The target customer is central to success. The needs that the organization chooses to address as they narrow in on the sweet spot comes from the target customer segment of the market. So who are these customers exactly and how do they influence the strategy?
Not all customers are created equal
That is a concept you surely know but may have difficulty applying. No one likes to walk away from a customer with a checkbook. But not all customers are profitable and not all customers are a good fit for what you do. In fact, having the wrong customers can cost you money.
Growing past your ability to scale
One of my clients was growing rapidly, over 30 percent a year. Yet, they were on the verge of imploding, as they had no infrastructure to support the growth. One of the reasons they had grown was their willingness to customize their work for every client. However, once in high-growth mode they were not able to scale.
Our work established a prioritization of customers based on three principles:
1) Which customers were profitable
2) Which customers they could grow with,
3) Which customers their capabilities best served.
By reviewing their customers against those criteria, they were able to develop a matrix of industries and customer requirements that allowed them to proactively target the best customers to maximize growth and profitability.
Once defined, they could provide flexibility for these clients within a pre-established range based on the similarity of their needs. Then they could take on other clients to the degree that they fit the model they developed for their best customers and they did not have to customize further to meet their needs.
Accurate data is key
The key to being able to define the target customer is having accurate and specific data on customers. The three key factors to assess are:
- Which customers are profitable and why?
- Which customers can you grow with?
- Which group of customers can you best satisfy?
Few companies like to leave any customer off the table. It may be more helpful to think of targeting customers as a matter of degrees, rather than in or out. Plot the array of potential customers into a bull’s eye target (imagine a dart board). At the center is the prize, the smallest circle with the highest point value. The organization’s customer target is similar; it is often a well-defined group that provides a very significant outcome in terms of profitable volume to the organization. It is at the core of the defined market. It is this very specific group that has the most influence on the organization in terms of where it is going and how it operates. This is the group of customers it most wants to please and develop long-term relationships with.
Two levels of customer criteria
The criterion that defines the target customer has two levels:
Potent prospects: Those things that help a salesperson identify whether the organization might be a target form generally-available information such as type of business or industry, private or public ownership, or size of company. This data doesn’t require information directly from the prospect, as it is usually publicly available.
Qualified prospects: The other criterion captures insights that must be examined in partnership with the prospect to determine if they are a good match with the organization’s strategic focus.