Small Business Financial Article

Why You Must Choose Your Customers and Narrow Your Focus

Why You Must Choose Your Customers and Narrow Your Focus

The title of this article comes from a great book that I recommend to anyone with aspirations of achieving uncommon success in their business. The book is,The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus and Dominate Your Market, by Michael Treacy and Fred Wiersema.

It was written over two decades ago, so it might be slightly outdated. Still, its premise is as valid today, if not more, so than it was then: Successful businesses - those which become the market leaders - are exceptional at delivering one type of value to their chosen customers.By focusing their energy and resources on a single discipline and increasing its value to their customers year after year, they can remain exceptional in their customers’ eyes, ensuring sustained growth and profitability.

The book focuses on three value disciplines that all businesses must be able to master, but they must choose one at which to become exceptional:

Product Innovation: Be able to keep their products relevant, if not cutting edge, in a dynamic and evolving marketplace. Think Apple.

Operational Excellence: Offer the lowest prices in the most convenient way. Think Amazon.

Customer Intimacy: Offer tailored, customer-focused solutions that meet the specific needs of a targeted group of customers. Think Nordstrom.

Becoming exceptional at any of the three value disciplines will lead to the same outcome expected by market leaders - creating stark raving fans out of your customers. Think of any market leader, and you can usually identify what it is that they do better than anyone else. There is a unique value they provide that sets them apart from the competition. And they constantly strive to increase that value year after year.

By choosing your customers and narrowing your focus, your business will be better positioned to overcome the common mistakes preventing many companies from becoming market leaders.

Not having a clearly defined "ideal" customer

When starting a business, there is a great temptation to try to be all things to all people and cater to any warm body to create as much opportunity for customer growth as possible. In reality, this strategy can have the opposite effect and prevent the business from establishing a true growth pattern:

  1. It almost guarantees inefficiency as energy and resources are spread across less productive or profitable business lines.
  2. It perpetuates business-wide mediocrity as the opportunity to excel in any market segment is diluted by inefficiency.
  3. And most importantly, the customers you really want to attract won’t see how your business offers any unique value that warrants their patronage.

You must choose your ideal customer and narrow your focus to offer uncommon value, even if it means gaining one customer at a time. Done right, you will create one stark raving fan at a time, which will quickly blossom into a base of ideal customers.

Not having a clear and concise message

If you can’t answer the one question on the mind of any potential customer - "Why should I do business with you when dozens of other companies offer the same product or service?" - in a concise and compelling way, it probably means you don’t clearly understand your target buyer, the problem your product or service is supposed to solve, or how it can solve it better than anyone else. These three key issues go to the heart of a value proposition which is a very brief (one to two sentences) summary of the most persuasive reasons people should notice you and answer your call to action.

Whether it’s a single sentence at the top of your website’s home page or from your lips as you ride an elevator with a potential customer, you will lose opportunities if you can’t clearly describe the promise of value you can deliver.

When you truly know your customer and the problems they want to solve, and you’ve narrowed your focus to the value discipline that you deliver better than anyone else, your value proposition practically creates itself.

Not deeply connecting with your customers

The true market leaders, who perennially dominate their markets, offer something that most of their competitors can’t match - a real and deep connection with their customers. Even if you have clearly defined your target customer and crafted the most compelling value proposition to attract them, if you fail to find ways to increase the value of your relationship with them, they will eventually slip away.

The most successful companies make customer loyalty their number one priority. Why? Because companies generate the greatest profit when they can increase the Lifetime Value of a Customer - through repeat sales and referrals. Otherwise, a business must spend most of its time, energy, and resources acquiring new customers, which is the least profitable activity.

You need to know your customer and narrow your focus to a value discipline that not only differentiates you in the marketplace but must also be constantly refined, improved, and communicated so your customer knows you know them.

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