Small business support: Attract new customers

Going after new customers is a useful strategy if you're having trouble getting more sales from your existing customers. It can also help you reduce your reliance on your existing customers and get more return from your products or services.

However, winning new customers can be expensive as you'll need to invest time and money to make it work. You'll also need strong sales and marketing skills. If yours need improvement, take a look at our free business skills training course.

How to find new customers in your existing area

There are four steps to follow:

1. Divide potential customers into segments

• Placing potential customers into groups with similar needs allows you to target your products and services to more people more effectively.

2. Find out how your potential customers buy

• How do people get to know about what you offer? What publications do they read? Do they go to trade fairs? Do they travel far to buy? Once you know the answers to questions like these, you'll be able to adapt your marketing strategy to suit your new audience.

3. Know your competition

• Who are they? How are their goods delivered or distributed? What do they offer that you don’t? What could you do better than them?

4. Target the right customer segments

• Few businesses have the resources to go after everyone who might buy your product so chances are you'll need to prioritise who you should target. Use a simple scoring system - for example, one for the least valuable and 10 for the most valuable - and evaluate each of your potential customer segments rationally.

When it comes to expanding your business further afield, you can be as bold or as cautious as you like. For example, you could minimise your risk by setting up shop in a nearby town where the inhabitants are similar to your existing customers. At the other end of the scale, you could look at opportunities overseas.

Either way, you'll need to:

• Get to know your new market. You should research potential customers, competitors and any barriers to competing successfully with the same level of diligence as you applied when you first set up your business
• Decide which market(s) you’re going to target. Create a shortlist, prioritise it and go after the market(s) that offer the most potential
• Determine the best routes to market. For example, you could go through a local agent or distributor, approach customers directly or team up with another local business. Each of these approaches has its risks and rewards, so you’ll need to decide which is right for you

If you're looking to expand into international markets, you'll need to be prepared to deal with language, legal and cultural issues. And remember, exporting is just one way of expanding abroad. Here are three other options you might wish to explore.

Licensing

This involves a contractual agreement between you and a foreign company, which manufactures, distributes and/or sells your product or service. It offers the following advantages:

• Fast entry into the market
• No need for capital investment to establish manufacturing operations abroad
• Quick returns in comparison with other methods

On the downside, preparing the licensing agreement can be time consuming and costly. You'll also need to give up control over the manufacturing and marketing of your goods. And if your partner ends up becoming your competitor, they'll be armed with an in-depth knowledge of your business.

Joint venture

This is a contractual arrangement with a particular business partner. There are two basic types:

• An equity partnership, where the partners are equal
• A non-equity partnership, where the host country partner contributes a greater percentage of equity in the joint venture

A joint venture is the only legal way for a foreign company to set up operations in some countries. The other advantages of joint ventures can include:

• More control over your foreign operations
• Extensive local knowledge, thanks to your host country partner
• Being able to take advantage of your partner's business and political contacts

Be aware that joint ventures require more investment than licensing as you'll need to commit resources to areas such as training, management and the transfer of technology. Cultural and language differences can also cause problems between you and your host country partner.

Setting up an international base

If you're committed to setting up production facilities offshore, you'll need to either set up your own or sub-contract your manufacturing to an assembly operator. Either way, this approach requires significantly more investment and carries more risk than joint ventures or licensing, but it can offer you:

• More control over your international operations
• Lower transport costs
• Exemptions from the tariffs or duties that you'd have to pay if you imported your goods
• Lower production costs
• Foreign government investment incentives, such as tax holidays.

If you're looking for ways to grow your business, you might also want to consider:

Getting your customers to buy more

Planning your future

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