Crunch the Numbers, Expand Your Business
Last month, I discussed the idea of market size and evaluating the concept of MCE (Marketing Circle Elasticity)—whether you can expand the size of your market.
This month, I’ll use these ideas in looking at your consumer market and how it impacts your business.
What is happening in the market? Where is the growth potential? If you’re planning to grow, where will that growth come from? Is the high-end customer buying more expensive products? Or are a larger number of customers buying lower-priced video displays? Is your growth going to be obtained by getting more market share, expanding the size of your market, or both? Is the market elasticity for a high-end customer there, or is that market contracting?
Let’s focus on the high-end consumer.
Examine Market Data
In determining size of your market and its growth pattern, look at the public data available, which can give you vital information for making business decisions. Evaluating these market trends is extremely important, and you can look at them with a telephoto lens in your particular market segment.
For example, let’s determine what is happening with luxury purchases. Are your potential customers in high-income brackets spending more or less today than they did last year? Are they holding back; do they have low confidence in the economy? Or is the segment growing significantly? Are the potential customers making more money than they were last year?
To get answers, analyze your customers’ habits with respect to the class of products they might purchase and the stores where they would purchase these products. If your class of consumer is more inclined to purchase at Saks and Neiman Marcus, examine the sales of that category of department stores and compare to that of the lower-end stores, like Wal-Mart.
Wal-Mart sales growth for October was estimated to be 0.5 percent, and 1.5 percent for the quarter. If these are your customers, clearly their spending is almost flat. If your class of customer is more high-end (likely so), the results over three recent months at Saks have been far better, with increased sales of 8.8 percent—a significant increase. Tiffany reported sales growth of 9.0 percent; Neiman Marcus had sales growth of 6.8 percent during a recent quarter.