Don’t be afraid to give up the good to go for the great. — John D Rockefeller
Opinion by Phillip Chichoni
Last week I met a young man, Jeffrey, who was one of my first clients when I started business planning consultancy in 2007. I clearly remember Jeffrey because he had big dreams. His very first project was greatly ambitious. He wanted to supply some eco-friendly fuel to households all over Africa, that were facing challenges accessing the electricity grid. We are talking of hundreds of millions of people here.
Although the project failed to expand as fast and as widely as Jeffrey desired, he did not stop dreaming big.
He is running an IT distribution company, which he sees supplying components all over Africa in the near future. But there is one lesson that Jeffrey has learned on his adventurous entrepreneurial journey.
It is that no matter how good your product or service is, you cannot please everybody. So this time he is going to focus on those customers that really value, need and can afford his products.
He has decided to offer only top-of-the-range, high margin products and not the cheap versions that are targeted at the mass market.
I totally agree with Jeffrey that a small and growing business is better off focusing on niche markets rather than going for the mass market. This is because you will not have the infrastructure, branch network, the people and facilities to please and satisfy customers scattered all over.
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You should have a clear strategy in your business, choosing where to play and how to win. Winners are not necessarily the best players, but play where and in a way that guarantees winning.
An example of a clear strategy came out in a recent Booz & Company report, which rated Southwest Airlines in America as one with the most focused strategy in the global airlines industry. In an industry where many big companies have either closed shop or merged in order to survive due to the economic recession, Southwest is doing quite well.
Early in its development, Southwest defined its target market to include regular bus travellers — people who wanted to get from point A to point B in the lowest-cost, most convenient way.
Contrary to the industry’s hub-and-spoke standard, Southwest’s point-to-point operations and hassle-free service model comprised a compelling value proposition for people who would otherwise choose bus travel. This gave the company a unique growth path, compared to the traditional airlines.
A month ago, South African low cost carrier went bankrupt, leaving passengers stranded at airports across the region. Over the years, we have seen Zimbabweans forming airlines to challenge the inefficient national carrier.
But most of them closed within a short period of time. Although many factors contributed to the high failures in this industry, I think it is the poor strategic positioning that played a major role.
The companies did not have clearly identified customers in enough numbers, who needed and could afford their services.
Get rid of bad customers In every industry, there are good and bad customers. Bad customers are those who demand big discounts and then waste your time and resources by continuously complaining and asking for more value and free services for a long time afterwards. Some even ask for credit and take long to pay, messing up your cash flows.
When starting a small business, you accept all the customers you can get because you want to grow. Even those who give you hassles you tolerate. However, a time will come when you will need to start sieving your customer base to get rid of those who don’t give you value.
You start by identifying from current customers, those you enjoy serving the most, who value and appreciate your products and services and are willing and able to pay the price you are asking.
Place them in clear segments, such as medical doctors in Harare who make US$100 000 per year or more, or taxi cab owners with fleets of between five and 20 cars. Then find ways of giving these customers more value so that they keep coming back to you.
Please feel free to send me your feedback. Best wishes in growing your business. If you have not received my eBook; How to develop your internet marketing strategy, you can download it at my website.
Grow with your best customers
As you build a base of loyal and happy customers, you can start clearing away the bad ones.
Sometimes you can tell them politely that you no longer supply the goods or services they want, or you can simply package your offer into minimum quantities so that if they cannot afford they can go elsewhere.
Clearing customers who don’t fit your targeted segment may seem ruthless or discriminatory, but that is how small business can grow while satisfying their most ideal customers.
Let new and smaller players come and serve those customers you leave while you grow with your best customers.
- Phillip Chichoni is a strategic business planning consultant who works with entrepreneurs and growing businesses. You may contact him by email on [email protected], or visit http://smebusinesslink.com
