideas you are going to research further allows you to plan accordingly.

Think about the marketplace you are currently in and the one you would like to enter. Consider how customers will respond to your product. At this point, the objective is simple: eliminate ideas that are obviously not meeting needs or obviously not feasible.

It is so crucial to have an idea of which products will be received the best by your audience. You don’t want to push a product through the development process if there isn’t a chance that it will gain traction within your market. If your product doesn’t meet a real need, you won’t make much money from it!

Start setting up your business plan for your product. You don’t even have to make a massive business plan. Just taking a few hours to think through the manufacturing, shipping, marketing, and sales processes will go a long way.

Is having a business plan really that necessary though? We think so. One study showed that writing a business plan correlated with increased success in every one of the business goals included. Regardless of what it is that you are trying to develop, having a plan will help make that happen.

Phase 3: Research Before You Develop New Products

Before you start serving a new market, you need to do your research. It is very difficult to market if you do not understand your audience or their needs. You need to know what your prospective customers like and dislike, as well as what they respond to. Where do they get their information? What needs of theirs have gone unmet?

You need to research your competition as well. Your direct competition likely shares a similar audience as you might have. Take a look at what they are doing, and what seems to be working well for them. Understanding what they are doing can oftentimes show you what you need to do.

Don’t skimp on market research. Well-conducted market research has a tremendous return on investment. By thoroughly understanding the market you desire to enter, you can make smarter choices for you and your business.

We get it. Any money you spend, you want to earn back. We’re running a business, too, so we know all about that! Believe us when we say that by understanding your market, you have a better chance of making those investments worthwhile.

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Phase 4: Develop Your New Product

Before you create a prototype, make sure you screen your product idea by your intended audience. This is called concept testing. You want to make sure your audience likes your product before you spend a lot of time or money on it. Screening with a small group of people from your audience will help you get a better feel for how people are receiving your product early on.

Run a business analysis once you nail down all of the details on your product. This is a critical step to manage through new product development. A business analysis is how you monitor all the financial impacts of your new product development.

Lastly, get to prototyping! A prototype is an early sample, model, or release of a product built to test a concept or process. By developing a prototype, you, as well as your audience, investors, and distributors get to see a real, tangible version of what you intend to sell.

Phase 5: Test Your New Product

Now that you have developed a product, it is time to test the functionality and performance. From here, you can zero in on any areas that need to be improved.

Develop a small batch of your product to release to the public to track and monitor the sales data. Going through this step serves as one last trial run before your product moves through to mass production. This is the last chance you get to make any final revisions to your product before launching!

Phase 6: Launch Your New Product

Finally, the day has arrived! When it’s time to launch your new product, you need to make sure several key issues are being adequately handled.

Before you are ready to take your product to the masses, make sure that you have all of your sourcing elements down pat. If you are running an online business, then know all of your shipping and fulfillment information. This means knowing every step of your supply chain throughout the whole process, for both you and your customers.

Figure out where you want to sell your product and how to get it there. Start drumming up attention by promoting your product prior to its launch too.

Bringing it All Together: Practical Steps to Develop New Products

As we said before, the vast majority of businesses will go through the same six phases of product development. The individual steps will be different for each business. With that in mind, we will now list specific steps that you can take to start developing new products. Keep the ones that work, drop the ones that don’t!

5 Steps for Idea Generation

All brilliant products start as ideas. Give yourself and your team time to be creative. Come up with ideas on your own and then seek out ideas from the outside world.

  1. Identify the needs and wants of your target market.
  2. Find a niche to serve.
  3. Brainstorm potential ideas with no restrictions. Allow yourself to be creative and come up with ideas, even if you don’t think they’ll work!
  4. Pick ideas you really like to take further into the idea generation phase.
  5. Use market research techniques to find ideas from other sources. Do this after coming up with your own ideas so you don’t subconsciously copy what you have already seen.
5 Steps for Idea Evaluation

Even the best ideas don’t always make for great products. Here is how you winnow down ideas and decide what to focus on.

  1. Rate all your ideas as A, B, and C. Give an A to ideas that are fantastic, B to ideas that are good, and C to ideas which are okay or bad.
  2. Toss out C ideas entirely.
  3. Determine whether each of your A and B are feasible. Toss out the ones that aren’t.
  4. Do additional market research to evaluate market demand for your A and B ideas. Toss out the ones where you can’t identify market demand.
  5. Start writing your business plan. Even a one-page document will help.
5 Steps for Research

With a handful of standout ideas, it’s time to really ask hard questions. Do people really need what you want to sell? Are you meeting real needs? To answer these questions, you will need to do thorough market research on a small handful of ideas.

  1. Read our article A Crash Course in Market Research for Your Small Business.
  2. Start by using low-cost research methods.
  3. Ask your customers questions.
  4. Research your competitors.
  5. Implement your research.
4 Steps for Development

One you have found the one idea you want to pursue, it’s time to start development. This is different for every different kind of product, but the basics remain the same regardless of the product itself.

  1. Nail down all the specific details of your product.
  2. Run concept tests to see what people think of your idea.
  3. Create a prototype.
  4. Test your prototype with a small control group to see the initial response.
6 Steps for Product Launch

In the future, we are going to write a much more detailed guide on how to launch products, but in the meantime, be sure to follow these six basic steps.

  1. Figure out where you want to sell your product.
  2. Estimate demand.
  3. Start manufacturing the product.
  4. Double check every step of the supply chain to make sure you can deliver goods on-time.
  5. Start promoting your product.
  6. Launch your product to the public!

Final Thoughts

Product development is pretty difficult! However, once you understand how the new product development process works, you have a better foundation from which to work.

Iteration is key! It takes a lot of trial and error to make the perfect products, but it’s not so bad when you have a process in place. All that’s left is to get started. So good luck and we believe in your product!

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Why Do New Products Matter for Small Businesses Anyway?

Ah, the bliss of creating new products. Many small businesses live and die on their ability to make new products and services to delight their customers and meet unmet needs. Yet when we see other more established firms like Spanx and Roku lean on a single product, we can find ourselves asking “why do new products matter” anyway?

This is a big question, and by analyzing it, we can help you to understand fundamental elements of business strategy.

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Complacency Will Destroy Your Business

Most successful companies you can think of have multiple products. Apple has iPhones, Macs, iPads, and more. Amazon sells web services in addition to being a massive online retailer. Nike sells tons of different kind of shoes. You get the idea.

There are a lot of reasons for this, including most notably:

  1. Multi-product companies can sell multiple products to the same people, increasing lifetime customer value.
  2. If one product fails, many other products can keep the company afloat.

But it’s critical to remember one thing here. Complacency kills companies. Focusing on a single product, at least at first, doesn’t.

The same article I list above cites Coca-Cola, Duracell, and Crocs as examples of companies that started out selling one product and later diversified, demonstrating that each company’s tight focus early on made it easier to diversify into other product lines later.

We’re going to talk about why launching new products is good in a moment, but this context is so important. Don’t launch products just to launch a bunch of products. Launch products as a strategic maneuver to grow a business at the right time. Or, as Ron Swanson says on Parks & Rec, “never half-ass two things, whole-ass one thing.”

7 Benefits of Launching New Products

At this point, it’s safe to say that launching products is not always appropriate. Yet it often is, and here are a few reasons why:

1. Your company will get noticed.

One of the hardest things to do online or in general is to draw attention to your business. When people come asking us for help, it’s usually “generate leads” or “help me close leads.” The actual act of launching a product can help you generate leads.

2. People will interact with your company.

When you release a new product (or service), you will naturally need to interact with customers more, or at least in novel ways. This gives you the chance to build trust, have meaningful conversations, and convince them to spread the word. All the while this happens, you’ll gain feedback on how to improve your service as well.

