“Who are your customers?” Answer: “Anyone who will buy from us.” This is possibly one of the most ill-considered responses I have ever heard delivered by a C-suite leader in a strategic planning session.
Active Knowledge Questions:
What are the boundaries of your chosen market? And why is the answer to this question so important to your ability to compete?
Where Is Your Focus?
It was a reasonably large group of executives – about 19, from memory – present at the strategic planning session and the start of a major rethink of the business and where it was going. As part of the opening discussion to get everyone’s minds working and on the same page, I asked a few opening questions. One of which was: “Who are your customers?” The immediate response from one of the most senior leaders in the room was, “Anyone who will buy from us.”
At first, I thought it was a tongue-in-cheek response. You know, the type you sometimes get at the start of a workshop where people are finding their comfort zones. Regretfully, as the day progressed, it became clear that this was the actual view of the executive – and quite a few others – that anyone and everyone could be a customer.
Why this is a problem would emerge as a key challenge as the days progressed.
If you were to ask any of your senior executives – or actually any employee – who your business’s customers are, how do you think they would answer? Try it and you may be surprised as to how diverse their answers are.
And why should this be a concern? Well, if you wish your business to outcompete others in your marketplace then you need to have a pretty clear focus on who your prospective customers are and what needs they are seeking to fulfil. Otherwise, you are really flying blind in trying to match your offerings to their needs and do so at a level that will outcompete others. But the full answer to this question extends beyond just knowing who your customers are.
Defining your chosen market and its boundaries is a key task in developing your competitive strategy.
Defining Your Chosen Market
In developing your business strategy, it is critical that your choice of market be deliberate. It’s not accidental, something that you stumbled into (well, that does happen) and continue to stumble your way through (that shouldn’t happen).
You chose your marketplace initially based on the purpose for which your business was created. Almost each and every business is formed to meet a specific customer need. Sometimes the business views this need through the lens of the product or service they sell, but that becomes very limiting and you need a role reversal to look at your product or service through the eyes of your prospective customer.
Today’s markets compete around the customer value delivered and you simply cannot get a handle on that value by viewing it solely through the eyes of a business owner or leader. If you consider customer need through the lens of your product/service then your value is unlikely to keep track with change. The scope of your view won’t be wide enough to see all the things that are occurring in the market, which are evolving your customers’ needs. And by the time the gap between your offering and what customer need has become is big enough for you to notice, well, it will likely be too late to catch up.
If the context of purpose in business strategy and competitiveness is new to you, then I would recommend you read one of my earlier articles, Purpose Equals Strength.
The first step is to think of the market you compete in as your chosen market. ‘Chosen’ because this is the market you can succeed in.
Understanding The Boundaries Of Your Chosen Market
When I speak of boundaries I don’t mean rigid, unchangeable barriers, but rather a line that draws everyone’s focus to a specific domain. These boundaries will expand and shift with growth, and, if they were to remain unchanged over years, it would reflect stagnation in the business.
The boundary of your chosen market is established by answering a range of questions, for example, what are/is the:
- Geographical markets you really compete it?
- Demographics of the clients you are targeting?
- Products/services you provide to meet client needs?
- Actual customer needs that you seek to meet?
- Value you seek to deliver to customers through those products/services?
- Channels to market used?
- Pricing points?
Pick up a blank piece of paper and a pencil, draw a circle and then answer each of these questions, jotting your answers down around the circumference of the circle. Review your answers and you will quickly see how you have defined your chosen market.
You should now have a clear view of:
- Where geographically you are seeking to sell.
- To whom you are seeking to sell.
- The need you are seeking to meet.
- The product/service you are hoping will meet that need.
- Your channels to market.
- Your pricing strategy.
- How all of that represents a customer value that will outcompete anyone else.
This crystal-clear view of your chosen market will allow all your resources to be focused on success in that market. And it will also allow you to answer two critical questions:
- Who else is competing in my chosen marketplace?
- Do I have the capabilities to outcompete them?
The second step is to define the boundaries of your market and be competitive in that market.
What’s Changing In Your Chosen Market?
Before you make any decision as to whether you have chosen a market in which you can be successful or one in which your competitors are far too strong for you to make inroads, you must understand what’s changing.
The drawing of your market boundaries also allows you to ask the questions:
- What is changing in my chosen market?
- How will that impact the value I intend to offer?
- What new opportunities may they offer for me to grow?
On a new sheet of paper, draw a table with three columns and list out the following:
- Factor: what are the changes you see occurring in your market?
- Impact: what do you think will be their impact on your customers’ needs, the value you deliver, strength of competitors’ offerings?
- Response: how do you propose responding to these changes?
The types of changes you should be considering looking into the future include, for example:
- Customer demographics.
- Customer needs.
- Government spending, intervention or regulation.
- The strength of the economy.
- Employment and interest rates.
You are seeking to identify changes which will impact the needs of your customers and the value you are able to offer them.
Always looking to the future and recognising what is changing in your chosen market is critical to your business’s continuing success. To explore this further, read Opportunity – Is It Lost In The Noise?
The third step is to recognise change in your chosen market and use it to your advantage.
The clarity and focus you are able to bring to your chosen market will support you in outcompeting everyone else who encroaches into your chosen space. You will know your market better than them, you will understand your customer needs more clearly, you will be able to track the change, and through all of this, you should be able to craft an undefeatable strategy.
We’re here to Compete.
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All the best in the success of your business,