What can business owners learn from Swedish furniture giants IKEA? More than you might imagine, actually.
Where do most of your customers come from? It seems like an easy question, but few company owners can instantly describe their process for attracting and retaining new business.
All service-led businesses need to take a clear strategic position on customer acquisition and retention. You need to know how you’re positioned in the local market, who your main customers are, and what makes you different.
Without this knowledge, it’ll be difficult to build a strong market position and maximise your limited resources, so it’s essential to get it right.
The Three Types of Proposition
To get clear on your positioning, there are three main approaches to consider.
The first is cost-based positioning. Essentially, this means pricing your services lower than other care providers in your area. Lower prices don’t necessarily mean lower quality; you’re still providing the same high service levels that your competitors do, but simply for less money.
Many businesses know that by offering more affordable rates, they can secure a regular influx of new enquiries. In an era where budgets are tight, cost-based positioning can be very effective.
But charging lower prices only works if you still have room for a tangible profit margin. You’ll need crystal-clear, accurate financial data to be able to make that decision.
The second approach is service-based positioning. This is about creating a range of tailored services, and using them to differentiate yourselves from competitors.
Perhaps you can offer a service other companies can’t, or it might be that you’ve developed a service that meets a specific customer need better than anyone else. If you’re adopting service-based positioning, you’ll need to think carefully about the capabilities you hold within the business, or the areas of expertise you have that truly sets you apart.
The third approach is audience-based positioning. This involves targeting your services at a particular demographic, or developing services to meet the specific needs and challenges of that demographic.
A vet, for instance, might specifically target farmers. A wedding venue would focus their efforts on reaching twenty and thirtysomething women. It’s all about tailoring your offering to the needs of this audience, and building up a trusting partnership with them.
The IKEA Model
So how do these types of market positioning work in practice? To find out, we can look to one of the world’s largest furniture retailers; IKEA. Unlike other furniture retailers, IKEA uses a two-pronged strategic approach which encompasses both cost and audience-based positioning.
By specifically targeting young buyers, IKEA can fully understand their lifestyles, needs and challenges and – in response – develop added value services like longer hours after the working day, and childcare facilities while parents are shopping. These services make their customers’ lives easier.
Simultaneously, their cost-based positioning means their products are affordable for this younger demographic. If you’re a twentysomething man or woman looking to furnish a new home on a budget, the chances are you’ll go to IKEA.
IKEA’s strategic model can help care businesses to drill down into who really needs their services and how they should be priced. Once you’re clear on these factors, you’ll be able to develop a much more effective business model and reclaim your time to focus on what matters most.
Points to Ponder
If you’re not sure where to start, here are some questions to help you get focussed. Doing this exercise will help you determine which strategy will be most effective for your business:
- How do other businesses in your area position themselves?
- How does your price point compare with theirs?
- Do you provide any services that others don’t?
- Who is your core audience? Who do most of your enquiries come from, and what age range are these people?
- How well do you understand their specific needs?
- What can you do to make their lives easier, and what problems can you solve for them?
- How can you build stronger partnerships with them?
Whichever approach you choose, you’ll need access to reliable, real-time financial information to help you make a well informed decision. If your current accountant doesn’t provide this data, talk to Fresh Clarity today to find out how we can help.