3. You may see an increase in revenue.

This almost goes without saying, but a successful product launch leads to increased revenue.

4. There is strong potential for good PR and increased influence.

With newfound attention comes a chance to make some waves. That increased influence can give all your marketing messages a boost. Not to mention, a new product launch makes for some great public relations opportunities.

5. Your company will identify new opportunities for expansion.

The act of launching a new product will force you to interact with customers and then find latent needs. If you’re an avid reader of this blog, you know that the discovery of new needs is what leads businesses to launch successful products or services in the first place!

6. With attention and successful delivery comes a reputation.

A successful product launch can help a company build a reputation that makes it easier to sell products in the future.

7. You will build new relationships.

Lastly, a benefit of product launches along the same line as previous points, you’ll meet a lot of new people in the process. That means more customers, more money, and potentially more well-connected contacts.

Creating New Products Helps You Create Better Products

GutCheck wrote an article positing that product development is valuable for far more reasons than what we’ve listed above. This point is, in fact, so nuanced that we’re dedicating a section to it.

Creating new products help you create better products. The reasons are myriad, but also easy to understand. The processes that must be followed to create new products forces your company to gain the institutional knowledge it needs to make better products in the future.

Think about it: product development is one of the best ways to perform market research. The act of prototyping, testing, and refining a product requires you to focus on customer experience, implement feedback, and hear their ideas. Throughout the process of product development, you’re creating a big backlog of data that you can return to at a later date.

Practice really does make perfect. Achieving the ideal product-market fit is not something you will get right on the first try. It comes from the journey.

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You’re Forced to Answer Hard Questions About Why Your Business Exists

Product launches are flashy. They draw a lot of attention. Along with that attention, comes scrutiny and negative feedback.

On top of that, product launches are expensive. You might wind up with bills left unpaid if the product doesn’t take off the way you want it to. Woof.

This might sound like a bad thing, but it isn’t. One of the ugly lessons that every small business has to reckon with at some point is “why do we exist?”

Product launches add stakes. You have skin in the game. When you’re trying to sell something new, you have to communicate, explain, and sell. You are forced to come up with a clear value proposition that speaks to the needs of your market. After that, you must understand consumer behavior and decision-making well enough to get people to buy what you’re selling.

You Can Even Learn from a Failed Launch

Many people have the mistaken impression that a product launch needs to be successful to be helpful. This is not always true, and in fact, with small businesses, a failed product or service launch can be one of the best things that could happen.

Sound weird? I’ll explain with an anecdote of mine. In 2018, I launched a Kickstarter for a board game called Highways & Byways. It was a board game about taking long road trips. A lot of people liked it, but the Kickstarter campaign failed pretty hard. If you want more details, I wrote an autopsy report of the campaign here.

Long story short, I had a good game that didn’t appeal to any subset of board gamers. Nobody was passionately interested in the theme and the mechanics didn’t draw attention to themselves either. It didn’t help that the price tag was – I shudder as I write this – $49.

But here’s the beautiful thing: I learned a ton from that campaign. I then went on to launch a campaign that raised over $28,000 on a shoestring budget. In between those two board games, I launched a marketing agency and started helping a diverse array of people succeed – from shipping companies to authors.

All of this happened because of the experience of getting my butt kicked on Kickstarter.

Common Reasons Product Launches Fail

With this in mind, nobody sets out to fail. So let’s take a moment to talk about reasons why product launches tank.

If your marketing research is sloppy, you will end up making a product that no one wants. This is probably the most common reason for products to fail – bad research resulting in a product with poor product-market fit.

Similarly, if your product is confusing, that’s a recipe for failure. To a lesser extent, a bad pricing strategy can also sign your product’s death certificate.

The beautiful thing about a failed product launch is that people will give you bad reviews. Those bad reviews will point you in the right direction, giving you specific and actionable feedback that you can use to diagnose your failure so that you avoid making the same mistakes in the future.

Final Thoughts

Thinking about the strategic reasons for launching new products will help you grow your business. Launching products is not just about generating revenue. It’s also a great way to learn about your customers and their needs, as well as to spread the word about your business. Even failure to launch products successfully can help you in that respect.

If you see a market need and have the resources to meet it, then by all means: go forth and create something new! You’ll be glad you did 🙂

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What is a Product? An Answer to an Essential Question in Small Business

“What is a product?” This question can be found in every business or economics book from elementary school onward. The answer seems obvious, but the truth, as often happens, is a good deal more complex.

Ask yourself the question once more of “what is a product?” This is not a question of petty semantics, but one that prompts us to examine the roots of a word we throw around all the time.

What is a product?
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The Many Answers to “What is a Product?”

First things first, let’s give the straightest possible answer we can to the initial question of “what is a product?” Upon careful analysis of the question, we found seven sometimes agreeing, sometimes conflicting definitions of product.

  1. The simplest definition of product is “an item offered for sale, physical or virtual.” (India Times).
  2. Product is also often used as a synonym for merchandise, which is nearly the same as the above definition, but is worth mentioning because “merchandise” is often used in conjunction with the word “retail.” (Wikipedia).
  3. For manufacturers, product can be used to describe finished goods, which is anything that is ready to be sold to another business. (Wikipedia).
  4. Products can also be used to refer to sub-products which are ready for another step of processing before being sent somewhere else. (Wikipedia).
  5. When providing a service that can be broken down into distinct stages, you can refer to project deliverables as products. (Wikipedia).
  6. “A tangible product is a physical object that can be perceived by touch such as a building, vehicle, or gadget. Most goods are tangible products. For example, a soccer ball is a tangible product.” (Lumen Learning).
  7. “An intangible product is a product that can only be perceived indirectly such as an insurance policy. Intangible data products can further be classified into virtual digital goods (‘VDG’), which are virtually located on a computer OS and accessible to users as conventional file types, such as JPG and MP3 files.” (Lumen Learning).
What is a product and what is a service?
This is how people typically think of product vs. service. This is only partly right.

Products & Services Aren’t As Different As You Think

So far, we’ve learned that products can be tangible or intangible, finished or unfinished, and can even be used to describe specific sets of tasks completed in service-driven industries. That makes things incredibly confusing, and leaves us searching for a new understanding of what exactly a product is in an increasingly digital world.

Take for example video games. In 1997, when you bought a game for the Nintendo 64, the game in the cartridge was sold as-is and would never change. There were no servers to connect to and, indeed, no online capabilities at all.

If you play a modern video game, though, you know that even if you buy a physical copy of the game, it will be patched repeatedly over time. You bought a product, sure, but again you must ask, “what is a product?” Are the patches and bugfixes a service or an extension of the original product itself?

Even When Products Don’t Change, Our Relationships With Them Do

And then you have to consider the following situation. Let’s say you buy a Lexus ES300. The only meaningful difference between that car and a fully loaded Toyota Avalon is the name. The luxury name of “Lexus” gives its user psychological and social benefits.

But why exactly is Lexus considered fancier than Toyota? We’ve discussed this before and have concluded that it’s purely about branding. Branding can change over time as companies tweak their strategies. That means the associations the general public at large makes when they hear the name “Lexus” changes over time. Does that mean the product, whose benefits derive mainly from branding, changes over time because of marketing activities?

To reiterate: products often change over time. Even when the products themselves don’t change, social perceptions often do. People purchase based on how they perceive value. When social perceptions change on a large scale, does the nature of a product itself change?

We think so.

Levels of Product

After such a heady philosophical argument, we want to bring things back down to earth by using what Lumen Learning refers to as the four levels of a product:

  • Core product
  • Tangible product
  • Augmented product
  • Promised product

The core product is the feeling that customers are buying. A wealthy man buying a Lexus may actually be buying status. A hungry woman buying a meal is buying freedom from hunger. The core product is different for every person and every product. Marketers spend an enormous amount of time, money, and energy figuring out what people are actually buying.

