Every business should have this goal: be the best in your market.
Luckily this is not as hard as it sounds. After all, you get to decide what your market is, from as large as the whole world to as small a niche with only a handful of customers. Also, not everyone’s definition of “the best” is the same, as everyone places different values on price, quality, prestige, backup-service, risk, etc.
Too often I hear people say something along the lines of “I only need 0.1% of the market to make good money”. Yes, this is good place to start and is obviously better than needing a 20% market share to make a profit. However, you won’t even get 0.1% of the market buying from you unless you can convince some portion of the market that you are their best option given their specific set of circumstances.
Let me explain further…
Several years ago I had an ankle injury that required surgery. I asked around and chose a surgeon who I was told was “the best ankle guy in Melbourne”.
I also have many friends that have had work done by orthopaedic surgeons to repair a range of sports injuries. Without exception they enjoy talking about which surgeon they used as if it is some form of status symbol. There is pride in having someone recognise the name of your surgeon and having them proclaim “I know him… he’s good”.
Strangely, I have also heard other ankle specialists described as “the best ankle guy in Melbourne”. The point is not which one is actually the best, but that they are all doing well because at least some portion of the market regards them as the best.
However, I have never heard anyone say that they chose their orthopaedic surgeon because “they will work on anything you need fixed”.
The lesson is simple: People want the best for their specific situation, not the most versatile1.
So why is it that so many small businesses think the answer to their troubles is to expand their product range?
I think it’s simple…
The number of customers your business has is a function of two things:
- the size of your target market; and
- your success rate in turning target customers into actual customers.
A target market of 1,000 people and a success rate of 1% equates to 10 customers for your business.
The reason that struggling businesses consistently look to increase their product range is that it increases their target market, and it is substantially easier to expand your target market than it is to improve your success rate. After all, expanding your target market involves nothing more than proclaiming, even if only to yourself, what your new target market is. That’s it, done! This sure beats all the work involved in coming up with new ideas or making real improvements to your business that will increase the rate of success that you have within your existing market.
However, in doing this you are becoming less of a specialist and less likely to be regarded as the best at anything. Therefore, any gains you planned (hoped?) to make by increasing your target market are offset by a further worsening in your success rate. You are becoming the orthopaedic surgeon that can do work on any limb and theoretically has a huge target market, but sits there doing nothing2 while all the ankle and knee and shoulder experts have six week wait lists and can charge whatever they like.
Try this exercise:
- Start with a list of your current target market – that is, all of your potential customers across all of your product lines (goods and services).
- Next, start removing the products where you are least skilled, least interested in, or which you feel have the least potential.
- Finally, take some potential customers from your list, starting with those who are least likely to buy from you, pay the price you want or who you know would really be better served by buying from someone else.
What you now have is a range of high quality products that you like and feel have potential, and a group of potential buyers that are open to buying from you at your chosen price and who you genuinely believe would benefit from being your customer.
Now ask yourself three questions:
- Can you actually deliver the small range of high quality products that remain on your list?
- Can you visualise your target clients buying from you and then telling their friends that they should use you because you’re the best [insert your product here] guy/girl in Melbourne?
- Can you make money from only serving this niche (even if it requires a substantially higher success rate than you currently are achieving)?
If you answered “yes” to each of these questions, you have a market niche worth pursuing. If done right, you’ll have a business worthy of others talking about, and a decent chance of becoming known to at least some people as the go-to person in your market.
So what’s your next step – increasing the size of your target market or shrinking it?
1. In some cases versatility can be of benefit to a customer, but only where it involves areas that the customer has some interest. In the majority of cases the versatility is for the benefit of the business owner, not the customer, and therefore does very little to improve sales.
2. They’re not really doing ‘nothing’… they’re probably busy thinking about how to expand their services even wider because their problem is they can ‘only’ do orthopaedic surgery.
Thanks: I need to give credit Seth Godin who’s constantly great writing inspired some ideas in this post.
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