Calculating buying capacity and marketing capacity may seem difficult, but it's easy even for the mathematically disinclined. Every business has a limited buying capacity. Understanding your customers' buying capacity helps you make the most of your marketing capacity. Unfortunately, a recent report released by NetProspex reveals that few small businesses gather the information needed to estimate the buying capacity of their customers.
Estimating Buying Capacity
In order to assess the buying capacity of your customers, you need to know: - Full range of product(s) your customers need - Needs your products satisfy - Level of priority customers place on getting your product(s) - Buying cycle of your product(s) - Size of individual businesses - Revenue generated by each business - Health of each business What To Do With That Information First, you need to generalize these factors across your customer base. You do this by assessing the portion of revenues customers are likely to spend on your products and services. This is based on their full range of needs, the needs you can satisfy, the priority of those needs and the buying cycle. This produces a baseline estimate of the percentage of revenues your customers can devote to your products and services. Then, you need to apply this percentage to individual customers. You start by weighing this percentage based on the size of the business. For example, larger businesses can devote more revenue to their expenses, so you should increase your estimated percentage in those cases. Next, weigh the modified percentage based on the health of the business. Unhealthy businesses have more expenses, so you should decrease your estimate. Finally, multiply the individualized percentage with the customer's total revenues. This gives you an estimate of the buying capacity of each customer.
Allocating Marketing Capacity
Just as your customers have a limited buying capacity, you have a limited marketing capacity. You don't want to lose customers because you ignore them, but you don't want to waste resources by selling to those already above their buying capacity. Consider your marketing resources and estimate your capacity to allocate marketing resources, maintaining maximized clients, maximizing existing clients and acquiring new clients. Compare each customer's capacity to the amount they are already buying and classify your customers based on the marketing priority they represent. Your goal is to do the following: - Maintain customers ** at or above capacity - **Increase purchases of customers near capacity - Increase purchases of customers below their buying capacity - Acquire new customers Calculating buyer capacity takes a little time and math. However, time spent hovering over your calculator and double-checking your figures is well spent towards the health of your business.