The tangible product is exactly what you think it is. If you buy a bike, the bike is the product. The tangible product covers features, quality, style, and packaging. It’s everything that can be touched, seen, or heard.

The augmented product includes any after-sale service, delivery, or installation. This is your Fitbit’s software updates or your video game’s patches. When Home Depot installs your brand new washer and dryer, that’s a good example, too.

Lastly, you have the promised product, which includes potential trade-in value, dependability, and status. Lumen Learning says it best in this quote:

There is no definite promise that a Mercedes-Benz holds its value better than a BMW. There will always be exceptions. How many parents have installed a swimming pool based on the implied promise that their two teenagers will stay home more or that they will entertain friends more often?

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Do airlines sell products?

I found a wonderful example on Mountain Goat Software that goes into detail about how airlines provide products. Seriously! I’ll give you a basic overview here, but I also encourage you to read the original article.

Airlines are typically thought of as a service. They move people from Point A to Point B. Simple as that.

But what about the website where you check a flight’s status? What about the system for scheduling aircraft maintenance? What about the system that allows crew members to set their schedules and request time off? Many of these systems are created in-house, so in this sense, the service industry is augmenting their service with products. One clearly faces customers, another indirectly serves customers, and the last one is purely internal.

They then go on to say that all of these systems can be thought of as products, even the last one that appears purely internal. After all, all of these directly or indirectly affect the quality of the service provided to customers.

I personally think this definition of product runs the risk of being too broad, but the detailed analysis allows us to pick points that we’re not so sure about and ask questions. That’s precisely what business owners should be doing when making products perfect for their customers. Analyze what you’re selling from every conceivable angle so that you can do your absolute best.

Is experience a product?

As if the waters were not muddy enough, I want to introduce yet another definition of product. This one comes from the field of user experience design (or UX, for short). To greatly oversimplify, UX designers think of a product as basically anything that is created. The definition of a product, therefore, arises out of a conscious design process and is tailored to match particular business needs.

Remember the concept of “core product” which we introduced a few paragraphs above? UX design helps teams to create tangible products and experiences that meet people’s underlying needs.

Thinking about product creation from a UX perspective helps you to make a tangible product that meets the basic needs of the customer. It also helps you make sure the augmented product (which you can control directly) and promised product (which you can influence through marketing) also meet your customers’ basic needs.

Why The Definition of Product Matters

It’s tough to get your head around the flexible definition of product, but it is nevertheless important. Companies that understand that marketing is literally the product succeed. Companies that don’t understand this run out of steam and fail.

This concept is not just postmodern schlock either. That’s why the old business cliche of “customers want 1/4-inch holes, not 1/4-inch drills” lives on even today. Benefits and features are not the same thing. Your customers want the benefits of your product, which you provide through features. In our increasingly technologically-driven world, these features are often intangible and never-ending.

Final Thoughts

Ultimately, your success in business will hinge upon providing customers with what they want. Oftentimes, this comes in unexpected forms since customers purchase solutions and not just products. Since we solve customers’ problems through products, the definition of product must necessarily evolve as customers’ problems do.

Don’t just think about products as goods you can touch and feel! Think about the context and the experience, too. Consider the ongoing responsibilities you will need to take on. And above all, consider what your customers actually need!

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15 Ways to Research Your Competitors & Grow Your Small Business

Researching your competitors is one of the most valuable things a small business can do. To succeed in business, you must be able to create products that fit market needs. This is borderline impossible to do without understanding what else your customers might be looking at. That’s why we’re going to teach you how to research your competitors.

With this in mind, we are going to talk about 15 specific ways you can research your competitors and grow your small business.

If you’ve been following along with our blog for the last few weeks, you know we’ve been talking about market research a lot lately.

You get the idea.

In all of these articles, we hinted at the importance of researching your competition. However, we stopped short of telling you how to do it. That changes today.

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Why Research Your Competitors Anyway?

But first, let’s talk about why specifically it is a good idea to research your competition. We can think of five specific reasons, most of which are well-articulated in this article by Inc.

1. Before you can do anything else effectively in small business, you must understand your market, your customers, and their needs. Therefore, researching your competitors is important for two reasons. First, you can see which needs your customers are paying to have met. Second, you can find out where your competition is failing to meet the underlying needs of a certain subset of customers, therefore helping you find your niche.

2. When you understand your competition, it helps you gain a sense of which needs are being met and which needs are being unmet. This helps you estimate potential market growth and changes in demand. In short, you can make an educated guess as to the market’s potential.

3. You need to understand what your competitors are offering and what they’re charing. Enough said.

4. This gives you a chance to figure out what you can do better.

5. One of the best sources of new customers is directly from the competition. They’re already paying for a product or service that you want to sell, so you only really have to convince them to go with you.

1. Identify your competition.

Before you can perform a good competitive analysis, you need to identify your competition. This article suggests that you pick your top 10 competitors, which is a recommendation we endorse. It’s a good place to start and you can always monitor more if you need to.

At a minimum, you need to identify the ten biggest players in your industry. If available, use public profit and revenue figures to figure out company size. If all those figures are hidden, see who pops up highest in the Google search results and also see who has the most likes on Facebook. Neither of these methods is perfect, but it’s a lot better than nothing.

Make sure you also keep a separate list of new entrants to the industry. This is especially relevant if you are just entering the industry. If you are starting a small flower shop, other local upstart flower shops are going to be a much better proxy for your business model than, say, Teleflora.

If you work in a market where different products or services can be used as a substitute for what you provide, don’t forget to monitor them as well.

2. Research your competitors’ strengths and weaknesses.

Take a moment to review our SWOT analysis post. A SWOT analysis is nothing more than a simple abbreviation for Strengths, Weaknesses, Opportunities, and Threats. Take a moment to identify all four of those qualities in each of the competitors who you have chosen to research.

3. Identify key brand differentiators.

We’ve talked about the importance of finding a niche in business. Otherwise, your business will be forgotten because people don’t have anything to remember it by. This is true for your competition, too, so make sure you go out of your way to identify what each brand considers to be their differentiating quality.

Not sure where to start? Open up their website. Look for headlines, slogans, and prominent text. Oftentimes, the competitor will outright say what they believe their differentiating quality is in an attempt to gain customers of their own!

4. Analyze the failures of your competition.

When you see a company changing their marketing strategy after a short amount of time, that’s a good indicator that their previous strategy did not work. Keep an eye out for behavior like this, because it indicates that your competition has failed in some way. You should be careful to avoid repeating their mistakes. If you’re especially wise about how you market your brand, you may even be able to use their mistakes to your advantage.

“This is market research.”

5. Shop from your competitors.

Even though it means putting money in your comeptitors’ pocket, the benefits cannot be denied. You learn a lot about your competition by merit of being a customer. It’s not just us advocating this method, either. We initially found this tip in this article.

6. Read, watch, or listen to their content marketing.

What a company chooses to create for content marketing will tell you a lot. Many companies have a blog, and a lot of them also have podcasts or YouTube channels these days. That means there is a wealth of information about your competition that is readily available. Consume some of it and see what you can learn about them!

7. Review our marketing research methods and use them to research your competitors.

We shared links to our marketing research articles above, but we’ll do again here for your convenience.

Basically any kind of market research you can do to grow your own business, you can do the same to investigate your competition. After all, market research often comes down to asking good questions, so you can tweak the wording to ask about your competition.

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8. Google them and see what comes up.

Google has put an enormous amount of time, money, and thought into curating the most relevant websites for any query you can imagine. Trust their intuition. Google your competitors and see what comes up. Do you see glowing testimonials or bad news? Do you content marketing or a social media presence?

