I was listening to the superb and insightful audiobook recently – Good Strategy/Bad Strategy by Richard Rumelt and one quote really stuck in my mind:
“Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests. Strategy is at least as much about what an organization does not do as it is about what it does.” — Good Strategy/Bad Strategy, Richard P. Rumelt
I find it a fascinating idea to focus on what not to do as a business.
In his book Rumelt argues that lofty goals such as “becoming the best” or an “industry leader” are not good strategies. That is because if you think about it in reality there is no “best” solicitor, accountant, marketer, website designer, phone, car restaurant etc. This title is completely arbitrary and the real value of a product or service lies in the eyes of the beholder. Ultimately it is the market that decides which products and services succeed or fail.
One of the buzzwords of the last few years in business is “defining your niche” or “find your niche” or “verticals” in the tech world. Firstly, what is a niche? It is defined as:
“A small but profitable segment of a market suitable for focused attention by a marketer”.
It occurred to me in relation to the quote above that it is equally important, and you could argue more important to define what your non niche is or as I would put it in more simpler terms who are the customers you don’t want?
I know this sounds counter productive to say you don’t want customers; we all need customers after all. However, this is exactly what the most successful businesses do. They understand that you cannot serve every customer and it is foolish to do so. A fantastic example of this is Ikea. You don’t go to Ikea looking for high end, hand made furniture for example. Everyone who goes there knows that you are going to buy it flat packed and you will build it yourself (or pay someone/get friends & family to do it!). Don’t get me wrong, I’m not saying you get a poor product from Ikea, I’m a big fan of Ikea and think their products are great and clearly there are a lot of other things Ikea do extremely well of course – marketing, sales, logistics, product design and innovation, but they are experts at defining who their customer is and who it isn’t.
Another example is Apple, their products appeal to customers who desire quality design, aesthetic visual appeal and a top end price point also.
A great local examples of this is www.lowdenguitars.com in Downpatrick. They are world class makers of acoustic guitars, recently agreeing to a partnership with Ed Sheeran on a range of guitars. Note they don’t make any other type of musical instrument, they specialise in guitars only and produce quality products.
It’s really important to define what types of customers you won’t take on or deal with or who your product isn’t for. I would say also this is easier in a service based business as if you sell a product in theory anyone could buy it. But again that is a risky proposition as most successful products are designed for specific customers or customer issues in mind. Take the Dyson hoover for example, it is designed and priced not to appeal to everyone who wants a hoover and Dyson has been incredibly successful at selling and marketing its products.
It can be easy to say yes to every customer, but it requires discipline to say no to some customers and if this is done successfully, I believe you will end up with a more profitable business as you will be able to focus on delivering a better product or service to those who do want it.
Here are some ideas that can help you define who your non customers:
· Accept that no business can afford to target everyone
· Create prices, terms and conditions for customers that they must agree to if they want your service or product. This could be something as simple as getting a 50% deposit upfront before you begin working with a customer. Then you will know anyone who doesn’t do this isn’t a customer you want to take on. For example our firm won’t take on a client unless they agree to paying by direct debit on a monthly basis as this works well for us and the client. We don’t take on clients who don’t want to use Xero or cloud accounting apps either as we are experts in Xero and don’t want to use other accounting software as we know using Xero with our clients allows us to provide our best service.
· Think about customers who didn’t sign up to your service or buy your product recently – list their reasons as best you can and analyse this. This can provide key insights and help you understand better the reasons customers refused your product or service and help you identify customers who may not have been a good fit anyway.
· Say no to customers who you know either don’t fit your criteria or are unwilling to accept your terms.
· Think about your best customers and list the reasons they are your best customers – that can help build a list of criteria for best fit for you and equally best non fit.
Over the last few years, this idea has worked very well for our business as we have clear criteria of the type of client we want to work with and what we are not willing to accept. This means we don’t take on every client we meet and that is fine for us.
Lastly it’s important to realise that you cannot get this right 100% of the time. There is always going to be customers who you agree to take on or who buy your product that are not a good fit but you didn’t realise it at the time. But if there are more customers who are a good fit, you are going to be able to have a more profitable business, with more time to serve your best customers who you like working or love your product rather than trying to serve every customer who you meet.