COMMENTARY

For the New Year, Really Know Your Customer

January 2004

By Donald J. Pfundstein*
for New Hampshire Business Review

B.A., BS, M.A., M.S., MBA, Ph.D. M.D., J.D., CPA. Hey … looks like you are all really smart. I remember seeing something saying that the people who read this publication are sophisticated business folks. Well, for those of you like me who need a simple framework, try my New Year’s resolution. It may just work for you.

Here’s a simple five-step analysis that will help us all better understand our customers. The analysis should be applied first to your company, next to all your critical customers, and then to your key competitors. The five-point analysis consists of a review of the relevant industry, market, customers, competitors and the future. Clearly, there is plenty of overlap, but stick to the framework as much as feasible. Actually, lay out three columns, then build some PowerPoint slides around the results of your analysis. Soon you’ll see a pretty bright road map.

Industry

The buggy whip metaphor is outdated. However, the point is still valid. Keeping current with what’s going on in your and your customers’ industries may help you avoid getting caught with the LIFO version of a warehouse full of buggy whips. Remember that the buggy whip manufacturer thought it was in the buggy whip business — not the transportation industry. For those born in the digital world, a buggy whip is your great-great-grandparent’s “floppy drive.”

The Internet’s resources make it very easy to gather the critical characteristics of virtually any industry. It takes some time, but the effort is worth it. Read about your industry. Then read about the sectors in which your core customers operate, hopefully survive and earn a profit. Don’t forget to read about what your competitors are doing.

Market

Your market, although related to your industry, is different. I view the market as the universe of transactions in the relevant industry. For instance, the buy-and-sell activity up and down the consumer electronics supply chain will give you a pretty good feel for what is happening in that market. What is the end-user, supplier, distributor, manufacturer, assembler and importer buying? What are they selling and how much of it? Answer these simple questions and you’ll know what is good and bad about your services and products if you are selling into that market. Now, ask and answer the same questions for your customers and competitors.

Targeting new prospective customers is important, but knowing what transactions are important to them will better enable you to “connect” with their reality. That’s the best way to earn and retain customer relationships in the face of competition.

Customer

Everyone claims to know their customer. Frankly, I don’t think that is the case. If you know their relevant industry, market, customers, competitors and their future, then you know your customer. If you don’t have a good appreciation for these five factors, then you are kidding yourself and the competition that does will earn its trust and steal your business. Remember, do the same analysis on your competitors’ customers. Your research may not be as deep — but don’t forget it. How else will you make them your customers?

Competitors

Who are your competitors? Is geography relevant and if so, how is it relevant? Many of you have competitors located all over the world. We no longer compete simply against the business across the street or town. We are generally compared to competitors irrespective of geographic location – but not always.

Who are your customers’ competitors? Learn how your customers differentiate themselves from their competitors. Then do the same with your competitors. How do they differentiate themselves from you? Remembering to focus externally not simply on your company will help you learn what you need to know.

Future

True visionaries are a pretty select group. However, we can all identify and learn relevant trends. It requires hard work, considerable focus and the confidence to get out ahead of the crowd.

There are numerous publications available in the print and electronic media that highlight and report on trends. In fact, there is too much “trendspeak” these days. Make a habit of skimming some of these materials. Read them simply for themes, ideas and concepts. These ideas will help you better anticipate your customers’ needs as they evolve. Staying ahead of the customer and your competitors is a great way to protect and grow both wallet and market share.

*Donald J. Pfundstein is admitted in New Hampshire.

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