GROWTH SECRETS: Targetting the right customers

Successful high growth businesses have a very clear definition of their target customer. They know exactly what problem they are solving and they know how and where to deliver a sales message to the customer in a way which will create a positive situation for closing a sale. Above all else, the sales process is proactive.

They go out and touch the target customer; they don’t wait for them to find out about the firm and its products or to come and find them to buy the product. They provide a solution to a job which the customer wants done.

You see businesses all the time which reach out to the general public in the hope they will buy. A retail store, a restaurant and the internet marketing firm are all hoping they can attract customers. But they have little influence over the buying cycle. When I walk down most main shopping streets I am constantly amazed at the number of shops which are closing or opening. I wonder what happened to the ones that failed? However it isn’t hard to guess what went wrong with most of them. They set up the business using the ‘hope’ strategy.

They put up a sign or develop a web site and then think: ‘I hope people bother to stop and read about my products. I hope they are interested enough to enquire and I hope that they have enough money and are willing to do so. Then I hope they will tell all their friends.’

This does not create a high growth business. The high growth business targets a specific customer who has a problem which they can solve. The customer is either publicly identified by name and address, such as a corporation, a professional service provider, is available through a mailing list or is a member of a club or association which is willing to support a marketing approach to its members.

The size of the market that is being addressed is sufficient to provide the growth projections of the firm for some years to come.

Alternatively, the customer can be readily reached through an established, or readily built, distribution channel. This might be through a subscription magazine, a credit card member directory, a specific specialty store or a web site targeted at a very specific group. The aim of the firm is to gain easy access to the specific customer who has a high likelihood of having the problem that is being addressed by the firm’s products or services.

In order to generate the growth rate needed, the firm must be able to project the rate of sales of its product or services. To the extent that it can estimate the number of potential customers it can reach with its sales message, it has a much better chance of estimating its sales closure rate. The marketing program needs to have a very good estimate of the number of potential customers hearing its message in order to be able to estimate potential customers. With a tight customer profile, a readily identified method of reaching them individually and a clear understanding of the sales triggers, a proactive approach can be mounted to generate the level of sales activity the firm can support.

The more successful firms solve a very specific problem which has a compelling need to be resolved. Where these problems are owned by highly targeted and readily identified customers who are able and willing to pay a reasonable price to satisfy the need, the firm has a much easier marketing problem. Highly specific problems also normally have readily obvious decision processes which the firm can work with. Thus specific information can be provided which can demonstrate how the product or service can readily solve the problem.

A great number of businesses target 16 – 25 year olds, time poor executives, free thinkers or people with a desire to feel young at heart. The problem with this type of approach is that it is difficult to be proactive, to actually reach out and connect directly with your target customer. These businesses are highly dependent on the passing traffic for business. They typically advertise to the general public through newspapers, popular journals and TV. But they can’t be sure they are getting to their intended audience. They are reliant on their target customers seeing them in passing. Since most of us are now highly resistant to advertising, much of the marketing spend is wasted.

Alternatively, highly targeted marketing to a named individual or to a tightly defined readership of a specialty journal or to a mailing list of a special interest group, is going to have a higher rate of contact. The marketing spend per contact is likely to be much lower and the conversion rate higher, especially if the problem being addressed has a high compelling need. Thus marketing productivity in high growth firms tends to be much higher.

Often the product or service can be aligned to a problem which is already the focus of attention of an interested group. Thus providing a solution to a new tax compliance issue may find receptive clients through an accountancy journal which has been addressing the need for some time. A plant soil additive which absorbs and slowly releases water which can be spread in a field in climates with erratic rainfall might be of interest to a farmers association or be picked up in a farming journal or TV program.

Sometimes a firm can use an existing distribution channel to gain access to a target audience. Thus an existing supplier might be willing to bring a new product to the notice of their own customers if they see that it might enhance their own customer relationships. This is often the case with strategic partnerships.

Multiple businesses might agree to work together to promote each other’s products to the ultimate benefit of a joint customer. This was often the case in the computer hardware industry. The marketing challenge of the computer hardward manufacturer was that they did not directly solve business problems. These were solved by software vendors and implementation consultants. Thus in order to sell the hardware, they would identify the problem to be solved, find the right software solution and then present the prospect with a package of products and services from multiple strategic partners. The strategic partners would spend much less on marketing as the hardware vendor was searching out the right prospects for them.

The potential customer needs to be reachable for the firm to proactively impact the sale.

A reachable customer is one you can get in front of with your product or service message. Potential customers must be identified with a location or place where you can deliver your message. This also needs to be cost effective, thus a TV advertisement aimed at registered dentists does not make a lot of sense when a trade journal, a dentist conference or direct sales visit to a registered dental surgery, would have a higher conversion rate.

For business-to-business sales, the sales process also needs to deal with complex multi-tiered decision processes. The person with the problem may not be the person making the buy recommendation or the person with the power to make the purchase. Sales processes need to understand the level of influence, the authority and the politics of the customer environment, to close a sale.

An important attribute of the target market must be that they have the willingness and the ability to spend on the product or service. A potential user who has no budget or authority may only be able to recommend the product or service, but the criteria for the buy decision may be made on other attributes of the product or vendor. The marketing and sales process needs to take these aspects into account when marketing and selling the product or service.

Clearly a high growth venture also needs to have prospective customers I sufficient numbers so the business can make enough revenue and profit to be a viable and growing entity. Many businesses limit themselves to one segment, geography or channel. For adequate growth to be achieved, the firm needs to project revenue over a number of years in its selected market segments. If these markets do not generate the necessary transaction volumes to support a target growth rate, the business needs to look at new geographies, new channels and/or new markets for growth.

Instead of seeking out or developing new products for new customers, the firm should first see if it can find more of the same customers which brought it success. A product which has a clear competitive advantage, solves a compelling need and has a well-defined target customer, should be readily accepted in other geographies. Even if the firm is unwilling or unable to set up its own operations in those new territories, it may be able to find distributors which have the capacity, knowledge and distribution channels to handle the product or service.

This way the firm can continue to benefit from its existing capabilities before it needs to spread its resources across other products.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.