Are your customers firmly in sight?

There are countless silver bullets when it comes to driving growth and profitability in a business, but we should never forget that the common ingredient is the customer.

Ultimately, it is the consumer of our products or services who will decide whether we are successful or not. In our haste to fix everything around us, we sometimes forget that we need to work backwards from the customer problem to build a business which satisfies them. Getting their attention and keeping their continued business is critical for survival and growth. So just how important is your business to your customer?

At the bottom of the food chain are the commodity products, those items that are sold purely on price and where sales are won and lost on the latest promotional campaign. At this level there is little customer loyalty and your business has little connection with the consumer.

As you add product or service differentiation, you gain greater traction with the customer but, if you have lots of competitor, growth is challenging. As you build greater innovation into your product or service, your competitive advantages improve and your customer relationships become stronger. However, innovation by itself and even strong intellectual property is not sufficient for sustained growth.

The missing component is the degree to which you solve a serious or difficult problem for the customer, which the customer needs to have resolved. This is what is called the ‘compelling need test’.

Products and services which are easily deferred or not required or have effective substitutes are unable to sustain any reasonable level of growth. When times get tough, these are the products which are bypassed. Products which save lives, take away serious physical or psychological pain or keep people out of jail cannot be readily deferred and these will always have a market.

What you need for growth is both a compelling need and a strong competitive advantage, usually derived from strong IP or deep expertise. Products and services which satisfy these characteristics have short sales cycles, premium prices and resilient sales prospects.

If you have products which are somewhat weak on these dimensions, you need to find other ways of creating value for your customers. There are many value components which you can work on, including product information, product availability, customer services, after sales support, financing, complementary products and services and so on. The key here is to find out what resonates with your target customer and to build a value proposition across many value components to give yourself a greater point of differentiation within your target market.

Start the analysis with the question: ‘How important am I to my customer?’ Then through internal discussion, focus groups with your customers, competitive analysis and some creative thinking, build additional components of value for the customer. As you connect better to your customer your referral rates will increase and your account penetration rate will grow, as will your business resilience and profitability. In the end, your growth will be directly related to the answer you have for that question.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.