Why is it important to focus on customers in business? How can you differentiate from your competitors in the market?
Your customers should be the main focus of your company. They’re the people giving you profit, so you should cater to their needs. That being said, you should also find your niche that shows your customers you stand out from competitors.
Here’s why you need to focus on creating a customer-focused company that values relationships with consumers.
Don’t Build What You Want, Build What Your Customers Want
In The Road Less Stupid, Keith Cunningham argues that doing what you love and expecting to somehow make money on it is fundamentally a bad idea. If you want to make money, you need to find out what your customers love (and are willing and able to pay for) and deliver it efficiently enough to make a profit by being a customer-focused company.
(Shortform note: As you investigate what your customers want, it’s often beneficial to observe them in the field. As innovation management expert Vijay Kumar explains in 101 Design Methods, watching users in action often reveals insights into how they use your product, what they like, and aspects they struggle with that they wouldn’t bring up if you just talked to them about it.)
For that matter, if you want to make more money or grow your business, Cunningham says you’re usually better off researching why people who know about your product aren’t buying it and addressing their concerns, rather than expanding your advertising to reach more people. If your product is making a bad impression, it’s stupid to expand your advertising, because then it will just make a bad impression on more people.
However, if there’s a grain of truth in the philosophy of doing what you love, it’s that you have to start with an understanding of your own resources and capabilities (which probably align with your interests) so you can make plans that you can realistically execute as you consider ways to win new or repeat customers. As Cunningham explains, starting with a realistic understanding of what you can do now helps you avoid another common business misconception: the idea that you should first identify your goals or desired end-state, and then plan how to achieve them. This philosophy implicitly assumes that you have the resources to execute any long-term vision that you can plan. And since you don’t have infinite resources, that’s a stupid assumption.
|Maximizing Your Strengths
Depending on your product and the reasons that prospective customers are hesitant to buy it, you might be able to resolve the problem by appealing to a different customer base rather than changing the product itself. This goes along with understanding your capabilities so you can plan realistic solutions: You need customers whose needs match your strengths so you can meet or exceed their expectations.
It’s also a business application of the principle of strengths-based self-improvement, which Tom Rath discusses in Strengths Finder 2.0. Rath points out that you can’t realistically fix all your weaknesses, and even if you could, it’s more productive to hone your strengths than to fix your weaknesses. This is because you’ll make more progress with the same investment of time and effort in areas that you’re naturally good at than in areas where you’re naturally weak. Furthermore, Rath explains, many traits are weaknesses in one context but strengths in another, so trying to fix a perceived weakness might make you forfeit what could have been a useful strength.
But even if you end up courting a different customer base, it might still behoove you to understand how your current customer base perceives you. In Positioning, Al Ries and Jack Trout elaborate on Cunningham’s assertion that you need to understand where you are now before you can make realistic plans to get to where you want to be: People outside your company often perceive your company differently than you do, and it’s possible that your desired future customer base will see your product differently than you expect them to. By understanding how current customers perceive you, you might get a firmer grasp on how your desired future customer base will perceive you and how to best appeal to them.
Trying to Be Everything to Everyone Instead of Finding Your Niche
As you tailor your product to your prospective customers’ needs and desires, Cunningham cautions you not to make bad mistakes like ignoring competing products or trying to make your product appeal to everyone instead of to a focused target market.
He observes that even within a target market, there are three things you can focus on to differentiate your offering from the competition: low cost, high quality or performance, and customer relationships (such as providing exceptionally fast service or making every customer feel like she’s getting special treatment). In Cunningham’s experience, successful companies stand out as superior in one of these three areas, keep up with competing products in a second area, and neglect the third area almost entirely. Meanwhile, products and companies that try to focus on all three tend to die off because they’re spread too thin and not adequately differentiated.
(Shortform note: Some analysts might disagree with Cunningham’s assertion that you’ll be more successful if you limit your focus to excelling in just one of these three areas. For example, in Ten Types of Innovation, Larry Keeley and his co-authors argue that to be successful, a new product typically needs to excel in at least five out 10 standard categories. Product performance and customer service are two of Keeley’s 10 categories, while three other categories (your company’s capabilities, organizational structure or efficiency, and type of revenue stream) would dictate your product’s cost.)
|The Importance of Positioning Your Product in Its Own Niche
In Crossing the Chasm, business innovation consultant Geoffrey Moore advises you to tailor your product exquisitely to the needs of a particular niche market whenever you’re introducing a new product. The reasoning behind his recommendation provides some complementary insight into Cunningham’s ideas.
As Moore explains, every product and company occupies a certain position on the market landscape in customers’ minds. For example, maybe customers think of your product as the premium model, the over-priced knockoff, the best-bang-for-the-buck, or the women’s version. Your marketing can influence customers’ perceptions to some extent, but not nearly as much as word-of-mouth from other people with similar needs or tastes.
If you make your product a balanced mix of everything, as Cunningham warns you not to, it will be hard for potential customers to mentally place your product on the market landscape, because it doesn’t stand out in any particular way. This makes them less likely to remember it, let alone buy it. But if you tailor it specifically to one niche (especially a niche that doesn’t have a clear market leader yet), it’s easy for people to remember your product as the leader in that niche. And in a small, close-knit market sector (for example, the market for radiation-hardened inspection cameras, or the market for sushi in a certain city), it’s easier for word-of-mouth to get around, which will amplify the effects of your marketing. This helps to explain why companies and products that try to appeal to everyone tend to die as Cunningham observes.
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Here's what you'll find in our full The Road Less Stupid summary:
- That the secret to financial success is to avoid making stupid mistakes
- The most common stupid mistakes executives make and how to avoid them
- Why doing what you love does not always translate to making money