If you try to be everything to everyone, you end up being nothing to no one

"You can't be everything to everyone". It is this truth that you must accept in order for you to find the right customers. And in fact, it's not about opting out of customers, but about identifying the customers you choose to spend most of your resources on.

Amazon is an example of a company that has made such a choice. Amazon serves four different customer groups: consumers, sellers, businesses and content providers. But they do not see these four as equally important. The vast majority of their resources go into making them individual consumers happy As their mission also makes clear: Amazon will be "the world's most consumer-centric company". So even though it goes beyond service and maybe even business Amazon can offer the other groups, they still focus first and foremost on consumers.

How to choose your most important customer

In an HBR article, Robert Simms reviews his method for choosing the right customer. It consists of four phases:

1. Identify your most important customer
2. Create processes so you can find out what your customer values
3. Allocate the right resources
4. Build an interactive control process that monitors the assumptions underlying your choice.

First stage: Identify your primary customer

Many people mistakenly believe that your most important customer is the one that generates the most revenue. But your most important customer is really the giver access to the greatest value. For some companies this is the final consumer, for others an intermediary or distributor.

To find your primary customer, Robert Simons recommends that you evaluate all your customer groups based on three dimensions: Perspective, abilities/skills and potential for profit.

The company's perspective
The company's culture, mission and internal stories. What is important to the company? Are you looking for the best quality, service or design? This must of course be reflected in your choice of primary customer. Otherwise, the company will not be able to take advantage of the energy and creativity that the organization's employees possess to serve the customer.

The company's competencies
Here, one thinks about the abilities the company possesses, e.g. technical expertise, logistics or brand marketing. The skills you possess in the company place your company in a position where you are able to service certain customers better than others.

Profit potential
What is the customer's potential to deliver/create profit? Use e.g. Michael Porte's five forces analysis to create an overview of the relative profitability of your different customer groups. And in that way weed out the worst candidates for your primary customer group.

Consider whether you should go after customers who are willing to pay a high price or whether it is wisest for you to go after a large volume of customers.

It may also be that you should do like LinkedIn: The individual users are their primary customer group, not because they generate the biggest profit, but because they constitute the product that other customers (recruitment companies and advertisers) are willing to pay for.

Second phase: Find out what your primary customer values

Most companies assume that their products and services meet customer needs, but surprisingly few test whether this is actually true. To find out what your primary customer group is willing to pay for, you need to do some research.

• Examine the digital footprint of your customers. What and how do they buy, what are they looking for? Etc.
• Find out what they are missing by asking them. Eg. through questionnaire surveys, focus group interviews or simply by arranging meetings with the managers of your largest customers.
• Find out what they does not know, they lack e.g. through ethnographic studies, where you e.g. spends time in the customer's own environment.

Third phase: Allocate the right resources

According to Simons, there are five basic models you can choose from when deciding how to allocate your resources:

1. Discount. If your primary customer is looking for the lowest price, your centralized operational functions, such as merchandising and distribution, must have the largest share of your resources so that you can take advantage of the economies of scale. Departments with service and direct customer contact get a correspondingly smaller share of the cake.
2. Local value creation. If your customers appreciate that products and services are adapted to local tastes, preferences and regulations, you must ensure that your regional managers get the majority of the company's resources. In return, the resources for the company's operational functions are minimized.
3. Best global standard. If your customers are looking for the best possible technology or the best brand wherever they are, you should organize your resources around global business units defined by their product. This configuration allows focus and influence in R&D, marketing and distribution.
4. Dedicated service relationship. If your customers are looking for an ongoing, deep service relationship, organize your customer service teams into industry-based “vertical” units and aggregate and coordinate the delivery of products and services from centralized product-based “horizontal” units.
5. Expert knowledge. If your primary customer is looking for technical expertise, you should organize the business with R&D at the top of the product organizations receiving the majority of the company's attention and resources. Other functions act as support.

There are, of course, a large number of variations and combinations of these five basic models.

Phase 4: Make control processes interactive

Over time, your customers' tastes will change and other technologies and competitors will emerge. Therefore, it is important that you create a system that is able to collect information about what is happening among your competitors and in the surrounding environment that can influence the behavior of your primary customers.

Make sure your system:

• Informs you of uncertainties that could potentially undermine the assumptions on which the current strategy is based and therefore require the attention of senior management.
• Widely used throughout the organization and receives frequent and regular attention from managers at all levels.
• Holds meetings that focus on new data, assumptions and action plans.

If you are not proactive in choosing your strategy (selection of your primary customer is a very central part of your strategy), you will quickly be overtaken by companies that have a better feel for what is happening in the market.