9. Follow them on social media.

Most brands have social media accounts. Follow them. Not only can you see the essence of their brand distilled for channels where customers consume bite-sized bits of information. You can also their advertising campaigns. In many cases, you can also search their mentions and see if they are conducting customer service functions through social media as well.

10. Research their sales tactics.

Two of the biggest problems for brand new businesses is generating leads and getting leads to buy. You can learn a lot about how to find people to sell to and how to close sales by watching your competition.

Using Hubspot’s article as a reference, try to answer the following questions about your competition’s sales tactics:

  • What does their sales process look like?
  • Where are they selling?
  • What are their customers reasons for buying or not buying?
  • Do they regularly discount their products or services?
  • What are their revenues?

11. Watch their ads.

When you stumble across one of your competitors’ advertisements on social media or TV, don’t just ignore it. Pay attention and see what the advertisement says. You may be able to learn from that and do better.

12. Check out their career sites and sites like Glassdoor and Indeed.

Nothing can spell problems for companies quite like disgruntled employees. Even though your goal is to win customers and not employees, thoughtful negative commentary by employees on Glassdoor and Indeed can often serve as the canary in the coal mine for much bigger problems. Ignore these sites at your peril!

13. Read their reviews on Trustpilot, Google Reviews, and Yelp.

At the risk of seeming too obvious, if you want to know what customers think of your competition, read the reviews! Oftentimes, you can figure out unmet needs just by seeing what customers have to say. Many companies have bad customer service, high prices, or take forever to complete their work or ship their products. Knowing this information – which often comes straight from customers – is beneficial.

What’s more, you should also read positive reviews of your competition. Oftentimes, customers love brands for different reasons than what brands think.

14. Figure out their pricing strategies.

Pricing strategies can become very complicated very quickly. However, at a minimum, you need to take the time to figure out how much your competition is charging. Don’t just pay attention to the numbers themselves so that you can position your product for a dollar cheaper. No, pay attention to whether your competition is trying to lead on price or make money by selling a better product at a higher price.

15. Set up Google Alerts to monitor your competition.

Google Alerts is a free way to receive daily or weekly digests containing a list of news headlines for relative keywords. To monitor your competition, simply set up an alert for each competitor you want to monitor. Then you will see what kind of press coverage they are receiving.

This technique could not be simpler. It’s a good way to passively monitor competition once you have identified it.

Final Thoughts

By taking the time to study your competition, you can better understand your customers’ needs and how you can serve them. You can also find a niche by figuring out what your competition is not already doing well. Taking some time to do your homework will help you to create products and services that

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A Crash Course in Setting Up Small Business Social Media

For businesses big and small, customers expect businesses to have a social media presence. In fact, 63% of customers expect customer service through social media. An online presence has gone from being the frontier to being the norm in a little over a decade. As such, small businesses, in order to compete, need to have a social media presence.

Setting up social media, in some ways, is very easy. Meeting the bare minimum requirements of being online and posting every once in a while is not hard. But how can a small business truly take advantage of the benefits social media has to offer? That is what we are going to discuss in this week’s article.

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How Social Media Can Help Your Small Business

In our current time, the statement that “businesses should use social media” has been fully accepted by society at large as truth. Indeed, we largely agree with the statement. Nevertheless, it’s important to ask exactly why social media is beneficial for businesses.

As it turns out, there is no shortage of benefits that businesses can reap through using social media. Social media can increase brand awareness and bring in traffic. It’s good for SEO. It improves conversion rate, customer satisfaction, and brand loyalty. It’s pretty cheap to run too.

Mistaken Beliefs About Social Media for Small Business

Of course, social media is certainly not perfect. It’s no silver bullet for your marketing plan. There are many disadvantages as well, many of which stem from mistaken beliefs.

Many business owners think of social media marketing is free. It’s not. It takes time to create, and that means paying in labor and time. Not to mention, advertisements, which are a very important part of social media marketing, are not free in any sense of the word!

Friends, followers, and likes also don’t matter as much as many think. Sure, 21 likes on an Instagram photo, all things equal, is better than 20 likes on an Instagram photo. But the real goals are engagement and, ultimately, sales. Don’t forget that!

Social media marketing is also not a fad. Elderly people use social media. Small children use social media. People use social media in the US, Europe, Canada, Australia, India, China, and nearly anywhere else you can name.

Pitfalls of Social Media for Small Business

For all the benefits social media has brought us – ease of connection and rapid access to information – it’s also brought a lot of irritating problems into the world, too. It’s very much like Pandora’s Box.

So what pitfalls are small businesses likely to encounter when using social media? We can think of several.

First of all, you have to spend a lot of time and often money to do it correctly. Updating Facebook, Twitter, Instagram, LinkedIn, and so on…this all takes dedicated time. Even if you use time-saving tools like Buffer to plan content in advance. Creating content takes time. Responding to comments and messages takes time.

There’s a learning curve to social media for business, too. Don’t rely on your Gen Z nephew to manage social media for you. Don’t pass off the responsibility on an intern. As we are going to discuss in this article, social media marketing is not necessarily hard, but there are a lot of moving parts and there is a lot of strategy to it.

Then there the many disadvantages of having a very public presence online. Problems are more obvious. Competitors can watch you. Trolls will hassle you. Privacy and security become issues.

Last but not least, some people even say that social media has a low ROI. I don’t know if I personally buy that, because it depends on how you define “return” and “investment.” The fact still stands that many businesses do not pull in revenue from social media and are online merely because it is expected.

Setting up Social Media: Before You Begin

Do not take social media lightly. It’s time-consuming and you have to put in real emotional effort. The majority of brands that I see online make the same mistakes. They have a mediocre, bland presence on Facebook, Twitter, and Instagram. This is a shame since a truly excellent presence, even in the dullest industry, would take just a bit more strategic thinking.

Don’t let this scare you, though. You don’t have to be a social media pro to run your small business social media. You just need to come across as professional. As I said in an old, similar post on another blog of mine, “professionalism isn’t about the size of your team or your number of followers. It’s about clarity of purpose, attention to detail, and consistency.”

Commit to having a clear purpose, consistent branding, and a focus on customers. If you can honor these three commitments, you will eventually master social media.

12 Steps to Setting Up Social Media for Your Small Business

With all of the above in mind, we are now going to go over twelve evergreen steps that you can use to run any social media account. These will help you define your small business social media strategy so that when you’re done reading, all you have to worry about are the small, ever-changing details of different social media channels’ quirks. That is, the difference between a tweet and a pin, the size of images displayed as previews in the Facebook feed, and so on.

1. Figure out your intentions and set realistic expectations.

Stephen Covey said it best in his 1989 self-help book, 7 Habits of Highly Effective People. Begin with the end in mind.

Ask yourself what your real goals are with social media. Do you just want to establish a presence so you can check boxes and not really worry too much about it? That’s fine. Spend two hours a week scheduling content on Buffer to automatically post to Facebook, Twitter, and Instagram. Monitor the comments every once in a while. Boom, done!

If that describes you, don’t sweat how many followers or likes you have. Your goal is just to have a bare minimum online presence. That is often a perfectly acceptable approach to social media.

However, if you want to cast yourself, say, as a “very online” luxury brand, then your strategy will be different. You’ll want to invest in gorgeous photography and videography. You need to be online a lot more and respond to more comments. Additionally, you may want to spend money on advertising so that you can grow your social media channels quickly and extend your brand reach.

In another example, if your goal is revenue, you may not care how visible your brand is or how many followers you have. Rather, you may just care about having a presence that looks respectable while you boost highly effective ads that push people to dedicated landing pages on your website.

