LIKE many CEOs, Larry Weinberg thought he knew his customer base – and was marketing to it correctly. His award-winning company, BOWA, which for 22 years has built and remodeled luxury homes in the Washington, DC area, considered its main customer the architects who were doing design work on a home and needed a builder’s help on the job.
Early last year, Mr Weinberg realised his business was marketing to the wrong people.
BOWA is far from alone. In advising growth companies, I’ve found that there are three mistakes business leaders make when thinking about their customer: failing to properly define their core customer; misusing the term ‘internal customer’; and failing to understand how well-informed customers are these days.
It’s not surprising. The word customer is one of the most overused terms in the business world – yet one of the least understood. Avoiding and overcoming the mistakes I’ve identified is the key to keeping your business growing. As BOWA found out, correcting even a single one of them can have a positive impact on the company.
The core customer
With the recession placing pressure on his industry, Mr Weinberg brought in Bob Bloom, author of two must-read books – The Inside Advantage, which I consider the best how-to book ever written on customer/product strategy, and The New Experts, which succinctly describes the only four points at which you have a chance of gaining customer preference in a crowded marketplace.
Mr Bloom pounds hard on the notion that you must first clearly define what he calls the ‘core customer’ – a definition that goes beyond simple demographics (ie architects of luxury homes in the DC region).
He helped BOWA to see that its core customer is “a successful couple looking to transform their family’s home without fear or regret”.
It’s important to note that the definition includes the emotions of the target customer. He then pushed them to design and direct their messaging to address this targeted market.
Since then, Mr Weinberg and his team have reshaped their marketing to reach these successful couples. The company has embraced creative new marketing approaches, such as: throwing big parties in clients’ homes when a job is completed to foster word-of-mouth referrals; optimising its website to come up higher in search engines for terms like ‘remodeling’, ‘rebuilding’ and ‘home transformations’; and using social media to spread the word about what it does.
The ‘internal customer’ doesn’t exist
The second mistake is adopting the idea of an ‘internal customer’. The word customer must be held sacred and reserved for the end user of your product or service.
Call everyone else between you and the customer what they are – distributors, purchasing agents, decision-makers, sales support – but don’t refer to them as a customer. Otherwise, the entire organisation begins to lose focus on the reason you’re in business in the first place.
It’s particularly dangerous when team members in one functional area of the business start referring to those in another as their ‘internal customers’. Before long, everyone is happily serving each other internally and the all-important core customer’s needs get lost in a buzz of self-serving activity.
For BOWA, seeing architects as a referral source or distributor of their services is a much healthier way to view their role. Internally, every BOWA employee must remain focused on how they can help core customers – those who are remodeling or building a home – avoid fears and regrets about these projects.
The new experts
The third mistake is underestimating the power of the customer. In the past, sellers had more information, and thus more power, than buyers. Then, wham, the internet came along. Suddenly, consumers came to transactions with a great deal of information about a product or service that they didn’t have before – including where to get the best prices.
In this new world, companies have to make sure they capture customers at four decisive moments or risk losing them forever, Mr Bloom says. These moments include: your first brief contact with a prospect; the lengthy transaction process; your customer’s continued usage; and upon their repeat purchase, advocacy and referral.
Each moment is crucial. For instance, if a customer calls your company and gets put on hold for a long time, they may hang up – and go elsewhere, permanently.
“The customer is now in charge,” Mr Bloom says.
The future belongs to companies that show they recognise this in every aspect of how they do business.
Verne Harnish is CEO of Gazelles Inc, an executive education and coaching solutions provider, and author of Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Fast-Growth Firm.