In business, it's always election season

As entrepreneurs and small business owners, it’s not what you think that matters, it’s what others think. In a sense, every day is “election day” for your business, because when customers buy or use your product or service it’s as if they were voting for you. So how do attract votes?

By Mark Stapp, Fred E. Taylor  |  Professor of Real Estate Director, Master of Real Estate Development

Companies and their brands need to reach out and speak directly to consumers, to honor their values and to form meaningful relationships with them. They must become architects of community, consistently demonstrating the values that their customer community expects in exchange for their loyalty and purchases.

— Simon Mainwaring

As entrepreneurs and small business owners, it’s not what you think that matters, it’s what others think. In a sense, every day is “election day” for your business, because when customers buy or use your product or service it’s as if they were voting for you. So how do attract votes?

First you need to know your customer — and I don't mean simply describing who your target is by simple socioeconomic or demographic characterization. I mean knowing them as people. This is one of the hardest things for small businesses and start-ups to do. Demographic analysis is not personal; it is categorical. Demography looks at age, gender or race, income, educational attainment and other factors — observable characteristics. But to attract customers you need to know how people think, what they value, what they actually do with their time, where they shop, how they recreate: basically how and why they make decisions. Decision making is a processes determined by an individual’s personality, interests and values.

Grouping people by their decision-making patterns means crossing demographic categories. This type of behavioral analysis is referred to as psychographics, or segmentation analysis. When is the last time you read an ad that completely resonated with you? When that happens, that company absolutely nailed the messaging to their target audience, which included you. They did it by understanding both the demographics and psychographics of their target buyer. You need to be able to do this in your business. Psychographic segmentation divides markets into groups based on social class, lifestyle and personality characteristics.

It assumes that what people do (recreate, vote, read, etc.) and what they buy (products and brands) reflect their characteristics and patterns of living. Psychographics looks at activity, interest and opinions, attitudes, personality, values and population characteristics. This information allows a business owner to match his value proposition to a target and assess whether he is delivering what that population wants or needs.

Psychographics also looks at groups of people based on their attitudes or beliefs. Sometimes referred to as "lifestyles," this category is of particular interest to marketers and advertisers. Psychographics usually builds on demographics (those quantifiable things like race, age, marital status, income, etc.) Let’s say you wanted to open an upscale restaurant. You choose a neighborhood and conduct a two-part market analysis consisting of two parts: demographics and psychographics.

Demographics will tell you the average age in that area and the percentage who are married, have a college education and have an income over $100,000 (among other things). Psychographics will tell you how many eat at restaurants, what types of restaurants and if they are willing to pay for good food or are busy with no time to cook. Getting this information is easier said than done. First you need to know your primary market area (the supply competitive market area and the demand competitive market area are sometimes different).

You can hire a consultant to do a segmentation analysis. This can be expensive but may be worth the cost to make sure you are going after the right target market, value proposition and messaging. If you don't you could find out the hard way, it may cost you more than the study. But, there are other ways to get information.

You can buy the data.

Nielsen Corp. has a company named Claritas Prizm. Mintel Academic offers yearly market research reports covering the U.K., Europe, the U.S. and international consumer markets for products, markets and demographics. Analysis includes market sizes and forecasts, market trends, market segmentation, competitive context, broken down segment performances, retail channels, consumer demographics and survey results; leading companies, brand share, marketing strategies and more. Passport offers a worldwide marketing database. This is especially good for the United Kingdom, Germany, the United States, Australia, China, Japan, South Korea and France.

You can collect your own data.

You can conduct focus groups, do surveys, collect info about your customers when at various points of contact. The point of all of this is that you need people to want and need whatever it is your company does — and you can't guess. Not getting this info and understanding it is, like the scene from the movie “Robin Hood: Men in Tights” when Blinkin, the blind man, is in a perch looking for strangers and Robin asks: "Blinkin, what are you doing?" Blinkin answers: "Guessing. I guess no one's coming."

"Getting Started" is an entrepreneurship column by the faculty of the W. P. Carey School of Business at Arizona State University. Mark Stapp is the director of the Master of Science in Real Estate Development program at the W. P. Carey School. First published, July 27, 2015.