March 01, 2009

Why Success Requires Strategic Focus

Where companies look for growth has a major bearing on the level of success they enjoy. This is simply a recognition that not all markets offer the same potential for growth.

Those companies that grow fastest do so by carefully choosing where they will compete – they steer themselves strategically into those market niches and segments that are most attractive and amenable.

They don’t seek to have the best solution in the marketplace overall, but do have distinct advantages in meeting the needs of particular groups of customers.

Why Strategic Focus is Important

Here are the reasons why you should focus on particular customer groups, or segements:

1. Your sales and marketing can only stretch so far, so you have to focus your efforts on those customers that can deliver the greatest success. The fact that for most companies 20% of their customers deliver 80% of their profits means that too much sales and marketing activity is focused on the wrong customers.

However, even if your resources were unlimited no company can be all things to all people. So inevitably you must therefore make choices about the customers you want.

Indeed, one of the greatest opportunities to increase the effectiveness of your sales and marketing is to tailor it to specific segments and niches. For example, instead of having one piece of marketing material, or sales presentation for all the industries and sectors you are targeting, tailor it to each significant segment and niche in turn.

2. Some customers are easier to win than others, being more attracted to your solution and more amenable to your sales efforts. Even if everybody needs your product, or solution, there are some that need it more, have specific requirements and can pay more for it. So it makes sense to seek them out.

3. Every company likes to think that it's industry, or segment is different. So they will quickly ask if you done work for others like them? They want to know that your product/solution is specifically suited. They will listen carefully to see if you understand their industry's trends, language and challenges.

Being a specialist (or at least being seen to be specialist) is important because customers think the needs of their business and their industries are special. The big bank, for example, will not be impressed if you experience is with credit unions.

4. A distinctive advantage does not come from being the absolute best, but from being better at meeting the specific needs of particular customer segments. That is because the needs of customers and the way they buy generally varies by sector, location, company size, stage of development, etc.

Successful companies are ordinary companies, but with a clear focus on a key market segment(s) where they have a distinctive advantage. Once they choose their ideal customer they are not afraid to alienate others in tailoring their proposition and message exclusively to that group.

Why focus can be difficult

For most managers the need to focus on the right market segment(s) goes undisputed, however the reality is that many companies struggle in this area.

• Too many companies try to be everything to everyone, but that dilutes the appeal of what they offer. They fail to recognize the unique differences and particular needs of different customer groups and are vulnerable to competitors as a result.

• Too many companies don't segment their market to identify the most attractive / amenable group of customers and don't tailor their proposition and how it is sold accordingly.

• Others make the choice but focus on the wrong segments with disastrous results. Focus, or segmentation, is not just about customers, it also means choosing your competitors, margins, and so on. Hence the importance of making the right decision.

• The main reason for getting the focus wrong is an insufficient understanding of potential customers needs, or competitors. The next is an impatience to get results accompanied by a concern that the chosen market may not pay sufficient dividends.

Want to read more on why you should not try to appeal to everybody?

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