When considering customer pains, it’s important to ask questions such as: What does “too costly” mean to your customers—does it refer to time, money, or effort? What are their frustrations, annoyances, or challenges? Are there issues with current solutions that leave customers dissatisfied, such as missing features or performance issues?
Business models are crucial for SMEs as they help outline how a business delivers value to customers and generates profit. A clear business model ensures that SMEs not only meet customer needs but also achieve long-term success by creating sustainable outcomes.
By crafting a solid business model, SMEs can connect their offerings with the market’s demands and position themselves for growth. SMEs can define their business model by answering a few key questions:
- What are you offering your customers? This is the core product or service. Understanding the problem it solves or the benefit it provides will help shape the value proposition.
- How will you deliver the value? This involves the methods and processes, such as distribution channels or customer service, that ensure customers get what they need.
- Why will your business generate profit? Identifying revenue streams—whether through sales, subscriptions, or other methods—is key to understanding profitability.
- Who are your customers? Knowing your target customers allows you to tailor marketing, sales, and product strategies to meet their needs.
The magic triangle for SMEs
The Magic Triangle framework is a handy tool for breaking down the key components of a business model. It focuses on four main areas: First, who—understanding your customers by identifying their needs, behaviors, and preferences. Next, what—ensuring your product or service addresses a specific problem or offers a better solution than competitors. Then, why—knowing your revenue streams and understanding how they contribute to profitability, including your pricing and cost structure. Lastly, how—planning how you interact with customers, whether through online platforms, physical stores, or customer service.
Customer segments for SMEs
Segmenting customers helps SMEs tailor their approach and create better offerings for each group.
Segmenting your customer base helps SMEs direct their marketing, personalize offerings, and allocate resources efficiently. Customer segmentation can take various forms, such as focusing on a broad market with similar needs or targeting smaller, specialized groups. For example, a cleaning service might target a mass market, while an eco-friendly brand could focus on sustainability-conscious consumers. Another example is a gym that offers different membership packages for distinct fitness levels. Or, a catering company that also offers event planning services might serve a diversified market, where each customer group has very different needs. Some businesses, like an online marketplace, may cater to multiple interdependent customer groups, such as both buyers and sellers.
What makes your customers happy
To identify customer pains and gains, SMEs can use trigger questions that help uncover the specific issues and desires that drive customer behavior. When considering customer pains, it’s important to ask questions such as: What does “too costly” mean to your customers—does it refer to time, money, or effort? What are their frustrations, annoyances, or challenges? Are there issues with current solutions that leave customers dissatisfied, such as missing features or performance issues?
Identifying the difficulties your customers encounter, such as understanding how things work or getting specific tasks done, can also highlight pain points. Additionally, understanding any negative social consequences or risks your customers fear, such as loss of trust or financial concerns, can help refine your offering. Consider what keeps your customers up at night and what barriers are preventing them from adopting current solutions, whether it’s upfront costs, a steep learning curve, or other obstacles.
On the other hand, identifying customer gains involves understanding what would make life easier or better for them. What savings—whether in time, money, or effort—would delight them? What quality expectations do they have, and how could your product exceed those expectations? What features or aspects of a current solution do customers enjoy, and how can your offering provide more of these benefits? Consider what would make your customer’s job or life easier, whether it’s better design, lower costs, or increased services.
By addressing both pains and gains, SMEs can better tailor their value propositions to meet the needs and desires of their customers.
Understanding the social benefits customers are seeking, such as increased status or recognition, is also key. Finally, look at what customers dream about or aspire to achieve and how your product can help them reach those goals.
Identifying profitable customer segments
To find profitable customer segments, SMEs should begin by analyzing customer behavior to understand the problems they face and how your product can solve them. It’s also important to assess how your offerings compare to competitors. Gathering direct feedback through surveys and interviews helps identify specific needs and what customers truly value. When assessing potential segments, make sure the market is large enough to support growth but not overly saturated with competition. Additionally, evaluating the lifetime value of customers, including repeat purchases and referrals, provides insight into which segments offer the highest return on investment. Focusing on these profitable segments allows SMEs to ensure they are targeting the right customers for sustainable growth.
Refining your business model is also essential for long-term success. SMEs can create detailed customer personas to refine marketing strategies and product development, ensuring that offerings are aligned with customer expectations. Using data analytics tools like CRM software helps track customer behavior, segment audiences, and identify trends. Testing new offerings, marketing strategies, or pricing models is key to staying competitive, and regularly iterating these strategies ensures continuous improvement. Fostering partnerships with complementary businesses can expand reach, share resources, and enhance the value provided to customers.
Pain relievers and gain creators
To strengthen your market position, SMEs should focus on how their products or services can ease customer pain points and add value. Pain relievers are the ways your business helps customers solve their problems. For example, offering a quick and reliable service can reduce customer frustration, while an affordable solution can help customers save money.
On the other hand, gain creators go beyond simply solving problems by offering added benefits that delight customers. This could include providing better quality, more convenience, or offering unique perks that customers didn’t expect. By delivering both pain relievers and gain creators, SMEs can create compelling value propositions that attract and retain loyal customers.
Source: The insights and framework for identifying customer pains and gains are adapted from “Value Proposition Design” by Osterwalder, Pigneur, Bernarda, and Smith (2014), Wiley & Sons Inc., NJ.
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