In a recent MSNBC.com article, James McQuivey, principal analyst for Forrester Research, says, “I don’t believe for a second that we’re ‘meh’ on new technology. Instead, we’re very sophisticated in what is going to get our attention. A fancy new device that doesn’t improve on the devices we already have, or a promised service that we can’t go out and buy yet, won’t be able to get our attention.”
[ipad, google buzz, 3D-TV: 'meh'? (Feb. 12th, 2010) by Suzanne Choney]

I couldn’t agree more. In fact, McQuivey is saying that new things entering a market have to be truly new – and not just new, but very useful – and not just very useful, but exciting.

Of course, that’s another way of describing an “I3 value proposition”. I3 means not just clever words spinning a tale, but meaningful words describing a true-truth about your product or service. In increasingly crowded, hyper competitive, and fast-moving markets, you have to think in terms of how your target customer will process your offering in a sea of similar (or similar enough) offerings. Your consumer is probably not as much a student of your market as you are (or should be).

They may see the nuances that excite you as relatively minor feature changes.
Wow! 10% more efficient! – let’s have a parade! >>> your engineers. Ho hum – whatever >>> your customers.

Are there other ways to compete? Certainly there are! Being the low cost provider and having a radically different approach to a problem are competitive levers that companies must consider as they go to the market.

But, the bottom line is, if these distinctions are buried in minutia and are things that mean your customer has to study, or get a new degree, in order to understand the significance of it all – then you’re missing the real opportunity. And that opportunity is to think of something that is not being addressed in some way or something that is not being addressed in the mind, the eye, or the heart of your target customer.

This is true, whether that target customer is a housewife in Peoria, a college student in New York or a corporate executive at the top of the Sears Tower in Chicago.

Find the sweet-spot of frustration – address it – and gain fans, not just customers.

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Knowing who is your ideal target customer focuses all your energies on higher probability prospects and also has the added benefit of optimizing your messaging to that audience.

The alternative has the false attraction of a bigger (and therefore, more bountiful) market.

This, however, is “fool’s gold” for all but the largest companies.

Most organizations simply cannot develop the capabilities to meet the expectations of many markets. Consider the cost of spreading yourself too thin over too many demands and requirements.

The Bottom Line: Really Know Thy Customer… because you are making major investments of time, staff and money to reach them.

Know Thy Customer

1. Know Thy Market
2. Don’t Inside-Out Your Assumptions
3. Know Thy Customers Are… People
4. Know Thy Customers’ Internal Motivations
5. Know Thy Customer’s Requirements
6. Know When to Switch Gears
7. Know Thy Real and Best Customer
8. Know Thy Strengths
9. Sharply Define Your Customer “Starting Block” for Your Go-to-Market Race

Sharply defining your customer is a “starting block” for your go-to-market race.

• How many of them are there?
• What size?
• What is the published market research?
• Are there demographic and market research reports written on your target market?

In today’s sophisticated marketing world, you can’t go after a market without being armed with data – fortunately there’s lots of it.

At this stage of the game, you’re not necessarily looking at the way the market works, but simply defining the kind of company that your product or service most fits. Ultimately, it’s about knowing your customer. In every market segment, there are cultures, commonalities, unspoken rules of the game that exist in enclaves of the high tech, business and manufacturing worlds.

You need to know what these are. If you don’t have a feel for the people you’re selling to, you’re already at risk of falling further behind your competition.

While with a consulting firm focused on smaller business services firms, we worked with a small regional web design company with heavy specialization in user experience and interface design. As is typical for companies this size, they defined their customers primarily by geography – any business in their area needing help with larger web projects. Over a two-year period we helped them refocus on one particular market segment they had past success with – large, socially focused non-for-profit organizations.

While this was a positioning move, it was much deeper than just looking a certain way to a particular market – or choosing which mailing list to use. By focusing on the specific non-for-profit sector, they were able to start understanding the target customer’s culture, eventually adopting the language, pace and unspoken “feel” of the non-for-profit world.

They’re back on track, growing revenues and profits with a dedicated core of clients who view them as their specialist firm for web design and deployment in the non-for-profit field. In the same way, your understanding of your target customer will influence your marketing and the direct sales communication you have with them and the way you interact and serve them.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

What level decision maker can you access?

If you want to sell to a specific type of company, you need to have access to call, talk and meet with the appropriate level of decision maker at that customer – whatever it takes to sell your product to them. Maybe you need to have access to CFOs of financial services organizations to sell your compliance solution.

While you may have many years and dollars worth of experience selling to financial services firms, you might find that you have no way to get your foot in the door of the C-suite, if your company never worked at that level before. That’s not to say that this marketing and sales capability cannot be acquired or developed – just that you need to know where you’re starting from and identify the gap as quickly as possible.