All of these examples, which are by no mean exhaustive, are perfectly fine approaches to social media. In each case, a different variable is optimized and expectations are set appropriately. In the first example, raw time-efficiency is most important and follower count and engagement don’t have to be great. The second example prioritizes sheer visibility, but at the cost of time and money. Finally, the third example uses social media as a lead generator at the expense of money and time spent community-building.

2. Know what you have to offer.

Before you start seriously using social media, you need to have a strong sense of what makes your business different from others. It is virtually impossible to engage your audience in a meaningful way without understanding what makes your brand unique.

If you haven’t already done so, take some time defining your niche and creating products or services that are perfect for your audience. This will help you understand what you have to offer. Unless you are meeting a need for your customers, they have no reason to read or watch your content, let alone respond to it or make a purchasing decision because of it.

3. Define your audience.

Once you know what you ultimately want to do and what you have to offer, it only makes sense to think about who you want to reach out to. Odds are, your target audience for social media will be the same as your target audience for your business as a whole. As such, when defining your audience, you to ask questions such as:

  • What are they interested in?
  • What media outlets do they read, watch, or listen to?
  • Which social media networks are they on?
  • How do they make decisions?
  • Are you selling to consumers or to businesses?

The act of asking these questions gives you insight into what your customers care about. This can then be used to create content that they want to interact with and to identify which social media networks they are already using.

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4. Come up with core branding and messaging rules.

On social media, you need to be very cognizant of certain branding best practices such as:

  • Make sure your brand matches what people say about your brand.
  • Ensure that your brand is meaningful to your target audience.
  • Focus on your customers’ needs and how you can solve them.
  • Use your logos and colors as consistently as possible.
  • Define a certain tone of voice for each social media channel and stick to it.
  • Be clear and consistent.
5. Choose your platforms and learn them.

You can’t have a good presence on every single social media channel unless you have a very large organization. Ideally, you need to have at least a Facebook page and then pick 2-3 other social networks that are appropriate for your industry. Pay attention to what works for your industry by researching brands like yours and choose wisely.

6. Each platform has a different “language.” Learn to speak it.

To help you get started, though, let’s talk about 9 really common social media networks and how each one fills a different niche online. Descriptions below are largely borrowed from Tufts Unviersity.

  • Facebook: The de facto water cooler of the internet and one of the most versatile social networking sites. Facebook has one of the most effective advertising systems and also owns Instagram. Users create a personal profile, add other users as friends, and exchange messages, including status updates. Brands create pages and Facebook users can “like” brands’ pages.
  • YouTube: A video watching and hosting website. Very popular with Generation Z and Millennial age groups.
  • Instagram: A free photo and video sharing app that allows users to apply digital filters, frames and special effects to their photos and then share them on a variety of social networking sites. Owned by Facebook.
  • Twitter: A social networking/micro-blogging platform that allows groups and individuals to stay connected through the exchange of short status messages, 280 character limit.
  • Reddit: A website consisting of millions of communities known as subreddits, each of which covers a different topic.
  • Pinterest: A social networking site that lets users organize and share ideas with others in the form of “boards” (collections of content) and “pins” (the content itself).
  • LinkedIn: The default social networking site for professional contacts and job searching.
  • Snapchat: A mobile app that lets users send photos and videos to friends or to their “story.” Snaps disappear after viewing or after 24 hours
  • TikTok: A short-form, video-sharing app that allows users to create and share 15 or 60-second videos on any topic.
7. Build a backlog of content.

Once you have selected a handful of social media networks and have done the basic setup, just start posting. Do this for a couple of weeks and don’t worry about anything else. Don’t worry about finding followers, running ads, or closing sales. Just start posting.

8. Start talking to others.

Once you’ve been posting on your chosen social media sites for a couple of weeks, it’s time to start talking to people. How you do this specifically differs by platform, but you basically need to do two things:

  1. Be seen.
  2. Make someone’s life better.

You can do this by following people with similar interests or by commenting on posts. If you’re feeling especially bold, you might even send a direct message. The point is to start having real conversations with people in some way. Not just “check out my page” but real, meaningful conversations.

9. Schedule and outsource.

Keeping up with social media all the time can be a huge chore. One of the easiest ways you can manage social media while still keeping your sanity is to start scheduling.

I mean that in two senses of the word. Schedule content ahead of time for social media using tools such as Buffer, which automatically posts content that you make ahead of time on your behalf. You should also schedule dedicated times each day to check your social media so that you aren’t constantly monitoring it. Big companies can afford to constantly monitor social media. Small businesses can’t. Left unchecked, social media will drain you.

Next, once you have a feel for what your social media should look like, you may choose to outsource part or all of the responsibility associated with it. You may do this by passing the responsibility to a freelancer or an agency. This can free up lots of time, but do so with caution because it’s expensive and whoever has your social media passwords is the face of your brand. They need to be qualified.

10. Gather data.

Nearly every social media outlet creates detailed analytics for social media business users. Periodically go through the data and see which behaviors are leading to the desired effects and which ones are not. You’d be surprised what you can find out with some digging.

11. Tweak your messaging.

Use the data you gather and change your approach. Do more of what’s working and less of what’s not. Remember: data-driven tweaking isn’t always about optimizing the number of likes or retweets. You want to refer back to your goals and make sure the posts that you make help you achieve those goals.

12. Push people down the sales funnel.

Social media is quite possibly the greatest time sink ever created. You can waste a phenomenal amount of time on it, and many businesses fall into this trap just as individuals do.

You’re on a mission to make money. Don’t forget that. You need to close sales even if you run a purpose-driven organization. Social media may be a very new kind of tool, but it is a marketing tool nonetheless. Forgetting this means leaving money on the table.

If people are watching you, give them a reason to be interested. Once people are interested in you, give them a reason to want your products or services. When they show you that they want their products, give them a reason to buy today.

Final Thoughts

Social media can be extraordinarily useful in small business when handled correctly. At your fingertips, you have a way to connect with seemingly anyone in the world. Reach out to people, have real conversations, and give them a reason to care!

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How to Build a Mailing List for Your Small Business

Email is one of the most effective marketing tools you have at your disposal. Many find this to be surprising at first, but the value of building a mailing list to grow your small business cannot be understated.

In this article, we are going to talk about how you can use email to spread the word of your business, keep customers interested in you, and – when the time is right – convince them to buy.

Please note this post is heavily inspired by How to Build a Mailing List and Send Newsletters as a Board Game Dev. It’s a post I wrote for board game creators in April 2018. Parts of this article are borrowed from that original post. The actual setup of MailChimp itself is almost unchanged.

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Why should I build a mailing list in the first place?

My colleague Pierson wrote a wonderful short article addressing this question just a few short days ago. I’ll summarize the key points here for your convenience, though.

For every $1 spent on email marketing, $44 are made in return. For that reason, email marketing is known for giving you an excellent return on your investment.

Why does this work? Email marketing helps you to keep your customers’ attention and interest. That means customers will be more likely to remember your brand over others, building an air of authority. What’s more, at key moments, you can use email to push people to buy what you’re selling.

What do all these numbers mean?

Before we teach you how to set up a mailing list, we’re going to review a few common metrics that you will see. These metrics will tell you how well your emails are performing and whether you need to correct course.

Here are a few to get us started:

  • Open Rate – the percentage of your mailing list that opens your email.
  • Click Rate – the percentage of your mailing list that clicks on at least one link in your email.
  • Hard Bounce – happens when you send to an invalid email address.
  • Soft Bounce – happens when your email is sent to a valid email address, but they don’t receive the email.
  • Subscribes – the number of people who join your mailing list.
  • Unsubscribes – the number of people who leave your mailing list.

That’s a lot of numbers. Do they all matter?

All of these metrics are important to some degree, but if you had to narrow your focus down to three metrics, I would pick open rate, click rate, and unsubscribes.

