A Follow-Up Question

 

In my last post I was talking about perhaps the most fundamental strategic question: What business are you in?  This question actually goes beyond how you define your product or service. It extends to the kind of customers you are seeking. Here’s something I often ask clients who are looking to grow by acquisition:

“Assuming the same revenue outcome, would you rather have 10,000 low-value customers or 1,000 high-value customers?” 

The answer is always revealing. If you are inclined to take the 10,000 you are more likely to be at the commodity end of the market. Nothing wrong with that, although it definitely carries challenges. That choice may also indicate you trust your marketing more than your product. If you prefer the 1,000 high-value customers, that suggests you have the potential for a strongly branded position, and you probably see unique strengths in your product or service. To flourish at this end of the spectrum, you had better be sure of your capacity for customer retention. In that case you are really a relationship company.

Tell me your ideal customer, and I’ll tell you what kind of business you are in.

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