The “access” issue can go the other way, too. In the product development process, larger software developers often end up creating simpler versions that they try to sell “down market” to smaller customers. Yet, they don’t know the smaller customers (SMB) – the way they function, and what’s important to them. They often do not really know how to access this smaller customer (as in the Cisco example above).

It isn’t primarily a product issue – it is simply that a company that has been selling to Fortune 500 companies will face the same challenge connecting with decision makers in a $50 million dollar manufacturing company that a SMB focused company would have calling on GE. Movement – both up or down market – is possible and many companies manage to do it successfully. However, many more have failed or have had to make many learning runs till they got it right (e.g., Microsoft moving up-market in corporate IT with server software).

Access challenges run both ways: smaller companies face challenges selling to bigger ones, but oftentimes, bigger players can’t get small enough to sell to smaller companies or individual buyers.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

Look at your target market and ideal customer in the following dimensions:

Whose problem can we solve?

Define your customer by a problem that they have that you solve. Make a list of your product attributes and match them to the needs of that specific customer. Think of it as a table with two columns – product attributes and customer needs.

This is not the same as your Value Proposition.

In this case, you’re not describing the actually quality or attractiveness of the attributes; rather, you are simply listing attributes that match your customer’s needs – regardless if the attribute is particularly compelling, unique or special in any way. In other words, your offering may not be unique, but does solve a set of problems for a specific group of customers.

What type of company do we have experience working with?

Do you have a history of serving the customer category or type that you’re targeting? For example, networking equipment giant, Cisco, decided to sell their products to smaller businesses. They were used to dealing with some of the world’s largest businesses, with limited history of selling to the new target audience.

As many business product/services vendors discover every year, Cisco learned that SMBs (small and mid-sized businesses) are not simply “smaller enterprises”.

They (SMBs) operate with fundamentally different time-frames and decision criteria and cultures. Cisco acquired Linksys, a consumer brand, which helped them branch out into the small business marketplace. Linksys brought Cisco SMB channel and customer competency. When you’re looking at your ideal customer, you have to look at your own experience relative to giving that ideal customer a high degree of comfort – a sense that you “get it” for them.

This is not just an issue of credibility within a given market. Experience with a customer allows you to move quickly and with stronger results – because you really do “get it”.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

Remember to think about your real customer.

Take the following (somewhat) hypothetical example:

A content management software company within a specific industry. An industry data provider brings them into many of their clients. The data provider sees the content management platform as a way to get their information to their customers more effectively. The software provider has limited access to this category of end-user or buyer. They’re excited about the access and start strategizing about this new-found customer category.

What they miss and may not fully grasp is that their real customer is the data provider who has brought them into deals.

They may see them as a channel – even a critical one. But instead of modifying their business model to serve this channel partner – they pursue the end-customer – without having established any independent access to them.

While either strategy could work – knowing your real customer helps determine if you will manage either successfully.

This means you have to determine who your real and best customer is because they are not necessarily the same thing.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

Whether you developed your product with a specific customer need in mind, or happened upon a product and want to sell it to someone, you have to start by knowing your customer.

Before the Internet boom, I assembled a group of friends and raised angel capital to start a company to develop a commodity chemical trading system, based on the notion that a hundred pounds of a specific chemical powder was the same as any other hundred pounds of the same chemical powder. It would be a trading system for chemicals – a brilliant idea – or so it seemed.

Along the way, the web “happened”, and it was gaining traction all around us.

Our company’s Chief Technologist developed a side-project to create dynamic websites for small businesses. Back then, things like Facebook and MySpace didn’t exist. It wasn’t easy to create a web presence or an identity on the Internet.

So, the idea was born – instant websites for smaller businesses.

We completely switched gears. While we started with what we thought was a brilliant idea, we came across something in development that we thought was even more valuable. Before we sold the company, we grew to several thousand customers – small change by today’s standards, but an interesting illustration of adaptation.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

New products happen in different ways.

You may have designed your product or service with a specific customer in mind. You may have also “backed into” the development of an innovative product, and now you’re looking for an actual market. I’ve been called into client situations (more than once) where they’ve already invested millions of dollars into a product and then ask me – “How do I sell this? And, who should we sell it to?”

Sometimes, the development of a new product doesn’t start with a specific problem. You might think, “these are my current customers, how can I expand my offerings to them?” In this case, you’re looking to leverage customers you have access to today.