As a rule of thumb, you want an open rate of 25% or greater. If you cannot manage that, clean your mailing list to remove people who are not reading your emails or segment it to send more relevant emails. Unopened emails drive costs up and customers nuts.

Next, always include at least one business link for customers to click on. It could be a sale, a blog post, or something else. It doesn’t really matter what – just pick an action you want customers to take and make a link that entices them to take that action. You want click rate to be generally higher than 2%. If it’s lower than that, your customers generally are not interested in what you’re offering.

Lastly, watch your unsubscribe rate and try to keep it to 1% or lower. Too many unsubscribes means that your email content is either really uninteresting or, much worse, you’re gathering emails from people who don’t care about what you’re saying.

How to Set up a Mailing List on MailChimp

There are a lot of wonderful email tools out there. MailChimp is the easiest to learn, though, so that’s what I will teach you to use today. Go to their website and click Sign Up Free. Provide an email, username, and password.

Once you’re logged in, create a list. Click Audiences and then click the Create Audience button. Enter the following:

  • Audience Name – I use Pangea Marketing Agency.
  • Default From Email Address – I set up one on my web server called no.reply@pangeamarketingagency.com.
  • Default From Name – I use Brandon Rollins. More personal that way.
  • Remind people how they signed up for your list – I use:
    • Thank you for signing up for our mailing list! You will soon be receiving updates from Pangea Marketing Agency.
  • Contact Information – We use the Pangea Marketing Agency P.O. Box.
  • Enable double opt-in – This asks people to confirm that they want to receive emails from you before you start sending them. We believe that checking this is best practice.
  • Enable GDPR fields – Definitely check this. GDPR fields help you gather consent that holds up to the legal standards of the GDPR, which determines how you can use European residents’ data for marketing purposes.
  • Notifications – I leave all of them unchecked. They’re annoying.

Click Save. Then click Settings and click List fields and *|MERGE|* tags. Merge tags pull information from your sign-up form and they associate it with each email. For example, when I sign up for a MailChimp campaign, I might see Email Address, First Name, and Last Name. Naturally, I’d enter brandon@pangeamarketingagency.com, Brandon, and Rollins respectively. That info is all stored in a database.

Each bit of information is associated with a merge tag.

  • *|EMAIL|* is brandon@pangeamarketingagency.com
  • *|FNAME|* is Brandon
  • *|LNAME|* is Rollins

Someone can then write a newsletter that starts out as “Hey *|FNAME|*!” and it will show up as “Hey Brandon!” For my colleague Pierson, it’d be “Hey Pierson!” You get the idea.

This lets you personalize your emails with anything your users provide.

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How to Create a Landing Page That Works

One of the qualities about MailChimp that I really like is that it gives you the ability to easily create landing pages. You are able to create forms hosted by MailChimp, and you can also get HTML code which you can insert on your own website. I’ve used both, but for simplicity, we’ll stick with MailChimp’s basic forms since the custom ones require you to know HTML. (You can learn HTML on W3Schools for free, if you’re interested in learning more about that.)

Click Signup forms. Click Select next to General forms. You can customize a whole bunch of forms, but we’re just going to talk about the Signup form itself since that’s the one you want to get absolutely right. This form will double as your landing page unless you decide to make a custom one and use MailChimp’s HTML code on your own website.

Customize Your Landing Page

With a little bit of effort, you can take MailChimp’s bland default landing pages and turn them into something much better. To do so, think about the data you want to gather on your landing page. You’ll definitely need an email address to start. We also recommend gathering first names and marketing permissions as well.

Everything you ask for beyond there is a bit risky. On the one hand, you’ll have more data to work with, which can be helpful. On the other, every additional question you ask increases the odds that they’ll drop off your page and not sign up.

Click on any fields you need to delete, rename, or relabel – you’ll have options on the right. Click on Add a field and then a button below to add a field asking for more information.

Once you’ve added and removed fields to your taste, click Design it. You can change the colors, fonts, and spacing of every part of your landing page – the page, the body, and the form itself. Click around in there and experiment to your taste. When you’re done, copy the Signup form URL that’s near the top in the screenshot above. That’s your landing page’s address. Share that address anywhere you need to such as your social media or your website.

How to Create a Template That Works

Click Templates then Create a template. I personally recommend that you pick one of MailChimp’s featured templates and modify it to your tastes. On the right side, click on the Design button – you’ll see items including Page, Header, Body, Footer, Mobile Styles, and Monkey Rewards.

You’ll be given lots of options on how to customize the page, such as colors, font sizes, line spacing, and more. I personally recommend staying pretty close to the original design, but swap out the colors for sure.

Once you’re happy with the basic colors, fonts, and spacing of your template, click on the Content button to see all the things you can put into your mailer. What you see in the screenshot below can be dragged and dropped right onto your template.

Drag all the elements you like into your template. If you don’t want something in your template, hover over the item and then click on the trash can symbol on the top right. Once you get all your content items in the right locations, click on each one on the left. Then edit the details on the right.

Details can be editing an image, updating text, changing where a button goes, and so on. Make sure to click Save & Close any time you make a change on the right side! When think you’ve got a good template, Preview and Test in the top right corner and then Enter preview mode.

Create a Template that Resembles Others

Now the whole time you’re doing this, you need to be looking at newsletters that you like and imitating their style. Pay particularly close attention to their “calls to action” – any articles they want you to read or buttons they want you to click. When you’re sending out your own mailer, you want to have one very clear call to action somewhere on the mailer. If you don’t, it’s pointless to send out in the first place. I personally put three calls to action in each blog email – one text link to an article and two image/text links to an article at the bottom – I’ve highlighted mine in yellow.

When you’re done with your template, click Save and Exit and give it a name you’ll remember. When you’re sending out email campaigns, you’ll be using your template. You can then swap out text and images and keep a consistent look and feel between all your emails. Go ahead and sign up for your email list and send out a sample campaign to yourself while you’re the only one on it. Make sure everything looks okay and go back and edit your template if it doesn’t.

An example of a typical email from my other website, Brandon the Game Dev. Note that links are highlighted in yellow.

How to Generate Leads for Your Mailing List

It’s wonderful to have a mailing list set up. However, it won’t do your business much good if the emails go to only a handful of inboxes. For that reason, you need to be able to generate leads for your mailing list. There are several ways you can do this, but we’re going to focus on just seven.

1. Create an opt-in incentive.

First and foremost, I’m not giving you my email without a reason. People need a reason to give you their email because doing so requires trust. The way you gain that trust is often by giving something valuable away in exchange for the email.

You can create how-to-guides and eBooks, which are downloadable opt-in incentives. Alternatively, you can give people a chance to win something in a giveaway. Lastly, you can build an online community and request that people provide their email to join.

The specific opt-in incentive will vary by business, but the principles are the same. Create something that’s so valuable that people are willing to give you their email and receive marketing messages in exchange for it.

2. Link your landing page to your website and social media and create strong calls to action.

Because your mailing list is one of your most valuable marketing tools, you want to promote it as often as you can. For that, you need strong calls to action on your website and ideally on pinned social media posts, too.

A favorite call-to-action of mine comes from my other website, Brandon the Game Dev. The call to action is “Learn to make board games. Join over 2,000 game devs, artists, and passionate creators. Click to get started!”

In those three sentences, I tell people what the site is for, offer them a chance to network with like-minded people, and give them a clear action (click here). This has been a remarkably effective and simple way to build a mailing list for years now.

3. Send direct messages on social media.

If you are truly trying to make something out of nothing, fancy opt-in incentives and call-to-action buttons won’t get the job done. If you already have attention online, then sure, they’ll work well.

