Why Understanding Why People Buy is Critical to Your Business Model
When assessing a business model, it’s important to start with understanding why people buy and quantifying the total addressable market. This provides a clear direction on how to build a go-to-market plan that caters to the different psychology strata of your target audience, while also being mindful of acquisition costs.
To begin, let’s explore why people buy. People buy products or services because it solves a problem or satisfies a need – a Job to be Done. It’s important to understand what need or problem your product or service is solving and who it is solving it for. This will help you define your target audience and create a marketing strategy that resonates with them.
Once you have a clear understanding of your target audience, you can start quantifying the total addressable market. This involves determining the number of potential customers who could benefit from your product or service, as well as their willingness to pay for it. You can use market research, industry reports, and customer surveys to estimate the size of your market.
With this information in hand, you can now start building a go-to-market plan. This plan should cater to the different psychology strata of your target audience. For example, some customers may be motivated by a fear of missing out, while others may be motivated by a desire for convenience or status. It will never b this simple. The deep sub-conscience traits are what drive decisions or at the least, limit who can be motivated to buy. Your marketing messages and tactics should speak to these motivations and emotions, by segment. Starting with a reasonable number of segments is important. Some companies I have encountered have hundreds of segments of customers. I have seen very large companies with 5 to 10. Verizon at one point had seven.
Different segments of customers help you define acquisition cost much better. Having only one message is like selling one plate of food to anybody who walks in your restaurant. Some people may one options.
It’s important to be mindful of acquisition costs when building your go-to-market plan. Acquisition costs refer to the expenses involved in acquiring a new customer, such as marketing and sales expenses. By understanding the psychology strata of your target audience, you can identify which marketing channels and tactics are most effective and efficient in acquiring new customers. Most important, he will understand the messaging that maximize his conversion rate thus reducing overall cost of acquisition. Only one message is like telling your audience that they have to fit to your limitations while their needs may be quite diverse.
Take for example why people buy electric cars. Some don’t want to stop at gas stations and some want clean energy. One represents the majority.
In conclusion, assessing a business model should begin with understanding why people buy and quantifying the total addressable market down to named details. This provides a clear direction on how to build a go-to-market plan that caters to the different psychology strata of your target audience, while also being mindful of acquisition costs. By following these steps, you can create a business model that is not only successful but also sustainable in the long run.