Other times, it’s not clear what the application of a new product will be. Companies that create large business solutions often stumble across other applications and tools to support the primary product, and say, “…there’s got to be some kind of market for this.” This is often true of services that arise around a specific technical product. Eventually it becomes clear that the services can be bundled and sold.

Then there are product “accidents.” In the late sixties, a 3M scientist stumbled upon glue that was not sticky enough. In 1974, Arthur Fry, another 3M scientist was singing in his church choir and became frustrated with his bookmarks falling out of his hymnal. He applied some of the “not sticky enough” glue to his bookmarks.

We know it today as the “post-it” note. But back then, the question that needed answering was “Would anyone else buy it?”
Of course, the answer was and is – “yes – billions!”

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

Here’s the second example – one that still makes me smile.

In another case, I was with the same research firm, and I had a mid-sized renewal with a regional reseller of wireless services. I looked up their utilization, as in the prior example. The company never used any of our services. Not a good sign. As before, no utilization can mean you’re dead; it’s over – no renewal. For me, this was bad news. If I lost a renewal this big, we risked missing quota.

So I called and left voicemails – even sent faxes – urgently communicating, “let us help you figure out how our services can work for you. We can make this work.”

I had a week left before the renewal deadline. I called early mornings and late nights in hopes that I would get Lisa on the line. One early morning, a day before the due date, she finally picks up. “Is this about the renewal?” she asks nonchalantly. “What do we need to do for it?”

I explained that a simple signature on a renewal form is all that was needed. Lisa said, “OK, send me the paperwork, and I’ll sign and fax it back.” Like any seasoned sales professional, I bit my tongue, shut up and send the paperwork. I get it back, signed, in about five minutes.

At first, I didn’t get it. Then I realized: customers don’t always see you the way you do.

I thought I was selling a great, useful product and service. Lisa knew that our analysts wrote about the telecom industry. She wanted her company to be written up and well-covered. Lisa believed that analysts would give a more favorable spin to companies that were subscribers, though that wasn’t true at my firm and other reputable competitors. However, it was her perception. We were just a “PR spend” and she just wanted to stay in our good graces.

The overall lesson is this: Remember to prepare your go-to-market plan – while looking at the marketplace to find competitive advantages to exploit – with a real sense of the customer at the heart of your planning. Right or wrong, you’ve got to know why your customers want to do business with you. If you don’t know or understand their motives, you won’t know the quickest route to sealing the deal.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

I want to share two simple stories to illustrate the same core issue:

Jane was the director of Knowledge Management at one of the major international consulting firms. She owned the budget for all of the firm’s market research activities, including contracts with Gartner, Forrester, Yankee Group and the like. What set our research company apart was our openness – we made our analysts easily accessible to our clients, in contrast to many of our competitors. We didn’t hide them behind an 800 number and a call screener and this differentiated us in the marketplace.

Jane’s account was one of my biggest contracts; I had a large renewal of a two-year deal, and if I missed it…well, you can imagine. I looked at their utilization (how often they accessed our research and contacted our analysts). They barely touched us. No one from the company was calling our analysts–and it was a large organization with nearly one hundred thousand employees.

I asked Jane why. She explained that her department charged back an allocated cost whenever anyone called one of our analysts. Jane’s organization was dividing the cost of the subscription and charging it to the departments only when they called us. Jane was charging departments over $500 an hour to talk to our analysts. Obviously, they didn’t want their budgets hit, so they avoided calling us.

I arranged to give Jane’s company an extra allotment of analyst calling hours for a specific time if her department didn’t charge back for utilization. Not surprisingly, utilization increased and many more potential users became aware of our value.

Lesson from above: you can have the most powerful value proposition – and an excited buying center, but other policies within the organization can undermine your success. Make sure you understand the way that your offering works its way through your customer – who is involved – there may be much more going on than you are aware.

In another case, I was with the same research firm, and I had a mid-sized renewal with a regional reseller of wireless services. I looked up their utilization, as in the prior example. The company never used any of our services. Not a good sign. As before, no utilization can mean you’re dead; it’s over – no renewal. For me, this was bad news. If I lost a renewal this big, we risked missing quota.

So I called and left voicemails – even sent faxes – urgently communicating, “let us help you figure out how our services can work for you. We can make this work.”

I had a week left before the renewal deadline. I called early mornings and late nights in hopes that I would get Lisa on the line. One early morning, a day before the due date, she finally picks up. “Is this about the renewal?” she asks nonchalantly. “What do we need to do for it?”

I explained that a simple signature on a renewal form is all that was needed. Lisa said, “OK, send me the paperwork, and I’ll sign and fax it back.” Like any seasoned sales professional, I bit my tongue, shut up and send the paperwork. I get it back, signed, in about five minutes.