But what if all you have are a few hundred followers on Twitter or Instagram? If that’s the case, you can send out personalized direct messages to each of your followers. It’s simple and here’s a basic template:

Hi (Name), I saw that you’re interested in (something). I’m offering (opt-in incentive). Is this something you’d be interested in?

If they say yes, then send them the link and tell them what they need to do next. That’s all you need to do! For even better results, personalize those sentences based on information they have publicly shared on social media to show that you took the time to get to know them first

4. Create content for others.

You can send the best direct messages in the world, but you will eventually run out of social media followers to contact for the first time. For this reason, you need to make content that gets people to pay attention to you, whether you’re blogging or simply creating something worthwhile on social media.

Now that makes a strong case for content marketing, but there’s another element to this. You want to create content for others. Ask people in your niche if you can write guest posts for them. Try to get interviewed for a podcast. Find ways to get your business’s name out there, and that will help draw people not only to your mailing list, but your brand as a whole.

5. Attend in-person events.

Conventions and trade shows provide wonderful networking opportunities. These kinds of events are fantastic for all kinds of purposes, but one digital marketing benefit is that you can create a simple sign-up sheet and start collecting emails. At a busy trade show, you can sometimes gather emails by the hundreds or thousands.

6. Give away prizes.

At Pangea, we’re huge fans of giving away prizes as a marketing technique. This is, by far, the fastest way I personally know of for building mailing lists. Offer something valuable in exchange for an email sign up. You can use tools like Gleam.io to help you get started. I recommend taking out $50-100 in targeted Facebook ads per giveaway for best results.

7. Advertise.

One of the best ways to easily grow a mailing list is by advertising. The downside, of course, is that it costs money, and sometimes a lot. The upside is that you can very quickly target people by interest on channels such as Facebook and Instagram.

Ideally, try to spend less than $2 per high-quality email address that you receive. I personally aim for $1 or less per high-quality email address.

Final Thoughts

Because email is such a powerful and effective tool for marketing your business, it only makes sense to use it to its fullest potential. As we have shown today, setting up a mailing list isn’t hard and there are a lot of effective ways you can grow your list.

Have you had any luck with email marketing? Share your experiences in the comments below – we’d love to hear them!

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How to Build an Online Community Around Your Small Business in 7 Steps

Many businesses are beginning to understand the power of creating online communities. The Holy Grail of all marketing is to make it where customers really like and trust your business and they buy everything that you make. But that kind of success must be earned, and it takes a lot of work!

First things first: I will be drawing heavily from a post I wrote about a year ago on my board game development blog. The linked post is also about building an online community, and the principles discussed there can apply to nearly any industry.

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What is an online community?

Before we go any further, though, let’s define what exactly an online community is. I’ll use the definition from the game dev blog here since it’s a good one.

As I see it, an online community is any place that people are actively engaged in conversation on the Internet. Actively engaged meaning that people check in regularly and talk to one another. It’s a simple definition, but you’ll notice that it specifically excludes online platforms where nobody ever engages. Engagement is key here.

Why build an online community?

There a number of benefits to building an online community for your small business. They can be neatly summarized in four points:

  1. Building a community of engaged, friendly, passionate people is simply great branding. It gives you a chance to have your company’s name seen in a positive light.
  2. When you have an actively engaged online community, it’s very easy to ask market research questions simply by starting a conversation.
  3. Communities are great sources for both product/service ideas and content to share online.
  4. When it’s time to launch new products or services, you will have a built-in audience. This makes it much easier to succeed.

With all this in mind, let’s talk about seven steps you can follow to build your online community.

1. Choose the Right Gathering Place for Your Online Community

Think about where your customers like to hang out online. This is very important because online communities cannot be separated from the places they are built.

You have a lot of potential gathering places. Facebook groups are one example, as are Slack and Discord servers, subreddits, other social media, and forums. Each type of community has ups and downs. Your best bet? Pick a gathering place that your customers are already using.

For example, I use Discord – a popular chat software made by gamers for gamers – as a gathering place for board game developers. Similarly, I use a Facebook group as a gathering place for entrepreneurs.

2. Establish a theme and ground rules to ensure positive discussion.

Early on in the creation of your community, you need to make sure its purpose is well understood. There are two pieces to this: theme and ground rules.

For a theme, figure out what you want people to talk about. Do you want people to swap recipes? Would you prefer for them to talk about their favorite video games? Are you making a place for real estate agents to talk shop? Pick a simple theme and come up with a punchy community name that succinctly conveys that. (For example, the Facebook group for this blog is Small Businesses Unite).

Next, you want to set a few ground rules and find a few people who will moderate your community. Keep the ground rules simple. As an example, here are the ones I use for the Pangea Games Facebook group:

  1. Be excellent to each other.
  2. Don’t discriminate.
  3. Be classy about self-promotion.
  4. Don’t spam.
  5. Help others out any way you can.
  6. Invite whoever you want, as long as they’re chill.
  7. Don’t do or coordinate anything illegal here.

I’ll once more borrow directly from the post on the game dev blog to explain why I use these seven rules.

I start with a positive rule. “Thou shalt nots” will only get you so far. Rules 2, 4, and 7 are obvious ones – don’t be any kind of -ist or -phobic, don’t tell me how you made $87,122 working from home, and don’t talk about your illegal gambling den. Numbers 5 and 6 reiterate the positive rules, with 6 doubling as encouragement to invite.

The trickiest rule here is 3. Decide how you’re going to handle self-promotion. You can police it heavily by banning self-promotion or limiting it to a certain amount per week. Alternatively, you can allow it all (within reason) and let Facebook’s algorithm do the sorting. (Bad ideas get buried in active communities, so I don’t sweat it). No matter what you choose, be explicit about how you handle self-promotion.

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3. Invite about 20 of your friends so the room’s not empty.

Online communities are dreadfully boring at first. Without bringing people you know into the community, you will probably need a few hundred strangers before you see conversations actually take place.

But if you start the community with a few friends? It becomes so much easier. Strangers will see that you and your friends are already talking, and they’ll join in, too.

4. Establish norms.

Very few people will read your rules. They’re important to have, but just remember that few people are going to look.

Rules are really just a way of encouraging certain norms. If you want people to engage, you need to ask questions until people start habitually answering. If you want people to help one another, you (and your friends) need to go out of your way to help new members. People mimic the behavior they see!

When you see behavior that you like, encourage it by liking and commenting on it. If you see a behavior you don’t like, ignore the small stuff and let the algorithm sort it out. For egregious misbehavior, tell the offender to stop.

Once your norms are baked in, new members who want to fit in will conform. You want to get this right before you spend a whole lot of time and energy promoting your online community.

5. Give people a reason to join your online community.

Once your online community has been established, you will want to draw people to it. A month or two of good engagement is usually enough to make people likely to join. However, they still need to find you in the first place!

Ideally, you want to give people some kind of incentive to join your community. The community itself is valuable, but if you really want to draw attention fast, give something away for free. When attracting board gamers to a Facebook group, for example, I give away a board game and people come in droves for the free stuff and stay for the conversation!

6. Push to 1,000 members.

Once your community is established and people have a reason to join, you need to push as hard as you can to 1,000 members. I will now reference the game dev blog post once more because the reasoning is sound and can apply to any business.

Early on with the Pangea Games Discord server, I hand messaged nearly 10,000 people on Twitter and Instagram. It took about 100 hours over weeks of effort. When I was done, I had just shy of 1,000 members in the community and it was actively engaged. It has remained active without sustained effort.

I don’t know what it is about 1,000 members specifically, but this seems to be the point at which communities are self-sustaining. There have been entire weeks where I’ve dropped out of Discord and barely been on Facebook, and the communities are still running. This should be your goal.

