Customers are the magic ingredient for any successful business. Seems obvious? Despite the obvious importance of the customer, very few businesses know their target customer. They know that a set of customers have bought from them. Yet, they often don’t understand why the customer bought from them. Is it because of my quality? Is it because I’m making something that’s different from competition? Is it because my price is low? Is it because there are no alternatives? Is it because I’m geographically close to my customer? Or is it God’s blessings?
Many businesses don’t have answers to these questions. Or at least don’t have answers backed up by evidence/data. If there are no credible answers to these questions, it’s unlikely that you’ll have a sustainable competitive advantage.
Successful companies start by creating products or services which appeal to a limited set of customers. The product is built around the customers need. In contrast, many businesses try to develop products and services which they think will appeal to a large customer base. Their answer to the question “Who is your ideal customer” is “Everyone!”. They hope that the availability of a wide variety of products and services will at least appeal to some customers. And will be enough for them to make good revenues and eventually profits. An example of this ideology is Maruti. While they did well in the economy segment, they could never crack the premium car buyer segment. Even when they introduced expensive imported models. Remember the Kizashi Sedan? They weren’t many takers for an uber exclusive limited numbers sedan from the same place selling cheap hatchbacks? Only after they’ve separated distribution under NEXA cars have they started to taste some success. The next step is likely to be a separate NEXA brand based on different quality, features and technology. That’s effectively a new business.
The problem with trying to serve everyone is that you land up serving no one. The clients and customers who would value your product or service the most, are forced to wade through a confusing array of products before they get what they want.
So, what’s the alternative?
Know your customer intimately. That means understanding why he buys your product over your competitors’. Understanding what product attribute changes will make him love your product even more. You need to understand the drivers of a purchase decision. What are the key requirements of a client that your product meets? Price? Availability? Eco-friendliness?
The other aspect is having a tightly defined product or service. Don’t go offering anything and everything to everyone. That means you say no to some customers, either because you don’t have the right product or because they are not the right customer for you. The customer might not offer you long-term value or simply not be profitable to work with. Having a tightly defined offering requires courage. There’s the risk that the product doesn’t click. Yet, in that case, modify your product or service attributes. And be sure that you’ve not erred in understanding your customer. Apple could easily have many different variants of the iPhone. Instead, they choose to place their bets on 1 model at any point in time.
All this doesn’t mean that you don’t innovate and say no to everything that doesn’t fit your tightly defined product. You should never keep your eyes closed to product innovations. Steve Jobs called the Corning CEO 6 months before the first iPhone launch in 2007. He wanted a scratch and crack resistant screen. Corning delivered. They saw a valuable customer and the potential in a new product. And they were right. Gorilla Glass has been used to cover more than 7 billion touchscreen phones by 40 different manufacturers.
There are plenty of businesses which do decently well without laser focused product offerings and selling to whoever is willing to buy from them. Yet, to go to the next level, those businesses need to start reducing their product range and tightly defining their customer. And even go as far are ‘firing’ existing customers. That will help them grow into a larger business. And more importantly keep you happier. We have a set amount of resources. With a sharp product and customer definition, you’ll have more time to spend on your other pursuits. While your business growth increases exponentially.
If you liked the article, help spread the word using the buttons below.