There are many ways to sell more to existing customers and potential customers like them. But before you start trying to maximise your market share, you need to make sure you fully understand how you are perceived by both existing and potential customers.
Answer the key questions
The first stage is to address the core questions about who buys from you, how and when they buy. You need to be clear about:
- who your customers are
- what they buy
- why they buy
- how they buy
- who else could buy from you
- the typical budget of existing and new buyers
- where else they buy from
Position for the future
Remember that the reasons customers buy from you now will not necessarily be the reasons they buy from you in six months or a year's time. And if you consider expected trends in customer behaviour and your market, you may be the first to exploit a niche and gain market share quickly.
For example, how will your customers prefer to place orders? While they may prefer a phone call or face-to-face visit now, is there a trend in your market for online ordering systems? If you are one of the first businesses in your sector to offer the facility, you could gain significant market share.
Predicted future developments in your marketplace could also provide significant opportunities for growth. For example, with the growth of home computing, IT support has developed from a mainly business-to-business service to a larger customer base of consumers.
Use your research to get as clear a picture of the future as you can. It's often difficult to predict with certainty - but the more you know about how your customers and market will look in the medium to long term, the more likely you are to successfully build your market share.
2. Sell more to existing customers
It's often easier and more effective to sell more to existing customers than it is to acquire new ones. Once you understand why your existing customers buy from you, you can examine ways of getting them to buy more or more frequently.
The Pareto principle - often referred to as the 80/20 rule - says that 80 per cent of your success in any given field is often due to 20 per cent of your effort.
You can use the idea as a starting point to analyse how you can sell more to existing customers. For example, if a small number of your products and services account for most of your profit, can you sell more of the less profitable products to your customers? Or if your higher-margin products or services are only being sold to a small percentage of your customers, how can you raise that percentage?
Encourage more frequent buying
You can increase market share by getting customers to buy more frequently.
If your research shows customers buy at a particular time, make contact with them just beforehand. For example, if you know that a business buys its stock from you at the end of each month, a courtesy phone call, email or letter in the middle of the month can be effective.
You can also add value to your products and services to ensure repeat business. For example, is there anything you can add to a service at little cost that is useful to your customers such as a free overall 'tune up' every time they send their car or computer in for repair?
Get customers to spend more
Where appropriate, encourage customers to buy a premium product or service that better meets their needs and provides a superior return for you. This is known as 'trading up'.
You could also offer purchase incentives and price promotions on items that they usually buy from competitors, such as 'buy one get one free' or 'buy for ten months and get two free'.
3. Get old customers back
If people have bought from you before, they may buy from you again. You need to find out why they stopped buying from you and apply that knowledge to regain their custom.
Find out what changed
Identify why customers stopped buying from you. Consider whether your product or service is:
- no longer necessary
- too expensive
- unsatisfactory
- being beaten by a competitive offer
Rebuild contact with your customers
Research suggests the reason many customers stop buying is because they don't feel that they have sufficient contact with their suppliers.
Try to have some form of regular contact e.g. monthly or quarterly phone calls, formal or informal visits to customers, mailshots or email newsletters - so that customers don't feel they are being ignored and look elsewhere.
If you have lost a customer for this reason, your first step is to rebuild contact and prove that you understand and are focused on their needs - eg a letter expressing regret that they have stopped buying from you and making them a time-limited offer.
It's worth trying a few times, but don't persist if you aren't getting any response. Many businesses have a limit to the amount of times they contact lapsed customers - usually five or seven times.
Make an offer to tempt them back
When you know why the customer is no longer buying from you, consider ways to make your business more appealing.
For example, if your price was viewed as too high, consider a time-limited discount to encourage them to start buying again, eg 20 per cent off for three months.
If your service was unsatisfactory, ask what you could do to make it meet your customer's expectations and assess if it is possible and profitable for you to adapt your service for the former customer.
4. Market and sell effectively to similar customers
There are probably many consumers or businesses that don't buy from you that are similar to those that do. You can grow your market share by bringing in these potential customers in a similar way to your existing customers.
This can be an effective route to increasing your market share as you may need to make only minimal adaptations to your products, services and systems to meet similar customers' needs. This simultaneously reduces the financial risks of expanding and can help protect your margins.
Find similar customers
You can use formal market research such as market reports and demographic studies to identify groups of potential customers. It's a good idea to follow this up with a combination of quantitative and qualitative research such as surveys or sampling with a significant number of responses, followed by smaller focus groups to make sure you are focusing your efforts wisely.
Remember these customers won't be exactly the same as your existing customers so it's essential you get the same understanding about what makes them buy as you have about your existing customers.
Reaching similar customers
Once you have identified your targets, you will have to promote your business to them. There are a variety of options and it's best to build a clear strategy combining them. You can consider:
1. Direct mail:
Sending mailshots, either by post or email, introducing yourself and what you offer.