“Brandon, I don’t have thousands of followers or the time to message all of them.” Hey, that’s fair – there are many other options. For example, I use the blog – which pulls traffic primarily from search engines – to pull in new members to the Discord server. I use regularly scheduled giveaways of popular board games to encourage engagement on the Facebook group, as well as other related channels.

7. Listen to feedback to keep your online community healthy.

Online communities need to be monitored even after they are established. While your community may be self-sustaining, bad things can still happen. People will spam you. Some individuals will be needlessly mean. You’ll be criticized for your administration of the community. Sometimes you’ll want to roll out new features.

The point here is to stay engaged after you build the community. Constantly tweak and improve based on feedback. A little bit of care goes a long way.

Final Thoughts

Building an online community is not difficult. By following the seven steps above, you can reap many of the rewards of having an engaged community.

Online communities are great for your branding and are a constant source of ideas. Once established, you’ll never struggle to find customers willing to answer your questions and you’ll never have to launch a product or service with no audience.

And of course, building communities around your interests is just plain fun 🙂

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15 Ways to Use Market Research to Grow Your Small Business

We’ve had market research on the brain lately! A few weeks ago, we wrote about what market research is. Shortly thereafter, we wrote about how you can do market research cheaply and made a long list of questions you can ask your customers.

Now we’re going to talk about all the ways you can use market research to grow your small business! It’s time to put all the information you’ve painstakingly gathered to good use.

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1. Research demand for new products or services before starting.

You know the easiest way to screw up in small business? Make something that nobody wants.

I know this sounds incredibly simplistic, but the truth is that it’s such an easy error to make. Market research lets you identify which opportunities you shouldn’t pursue so that you can focus on the ones that you should.

By conducting market research, you can get a sense of market demand before you waste time. You can identify products that are ideal for your target market, or that have, in other words, a good product-market fit.

2. Identify customers’ goals to see if there are needs not yet met.

Good marketing strategy has two major parts to it:

  1. Identify customers’ needs and meet them.
  2. Tell potential customers that you can meet their needs.

Consumer behavior is driven by needs, but not just basic needs like the need for food, water, and sleep. People have a need to feel confident, to feel intelligent, to feel like they have achieved something with their life, and so on.

This may seem heady and abstract, but when you actually ask customers questions through market research, you often find they have unmet needs. When this happens, you have the chance to make good products or services before your competition catches on!

3. Identify more niches in your industry.

One of the ways that market research can help you grow your business is by identifying needs that are not yet met. When your business finds a way to meet those unmet needs in a way that few others are doing, then you have found a new potential niche.

This is really valuable. Finding a unique niche helps you narrow down your business’s focus so you can do what you do best.

4. Create more compelling marketing materials.

Some businesses are phenomenal at creating products or providing services. However, their marketing messaging is lackluster, and thus, people either walk away without buying or simply never find them. It’s a shame!

Market research can help you identify which kinds of ads people respond to. It can help you polish your brand so that your business looks like what others expect, thus signaling your ability to meet potential customers’ needs. In short, using market research to figure out what others like or expect helps you play the part when it comes time to brand and promote your business.

“Got to keep an eye on the competition!”

5. Watch your competition and understanding their marketing strategies.

It’s no big secret that paying attention to your competition can make you richer. Often in the course of market research, you find out a lot about what your competition is doing.

You can learn about what they offer and their unique selling points. You can get a sense of how their business is positioned. Lastly, you can often figure out their marketing strategies just through simple observation. Knowing what your competition is doing allows you to respond in kind.

6. Watch your competition and understand their weaknesses.

Similar to the point above, you can figure out what your competition is not doing as well. This can often be as insightful if not more so than figuring out what they are doing.

Are their products expensive? Is their branding lackluster? Are they failing to engage their audience? Are they leaving important meets unmet? Market research helps provide answers to these questions.

7. Reduce risk of bad marketing plans.

It’s easier for customers to remember bad marketing campaigns than to remember good ones. Just think of the Quiznos ads that came out around 2004. (Though in their defense, “they got a pepper bar.”)

Above, we said that marketing basically has two goals:

  1. Identify customers’ needs and meet them.
  2. Tell potential customers that you can meet their needs.

That means a bad marketing plan either doesn’t meet needs or doesn’t effectively signal that a business can meet customers’ needs. In my personal experience, market research with customers helps you avoid the first error while observation of competition keeps you from repeating their expensive mistakes and making the second error.

8. Fix problems in your product or service before it’s too late.

Reviewing what customers say about you is a form of market research. For nearly any business, there is a place where online reviews can be found – social media, Yelp, Trustpilot, Google, Shopify, Rate My Professor…you get the idea.

The point is: read the reviews every once in a while. Keep doing what works, of course, but pay extra attention to the negative reviews. You might find out that some of your staff is rude. Perhaps your slow responses to emails are alienating clients. Whatever issues you find, take steps to address them.

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9. Test products or services before release.

Remember how we said that the most egregious error a small business can make is to create a product or service that people don’t want? Oftentimes, this can happen not because the idea was poorly conceived, but rather just poorly executed.

One form of market research involves creating focus groups. This kind of market research provides you an excellent opportunity to test products or services before releasing them to the general public. That way, if there are issues, you can correct them before it’s too late.

10. Test branding and advertising on a small scale.

Similarly to the way that product and services can be testing, so can branding and advertising. You can do this by running advertisements or branding decisions across a group of people online or in-person.

In the case of digital marketing, you can also take out ads on a small scale or set up simple A/B testing. This lets you see how people will react to changes on a small scale before spending a lot of money.

11. Make improvements based on survey data.

One of the most popular forms of market research is collecting survey data. When you send out surveys to either current customers or potential ones, you can ask nearly any question you want. This means if you have specific questions you want to be answered, you can read real responses from people that you can take to heart. You can also ask open-ended questions if you want unprompted, unfiltered responses.

In both cases, you can aggregate survey data and find trends. When you spot a trend, you can start implementing the survey feedback.

12. Improve the effectiveness of social media.

Basically every social media channel creates an enormous amount of data that you can review. Facebook and Instagram both have Insights. Twitter has Analytics. The list goes on.

One of my favorite goals for social media is simply engagement, more so even than growth in many cases. Engagement includes comments as well as likes, views, clicks, and so on. To improve engagement, you can review your social media history and create more posts like the ones that performed the best.

13. Improve effectiveness of website.

Using market research as well as data from tools like Google Analytics, you can figure out how to improve the effectiveness of your website. If people are adding items to their cart but abandoning them without purchasing, you can use market research to figure out why that is and discourage that behavior.

Similarly, you can figure out where to place calls to action to get more sales or email signups. Market research can also help you figure out how to layout your website, which pages are most likely to get attention, and how to optimize for search engines.

This is particularly notable when you run an eCommerce business. Often small tweaks can turn a 2% conversion rate into a 3% conversion rate, which if you’re already established, is like putting money right into your pocket.

14. Catch on to industry trends early.

The act of market research alone forces you to get out of your shell and observe the outside world. Just through the simple act of researching alone, you become a lot more aware of industry trends in the making. This allows you to respond appropriately early on.

15. Improve customer retention.

Once your business is established, one of the easiest ways to improve your profitability is to improve customer retention. This could mean upselling, implementing a subscription-based model, or launching new but related products or services. It could also mean, as we mentioned earlier, finding breakdowns and fixing them so you don’t lose potential repeat customers.

Market research helps you identify both the weaknesses you need to correct and the opportunities you need to pursue. This makes it a lot easier to keep customers coming back for more.

Final Thoughts

As you can see, market research is not merely a bookish exercise. It has many practical applications! Market research data, like oil or timber, is a natural resource upon which you can build larger marketing strategies.

Used correctly, market research will allow you to identify needs, make sure your meeting them, and make you’re communicating value. The goals are simple but the benefits of applying market research well are profound.

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