Question

Topic: Research/Metrics

Determining Customer Statistics

Posted by Anonymous on 9/1/2011 at 10:16 AM ET 250 Points
I run a company that offers a discounted logistics platform that reduces the time spent digesting shipment data through robust reporting features and shipment data control fields.

Our service is perfect for companies shipping at least $10,000 per year in express class services (overnight, 2- and 3-day). Currently, the average savings of our customers is over 20% compared to what they were doing before they were our client.

Here's the dilemma
Our potential customers are very difficult to identify and the opportunity is certainly not easily quantified. For example, law firms are typically good candidates, but some firms are mainly digital and others still use a high volume of expressed paper documents. Some other use simple priority mail.

I need to figure out how to identify candidates for our program so I can dial in my marketing efforts to reach out to those who can really benefit. These companies should spend a minimum of $10,000 a year in express shipping (it's okay if they use a ground service as well, but it can't be only ground).

Other industries of interest are real estate and mortgage, compounding, and pharmacy.
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RESPONSES

  • Posted on 9/1/2011 at 11:04 AM Member
    Hi Cfisk -

    Your first step, if you have not already done it, is to conduct some analysis of your internal database, to determine any possible segments in terms of usage, habits, etc. This can be an inexpensive way to determine who your best customers are, and give you some indication of who to pursue in the future.

    However, an even more powerful strategy is to conduct some primary market research of companies that fit your overall customer profile as you've described it. This type of a study can not only lead you to determine the type of companies that would be your best prospects, but can also help you learn about purchase motivators, barriers, desired benefits, and how to position your platform to potential buyers. There's some investment involved in obtaining the sample, and if needed, in outsourcing the research design and analysis, but the information gleaned can lead to increases in both revenue and profitability, and the development of a sustainable competitive advantage.

    Good luck with your efforts!!!
  • Posted on 9/2/2011 at 10:00 AM Author
    Hi Jlevin,

    Thank you for your response. Our database is a little on the light side right now. We only have four active clients. While each of those clients has strong volume, they are very widely spaced.

    The primary market research sounds a lot like a project that I don't have the expertise or budget to put together.
  • Posted on 9/2/2011 at 7:34 PM Moderator
    I have a concern for you based on your remark about not having a budget for some early market research. If you don't have the funds to learn who your best prospects are, how will you be able to afford to reach them once you know who they are?

    If you're trying to start a serious business without adequate funding, you're looking for trouble. The most common reason new businesses fail is that they are under-capitalized. And 9 out of 10 new businesses fail in the first few years.

    So take another look at your business plan and see if the smartest course of action would be to stop now, cut your losses, and move on to another pursuit that has a better chance of success (and adequate funding). You could sink a lot of time and money into this one, and still not get a positive return on your investment. Better to swallow that pill now than after you've sunk even more into the venture.

    I don't intend for this to be negative. I just want to share a concern that could save you a lot of money (and time, and emotional energy) before it's too late.
  • Posted on 9/3/2011 at 11:03 AM Author
    The advice and concern is appreciated. Quantifying that cost is something I would want to at least ballpark before saying yes or no to a beneficial endeavor.
  • Posted on 9/3/2011 at 11:36 AM Accepted
    I certainly understand that, and I would want a cost estimate too, if I were in your position. That's entirely reasonable.

    What I'd ask first is what a new customer is worth to you. What's the lifetime value of a customer in your business? If you figure that a new customer is worth, say, $2,000 to you, then you're probably prepared to spend something like half of that (or more) to reach the customer. And if identifying that customer and understanding what makes the customer tick is, say, half of that process, then you might be willing to spend $500 per customer on the up-front research.

    So if you're looking at a business plan that calls for you to have an average of 100 active customers, you should arguably be willing to invest $50,000 in the research. (Adjust the numbers to whatever makes sense for you. I'm only demonstrating the thinking and the methodology. The actual cost will likely be a lot smaller than the number I've calculated above.)

    A competent market research professional should be able to give you better guidance once they understand the objective. (Try contacting jlevin directly if you want more specific help. Use the email address in her profile.)

    And if the number comes out too high for your comfort level, I'd reconsider the business plan and proposition. You may be undercapitalized.

    Hope this helps.
  • Posted by koen.h.pauwels on 9/4/2011 at 12:51 AM Accepted
    Agreed with previous comments, which take the 'bee' or 'hunter' perspective. How about the 'flower'; i.e. making it easy for potential customers to find you?

    A client of mine faced a similar dilemma of being unable to target customers or even predict when their services would be needed. Google search worked wonders for them because potential customers would search online at the moment they needed the service (at other times they were not open to marketing messages) and they had a great search ad message, website and service to back it up.
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