2. Cold calling:
Door-to-door or telesales, depending on the nature of your business and your understanding of potential customers' buying preferences.
3. Advertising:
Local newspapers, trade magazines, radio, television or internet can all be useful. Make sure you're using media that your target customers will see or listen to.
4. Word-of-mouth and recommendation schemes:
A cost-effective strategy, rewarding existing customers for getting new business to come to you. Make sure the incentive you offer is of value to your existing customers. Common examples include gift vouchers, discounts or free products for customers who successfully recommend new business.
5. Use other channels to market
You may be able to increase your sales and market share significantly by using different and/or additional sales methods. You can also use other business' customer bases in some circumstances, eg wholesalers and distributors.
Choose the right channels
Your choice of additional channels to market will depend on your product or service type and how your customers choose to buy. The key areas to consider are:
1. Selling direct. You may be able to set up a direct sales operation so customers don't need to go through a third party, such as a retailer or wholesaler. This can be good for your margins as you don't have to pay commission. But you should consider the impact this would have on any third parties that already sell your product or service - they may react badly to you 'going into competition' with them.
2. Using wholesalers or distributors. If you are selling direct, you can consider broadening your base by using wholesalers or distributors. This will mean you are effectively 'piggybacking' on their customer bases. However, you may need to consider pricing carefully as intermediaries will need to make a profit.
3. Agents. If you wish to expand into other geographical areas at minimal risk, consider appointing an agent. This can provide representation in areas that would otherwise be difficult to reach. However, you will have to spend time managing the relationship.
4. Online and e-commerce. Setting up an e-commerce operation can break down geographical barriers. You will need to make some form of investment in getting it up and running and pay careful attention to servicing remote customers.
5. Sell into new markets
One of the most radical ways to grow your market share is to move into new markets. The rewards can be significant, but the risks are higher when you contrast this with getting the most out of your existing business and customer base.
Set clear goals for expansion
Before you start, make sure that you have clearly defined goals - it's essential that you set targets at each step of the way. If you don't carefully benchmark your progress at every stage, you can spend a lot of time and money on an unsuccessful expansion effort. If you can't set clear goals, you may be better served trying to exploit your existing customer base more efficiently.
You'll need to spend time researching the market fully, so you understand your potential customers as well as you do your existing customers. See our guide on market research and market reports.
You also need to understand the competitive environment in the new sector you plan to enter - it won't be the same as your current market. See our guide: understand your competitors.
5. Market effectively
It's essential that you create and commit to a marketing plan. While you can adapt to circumstances as you proceed, you must have a clear framework in place to boost your chances of success.
Remember that you should try to reach the most likely customers first. The best way to do this is to segment your target customer base - which means sorting them into groups with similar characteristics. You can read more about this in our guide on how to segment your customers.
6. Selling overseas
Exporting can have a significant impact on your sales figures but it will also involve trading in a different way - customers are more remote and may need more management. See our guides: exporting: an overview and entering overseas markets.
Team up with other businesses
You can sell into new markets by joining with other businesses, either in formal joint ventures and partnerships or more informal arrangements.
These routes can help get you established in new sectors more quickly and give you easier access to a range of potential customers. However, you will need to spend time managing the relationship and will sometimes have to compromise to keep your partners happy. See our guide on joint ventures and partnering.
7. Consider diversification
Growth by creating new products or services to sell to existing or new customer bases is inherently risky, but when handled well it can transform a business.
Understand the risks
If you get it right, diversification could be your biggest driver to growth and profitability. Mishandled, it could damage your productivity and relationships with existing customers.
You will need to devote time and resources to research and development (R&D) - this will have implications for your cash flow. You will also have to ensure your customers still receive the levels of service they are used to while you are working on new projects. See our guide on how to develop new products and services.
Is diversification suitable for your business?
Have you got enough financial and human resources to carry out the required R&D? If not, it may be better to increase your market share through other routes, eg joint ventures or informal partnerships.
Remember that you will also need to keep track of market trends in an unfamiliar sector. Will you be able to react to changes in the competitive environment?
Plan the process
Diversification is like setting up a new business. You will need to understand your new market, its customers, competitors and dynamics, just as you would for any new business. You'll also have to create a marketing plan specifically for your new business unit.
Key points to consider
Diversification is a big commitment and there are key issues you will need to consider and manage on both a day-to-day and strategic basis. These include:
1. Market knowledge - make sure you understand your new market as well as your existing one.
2. In-house expertise - do you need to hire specialists for the new products and services?
3. Sales skills - do you know how to sell effectively to this new and different customer base?
4. Capacity - can you continue serving existing customers without alienating core customers?
5. Finance - you will need to consider how you will fund the diversification. Will you need investment? You will also have to carefully plan sales and your return on investment.
6. Risk management - are there any ways to minimise the risk to an acceptable level? For example, could you explore partnerships or distribution agreements to ease your entry into the new market?
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