Choosing target markets and market segmentation have always intrigued me. Although there are many ways to think of it, I had an epiphany as I reread one of the classic strategy books over the weekend, the book is “The Discipline of Market Leaders” and is available at Amazon through this link.
In the book the authors claim that to be a market leader you need to focus and organize around one of three distinct principles that customers value.
- Operational Excellence, BEST TOTAL PRICE. You are middle of the market (or lower) at the best price with the least inconvenience. Low price, hassle free service, think Wal-Mart
- Product Leadership – BEST PRODUCTS. Offer products that push performance boundaries. Value Proposition is “we offer the best products, period!” Continuous innovation, they will obsolete their own products. Think Apple and Nike
- Customer Intimacy BEST TOTAL SOLUTION. Delivering NOT what the market wants, but what individual customers want. They do NOT pursue one time deals; they pursue long term, mutually profitable relationships.
Selecting a Value Discipline in which to operate is a strategic goal, it is a central act that shapes every subsequent plan, in short it is strategy. The authors argue that “If a company is going to achieve and sustain dominance, it must first decide where it will stake its claim in the marketplace and what kind of value it will offer its customers.” The choice of a value discipline shapes the company’s subsequent plans and decisions, coloring the whole organization, from its culture to its public stance. To choose a value discipline is to define the very nature of a company.
- If your customers love your consistency and speed of your products, you’d better be stellar at the core processes of product supply, expedient customer service and demand management. You will fine tune your structure to empower the people who can make a difference in producing value. You’ll design your management systems around measuring and rewarding what’s most important; and you’ll make sure your people are indoctrinated with your specific definition of success.
- If you are a product leader, such as Apple or Sony, the critical processes include invention, intimately understanding your customers, product development and market exploitation. You’ll have management systems that are results-driven, that measure and reward new product success, and you won’t punish failure.
- For customer intimate organizations you will have a business structure that delegates decision-making to employees who are close to the customer; you will reward the sales force for how long customers remain with the company.
Okay, so we’ve established the three types. But, the real crux of the matter from a sales and marketing perspective is how do you attract the right type of customers?
- Don’t try to fit a round peg in a square hole. What do I mean by that? Well, if you are organized in one discipline, say customer intimacy, you should train your sales reps to ask questions to the prospect to determine just what type of relationship they want to have with you!
- Just because you want customers who value customer intimacy it does not mean that every prospect you get will actually want that kind of relationship. So, establish a process to qualify them out!
- Understand that attracting a customer who desires one type of relationship when you offer another is a disaster waiting to happen! You’ve all heard about the “customer from hell”, well there is a good chance this one might be it since you simply will only disappoint them!
- Train your sales people that there is such thing as bad business. Many sales people don’t know how to differentiate between a good customer and a bad. Train them and reward them for successfully selling to the right kind of customer. This will be difficult in the beginning, but I can tell you from experience that in the long run your reps will be much more successful and much happier when they bring in the right business.
I am curious what people have to say about this topic. It certainly provides us much to think about.