Understanding your market is essential in order to successfully build, market and sell products and services and it is something that is often overlooked by accounting firms. The process starts with understanding your target clients, especially regarding what ‘drives’ them to buy your products (or those of your competitors). Another important consideration is understanding your competitors, that is, who they are and how they are perceived.
What market are you in?
The first step is to define your chosen market. Our definition of a market is:
A group of individuals or companies who demand a certain product and
have the ability to pay for it.
So, for example, we talk about the ‘automotive market’ referring to people who may want to buy a car. Most markets have ‘segments’ referring to groups within that market who have more specific needs. Examples of segments within the automotive market might include the ‘family vehicle’, ‘luxury vehicle’, ‘utility vehicle’, ‘sports vehicle’ segments.
Another example might be the ‘accounting services’ market referring to the individuals (and corporations) who have a need (a demand) for accounting services. The accounting services market comprises segments including, for example, ‘high net worth individuals’, ‘businesses with international tax planning needs’, ‘businesses requiring audit services’, ‘businesses requiring complex forecasting’ etc.
Which segments exist will depend on a number of factors including geography, the business environment and other factors.
Your first challenge is to discuss and define your market and any segments you serve. Think critically and creatively about this. Think of some existing client relationships. In what market segment would you place these clients?
What benefits are attractive to your target market?
Clients buy products because they seek certain benefits. They want to satisfy their needs. We can refer to these as ‘drivers’ of sales, that is, the basis upon which purchasers make decisions.
It is important to note that determining the drivers of sales is more complex than it seems at first. Humans are not always good at describing exactly what drives them to purchase. An example might be the beverage market, specifically the segment related to beer. If you ask a group of beer drinkers, what drives them to prefer a certain beer over the competition, they will often respond, “taste”. But, when blindfolded and asked to identify their preferred beer, they cannot do so meaning the taste is not so obvious to them. So why did they select taste? The truth is that their choice maybe driven by things such as:
• I feel good drinking this with my friends
• I look cool drinking this beer
• I used to drink this beer when I was young
• I like the company which makes this beer etc
These drivers are more emotional than functional though many consumers would prefer to suggest they are driven by product features rather than their feelings.
Many accountants believe their clients work with them because of their technical expertise and prompt service. But there is a range of other reasons including:
• I like the partner who deals with me
• I know and trust the accountant who does my work
• I value someone who will look at my situation from an external perspective and tell me where I am going wrong
• I need someone to have my back when I am going through difficult times.
How important are these drivers?
You might come up with a list of eight to ten drivers that influence clients in your chosen market to select an accounting firm. But not all of those drivers are of equal importance. A client does not consider all possible factors equally and in sequence before making a purchase decision.
They quickly consider their priorities (maybe just one or two items) and then decide. This is often done subconsciously. With that in mind, it is useful to consider the RELATIVE IMPORTANCE of each of the drivers. You may wish to validate your thinking on this with clients, and several of our own clients have done just that using our ClientBuilder product to solicit feedback from clients on their internal thinking.
Who are you competing with?
You are unlikely to be the only firm in town targeting your chosen market, so you should consider others who compete with you. These could be other accounting firms, independent coaches and consultants (in the event that offering advisory services is important to you) or, thinking laterally, internal employees within a client’s business such as a Financial Controller. Once you have determined the likely competitors, you should assess how you stack up against each of them by rating your firm and the competitors against each of the drivers.
This analysis enables you to make smart decisions on where you should focus to become more attractive to your target market. You may find that you are investing time and money on matters that are of little importance, and that you are neglecting significant drivers that are of paramount importance to your target clients. This is business data that can be used to shape product development, marketing, sales and delivery decisions in your firm.
Panalitix has developed a methodology called MarketDecoder to help you with this important exercise. Get in touch if you would like more information to help you better understand your market so that you can gear up for the right sort of growth.