Not using these Marketing Tools could hurt your business

If you are of the habit of running your business without stopping to analyse your marketing strategies to see where you stand in relation to your competition, you are likened to one who takes a jump over a cliff without  looking.

 It is no news that small businesses are averse to marketing. The reasons for this have been linked to the attitude of owners-managers to marketing. Little wonder these small businesses struggle to compete favourably in the marketplace.

In this post, I will reveal how to use marketing tools to determine:

  • how customer penetration fluctuates over a time period
  • understand how often a specific product is purchased and its usage across different target segments
  • number of customers that have purchased a specific product at least twice within a specific period of time.

This will enable small business owners craft resounding and informed marketing decisions that would help them stay competitive and grow their businesses.

TOOLS TO SUPPORT MARKETING DECISIONS

Customer penetration

This is a term used to measure how much a product or service is used by customers compared to the total estimated market for that product or service.It also shows the number of customers that have purchased a specific company’s product instead of that of your competitor.

Market penetration can be used to determine the size of your potential market.If  the total market is high,it means that new entrants to your industry might be encouraged that they can get market share or a percentage of total number of potential customers in your industry.

How to calculate customer penetration

To calculate market penetration, the current sales volume for your product or services is divided by the total sales volume of all similar products, including those sold by your competitors.

 For example, let’s assume you sell phone accessories and your target customers are 1000 university students between the ages of 19-22 years.

Total number of students who bought phones = 12,000 and 1500 purchased your product once in three months.

To calculate penetration for students:

Customer penetration [CP] =     students who bought                    x100

                                                    total number of students in area

CP = 1500/12000 x 100

CP = 12.5 % in three months.

With this analysis you would be able to see your position relative to other competitors and know how to improve your business strategies in the coming months.

 Frequency of Purchase

A lot of times business owners find it difficult to know the customers that are loyal to them in the long run. They often fail to balance high volume purchase customers and those that buy not so big volumes repeatedly. Being able to calculate your customers’ frequency of purchase will help your businesses in the following ways:

Understand how often a specific product is purchased

Let’s say you sell a basket of different products and you want to know which product sells faster than others.

By calculating the frequency of purchase, you would be able to know your fast lines and design marketing strategies to boost sales by stimulating further usage of the products or new usages for the same product.

Compare your product usages across different target segments or across different product lines you supply.

By calculating frequency of purchase you would be able to determine customers who are heavy users, as opposed to light users, or you might be able to spot differences in usage that are related to the customer’s segment personal characteristics  like age,gender,lifestyle etc.

How to calculate frequency of purchase

Consider the table below:

Customer12  3  45  6  7  8  9  10Total number :10  
Product X4456859478Total:60

Let’s suppose you have 10 customers and they purchase your product ‘X’ a certain number of times in one month.

The table above shows how many times each of your customers bought product ‘X’  from you.To get started you have to  add the number of times they bought your  product ‘X’, which from the table is 60 (4+4+5+6+8+5+9+4+7+8).

To calculate your frequency of purchase, divide the sum of times your customers bought your product ‘X’ (which is 60) by the total number of customers (which is 10):

Freq. Of Purchase =  sum of the times your product ‘X’ was bought

                                   Total number of people in the segment

=      60/10

=      6

This result explains that your customers belonging to that specific segment purchased your product ‘X’,6 times (6x) in a month.

Armed with this finding, you will be able to determine whether this purchase frequency is a little or a lot by comparing the figure in your other customer segments and use your personal intuition or judgement to make your marketing inferences.

Benefits of customer penetration and repeat purchase calculation

Customer penetration calculation would enable your business know its market share relative to the competition.With data from this calculation you will be able to know how to improve on your products,know how to respond to the marketing strategies of your competition.For example you may decide to lower your product’s pricing to make it more tempting and encourage  more customers purchase your products.

You could also design some “special offers” and “loyalty schemes” to your existing customers to reduce churn rate and gain market share.

It is a well known fact that it costs more to attract a new customer than to maintain an existing one.Calculating your repeat customers will help your business identify your customer segments that have a high repeat purchase as you do not want to lose them.Information of your repeat customers would help you to design reward incentives to increase their loyalty.

On the other hand, segments with low repeat purchase have little loyalty and you should identify them so you could work out ideas about how to improve their loyalty.

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