(I’ll share another example in my next post.)

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

My favorite client also became one of my best friends. Tony was a Brooklyn-raised child of the Depression. He was an early IT professional – the kind that could talk about having programmed in IBM 1401 Autocoder language in the early sixties.

Tony took a chance on a self-taught PC programmer and hired me to manage “microcomputers” at a major financial services firm in the mid-eighties. He identified and affirmed my entrepreneurial spirit and encouraged it. I joined a truly great computer company because of Tony. A few years later, Tony brought me into his last job, where he helped me launch a new consulting firm.

All told, Tony touched my professional and personal life for nearly 20 years and several significant career moments. Tony has been gone for some time now and I miss him dearly still.

I remember being on the “buy-side” of many vendor meeting with Tony. If he felt the salesperson wasn’t respecting his intelligence – or if the rep wasn’t fully prepared… well, Tony wasn’t Brooklyn born and raised for nothing. He could cut to the main point and make an unprepared salesperson very, very uncomfortable.

However, I also saw something else – if Tony assessed that you were there to help – truly committed to finding answers that were mutually beneficial – then you would gain a fiercely loyal ally – a prospect that would go the extra mile to help a vendor close the deal.

I mention Tony in this discussion about customers to illustrate a simple point: in all of your planning for go-to-market, positioning and strategic advantage – don’t forget that at the heart of every business – every organization – you will find… people and relationships. The more strategic your offering is, the more this simple truth exerts influence on your go-to-market plans.

• People – not “organizations”, make business decisions. They make these decisions for many different reasons. Logic should and does win – often, but not always. And, it would be fair to argue that logic is used to substantiate an emotional decision – even big-ticket corporate purchases.
• Plans, message stacks and sales processes will fail you if you don’t infuse them with a sales culture that understands this truth.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

You might want to look at the point in your launch cycle in which your company actually asks customers their opinion.

For example, a few years ago, BusinessWeek cited Xerox as typically developing products fully and then asking customers what they thought. Xerox has since refocused on customers from the onset in their product development timeline.

Stephen Hoover, vice-president of Xerox’s research and development hub commented, “The team had had a certain idea of what customers wanted. Going out and actually talking to them really changed that.”

The lesson here is not that Xerox experienced a “blinding flash of the obvious”, i.e., talk to customers before building new products. No, it is instructive in that it is easy for companies of all sizes and in all industries to approach markets from an “inside-out” mindset.

While customers are actually not the only influence on a marketplace, they are certainly the “hub of the wheel”. We forget this at our own peril.

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

Understand Your Target Market and size up the “universe” in which you’ve chosen to compete.

The market forces behind big ticket, complex sales differ significantly from those of small-ticket or consumer-based sales. Accordingly, an understanding of your marketplace must go beyond the simple and take into account not only competitors but alternatives. You must also grasp the market forces (see note below) driving the marketplace “universe” your company competes in, as well.

Examine the essence of your offering’s connection within its target market: the greater this connection, the greater your company’s ability to influence and navigate the marketplace.

• Is your business overlooking key changes in your competitive marketplace?
• Are you wary of the crucial outside forces that can affect your product’s success?
• How can you use the dynamics of your market to enter the market faster and with greater success? (Think of the archetypical “sci-fi” movie scene where someone exclaims, “…all we have to do is whip around their moon – use its gravitational force – and gain the speed we need to break free of their sun’s orbit…”.)

Adapted from the forthcoming eBook, “Know Thy Customer” by Jose Palomino

“Understand that what is important is what’s important to the customer. That’s what we all get paid for in the last analysis: how does the customer buy, and why.”

Peter Drucker, quoted in:
The Essential Drucker: In One Volume the Best of Sixty Years of Peter Drucker’s Essential Writings on Management

Carefully crafted messages alone won’t sell your product or service. You must target your message for your best audience and via the most effective venues. While doing this you must continuously refine your position against relevant competitors in the marketplace.

To leverage your message to the greatest degree possible:

• really know your target market
• anchor your approach to market on an accurate competitive understanding, and
• carefully select and design your primary approach to enter your chosen market.

Think about your prospective market(s) within a framework of key questions and “points to ponder”.

Jot down some thoughts that you can discuss with trusted advisers.

Very few (read: none) companies fail because they knew their markets too well.

Very few (read: almost none) companies succeed without making knowing their customers their top priority.

Ok. That is cool. A little unsettling from a security POV – but cool.

But it costs $200 – $300!

So – this is a cool idea that is Innovative and even a little Wow! (Inspiring) – but does its utility (Indispensability) pass a common-sense cost/benefit test?

That is the question.