Recently, I spoke with some young entrepreneurs who invested in a high end salon and spa in a posh area where there are many gated subdivisions with class A residents. They invested on premium pieces of furniture, imported consumables and priced their services accordingly. They found out soon enough that the customers who checked them out found their services too expensive and, when asked about the profile of these customers, it was revealed that those who tried their services were a different market from the expected residents in the area, as these were people who worked in offices in the nearby community.

I asked if they checked foot traffic and the profile of potential customers as well as the other tenants beside them before setting up the business and they said no. Apparently, they had this idea in their heads of something they liked (a high-end spa and salon) and when a space became available they immediately jumped into creating something not based on due diligence. These young entrepreneurs clearly had some financial resources for them to have made decisions based on impulse and it made me think how things might have been different if the money for investment wasn’t so readily available.

There are many cases where availability of investment funds (or lack of it) impacted serious decisions that could make or break a business. A popular online business which was able to gather lots of funds from venture capitalists for its pioneering efforts, was said to have lost its creativity or resourcefulness (over-spending in marketing for example) because money came in too fast and too much, resulting in falling stock prices. On the other hand, a local entrepreneur whose car repair business was near bankruptcy was forced to make the most of it by photocopying a dozen flyers and giving them to a specific target: He specifically chose to approach owners of cars with dents in his neighborhood. It was all he needed to revive his business.

On the other hand, another entrepreneur who owned a food cart also thought of producing flyers for distribution when she didn’t have the statistics to make a sound decision as to what the problem really was. She did not have answers to my questions on what time customers went to her cart (lunch, merienda or take out after work), or how many of them came at a time (solo or group). Assuming her cart was in a good location, was the food priced right and tasted good? She would, of course say yes, without verifying from her customers if this were indeed the case.

It is interesting to find out how people make decisions based on the money in their pocket or how many pledges were made. What solutions would they think of based on their perceived issue or problem at hand?

In the case of the high end spa and salon, they planned to get celebrity endorsers to attract the higher end crowd. They were going to offer loyalty cards for discounted rates to address the complaint on high price. They also wanted to offer home service to residents of the subdivisions. They had a menu of sales promotional activities and planned to deploy one or all in hope something clicks – quite an expensive way of solving a problem they could not define clearly.

People perceive something as expensive when they do not see or feel (or taste in the case of food), the value of what they are paying for. It is possible that there are inconsistencies in the branding or communications or simply, a reality check might show a poor value proposition, where the product is not good enough for the price being paid. Put another way, not having a clear understanding or knowledge of who your target market is will lead to an imperfect value proposition and accordingly inconsistent or confusing marketing communication and implementation of marketing tasks.

I have seen marketing students who are also more focused on form rather than content when doing their final projects for marketing 101. Communications or sales promotions objectives are mistaken for marketing strategy objectives as if the intention of the exercise was to check students’ knowledge of advertising, radio, or outdoor billboard rate cards.

In the real world of business, the risks are of course different, and the tuition fee for mistakes may be expensive. For challenged businesses, knowing what the problem is or even admitting there is a problem may be the first step for a turnaround.

Chiqui Escareal-Go is the CEO and Chief Service Strategist of Mansmith and Fielders, Inc. For inquiries, please email info@mansmith.netor call (02) 584-5858 or (02) 412-0034.