Helping Small Businesses Grow – Choosing Your Customer Segments

by Howard Shore, Date: Oct 15, 2013

Helping Small Businesses Grow – Choosing Your Customer Segments

Customer Segmentation & Growth

Are you spending enough time focusing on how to help your company address sales growth? The lack of adequate attention small businesses spend in this area is surprising. Ironically, when one talks to the leaders of companies, they insist they have done all they can. In my experience, there has been more talk than action, particularly in the business-to-business arena, where most of the companies are very good at delivering their products and services.

When I try to help small businesses grow, they seem much more comfortable at perfecting their craft than they are at addressing the fact that they continually miss their growth objectives. This article will focus on how properly choosing customer segments can help accelerate your business growth rate.

Are You Perfecting The Same Strategies That Have Not Worked?

When helping small businesses with their growth issues, often I find the real dilemma is that they continue the same sales and marketing strategies that failed in the previous year, hoping that things will magically get better for them. The changes they had made were minor and did not get to the root of their problem.

Before we examine the real issues, let me mention that the order in which you address these issues is critical. For example, I see some companies experiencing constant turnover in their sales force, followed by leadership complaining about how the salespeople keep failing. However, the most common reason for this kind of turnover is failed strategy. A bad business strategy results in sending good salespeople out to get slaughtered. In my experience, when you have a good strategy, even a bad salesperson can sell your product or service.

Choose Your Customer Focus

Narrower Segmentation is Better

The first principle every small business owner must master to help their business grow faster is “Choosing Your Customer Focus.” Actually, this is something that every business — small, medium and large — must master. The narrower you can make your customer focus, the better. It is also counter intuitive to the typical entrepreneur, who naturally wants to serve everyone and anyone. The goal is more customers, and focus is not usually the topic of discussion. In small businesses, focus is especially hard to consider when revenue may be hard to come by, and you may be losing money on a daily basis.

However, there are three factors that I think can help you understand the principle of choosing your customer focus:

  1. Time is limited
  2. Cash does not grow on trees
  3. Not all customers are created equal

What is a Segment?

A segment is a group of customers with common characteristics that influence how they make decisions.

By focusing time on a specific customer segment, you can become the dominant player in that segment. In every industry, you can group potential customers into many possible segments. For example – whether or not they can afford your product or service; if they will have interest in your product or service; where they might go to buy your product or service; and so on.

Failure to identify segments destroys time allocation in your business. I find that this is more obvious when your company is small and time constraints are more serious. In most cases, we consider whether or not a prospect can afford to do business with us, rather than the likelihood of their doing business with us.

Each Customer Segment Requires Its Own Set of Resources and Attention

Each customer segment you target requires you to spend time to gain their attention. Time spent in front of one segment takes time away from another. In most instances, to properly dominate a segment, you need the ability to market and sell to different people in different ways in different places, and all of those people have different expectations and needs. This takes time which is finite. By not focusing on a specific customer segment, businesses harm their growth instead of improving it.

In order to grow your small business, you need to know that cash does not grow on trees, that having cash gives you options, and that you need to use your cash wisely. Going after too many customer segments is not using your cash wisely. You need to understand each segment and where they are most likely to buy your product or service.

While you may envision a customer segment as attractive, it becomes much less appealing if you do not have the cash to take the journey. Unfortunately, most business owners do not realize this until it is too late. They throw their cash in lots of directions hoping something will stick, and then they run out of cash or have to settle for a lesser path because they did not have enough foresight.

Each Customer Segment is Not Created Equal

Lastly, each customer segment is not created equal. I believe that the harder it is to master a segment, the more valuable it is. The lower the barrier to entry, the more competition you will have and the less profit you will make. The higher the barrier to entry, the harder it is to acquire the customers, more difficult their challenges, and the better your ability to master those challenges, the better the opportunity for dominance and profit. Your job is to find this customer segment and to make it easier for your company to dominate by focusing on it.

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