As a business owner, attracting customers is so central and occupies so much of your focus that it’s easy to lose sight of the fact that not all customers are created equal.
Not knowing who your best customer is results in countless and costly efforts to attract a customer who isn’t actually your ideal. You suffer endless frustrations, false starts, wasted time and money, and sometimes even total failure, all to pursue an audience that never was that “into you” to begin with. More importantly, if you really examined that audience, would you be that into them?
When you look at your current client database, do you have any objective, tangible evidence of who your best customer is, why they are attracted to what you offer, why they choose to buy from you, and how much revenue they bring your business? What would happen if you did? Knowing who your most probable—and most profitable—customer is will save you and your business in countless ways. By specifically targeting your best customer and dedicating your service to satisfying their needs, you will produce the best results for your business. You’ll also make the best use of your time, marketing efforts, and money.
Finding Your Best Customer
One of the most effective tools to pinpointing your most probable and profitable customer is the EMyth Product-Market Grid. The grid is a tool to identify, describe, and define who your target market is.
Down the left side of the grid, you list the products and services you offer. Across the top, you list the markets and customers you sell to. Then, fill in the grid with the actual sales of each product-market set. Now you can clearly identify and prioritize each product-market set in order of potential revenue.
This can be a mind-bending exercise. Most business owners operate on instinct and assumptions. When you take the time to step back and challenge these, amazing things can happen.
Let me tell you about Ray.
Ray took over his father’s commercial construction renovation business. His father had many small customers he’d done projects for year after year, and they were the customer base Ray inherited. These customers had no qualms about constantly asking for help with the smallest repair and maintenance projects. As Ray took over the business, all these tiny jobs filled up his time. He assumed this was normal—that he would have to continue juggling hundreds of little projects to satisfy his customers.
It wasn’t just the company’s history with Ray’s dad’s old customers; Ray believed taking on these little jobs was worthwhile because they created opportunities to bid on larger projects. He was convinced he had to accept every request, so that those bigger opportunities would materialize.
What a surprise, then, when we worked on the Product-Market Grid together and actually identified the source of his best jobs! (Spoiler: It had nothing whatsoever to do with these legacy customers.)
Here’s what we found:
Ray had completed 264 repair and maintenance projects in the past year, each taking significant time and effort to win and complete. These 264 jobs generated about $397k.
As he further analyzed the grid, there were five major projects, each over $100k, that generated $1.2M, over 50% of his revenue that year.
Where did those projects come from? What markets created that revenue? It clearly wasn’t the tiny individual repair and maintenance projects. It turned out that the projects over $100k had come from sources Ray had overlooked or taken for granted: Property Management and Designers/Architects accounted for over 50% of his business. Ray was stunned.
How the EMyth Product-Market Grid Reveals Your Best Customer
As I mentioned earlier, this is a mind-bending exercise that will challenge your assumptions about who you do business with.The EMyth Product-Market Grid is a spreadsheet; across the top of the sheet are the markets or customers who buy from you. Going down the sheet are the products or services your clients purchase from you. Ray categorized the products by the dollar value of the project, and he categorized the market as the type of customers who bought his services.
The EMyth Product-Market Grid is a spreadsheet; across the top of the sheet are the markets or customers who buy from you. Going down the sheet are the products or services your clients purchase from you. Ray categorized the products by the dollar value of the project, and he categorized the market as the type of customers who bought his services.
When Ray first started to fill in the product-market grid, he was overwhelmed with the infinite combinations of project details that constituted a job—repairs, maintenance, drywall, paint, electricity, carpeting...the combinations were endless, and impractical to track and categorize. No wonder he was endlessly juggling! Filling in the grid forced him to take a step back.
Thinking more globally, he decided to lump projects together by dollar value rather than specific services. This made for manageable categories to use in the grid. It also made it easy to see the true value of each job in black and white.
Ray’s Products & Services
Repairs and Maintenance (Jobs under $5k)
Small Projects (Jobs $5k to $25k)
Medium Projects (Jobs $25k to $50k)
Larger Projects (Jobs $50k to $100k)
Even Larger Projects (Over $100k)
Ray’s Markets & Customers
The product-market grid gave Ray clarity about where the best projects were coming from. From there, it became a simple matter of allocating his resources. Would Ray continue the chaos of accepting 264 repair and maintenance jobs that accounted for ⅙ of his revenue? Or intentionally target his market for the much larger projects that had produced the rest?
Once he saw the reality staring back at him from the grid, Ray realized the time and effort he and his team put into the 264 small jobs could be exponentially leveraged to win five more large projects with the same financial outcome! Ray was clear he would prefer to focus on projects over $100k, and turned his marketing attentions to the markets that offered those jobs.
How to Do Your Own EMyth Product-Market Grid
If you run a donut shop that serves only one kind of donut and you only have walk-in customers, your grid has just one product-market set. If your donut shop has more offerings, or if it also has mail-order customers, it will have more product-market sets. Consider all the possible combinations. Our goal is to understand which product-market sets do the best job of moving you towards your financial objectives.
Once you’ve got all your products or services and all your customers accounted for, what goes into the grid? Consider sales, the number of units sold, and the profit margin for each segment.
As Ray discovered, the 264 repair and maintenance jobs bore no correlation whatsoever to the referrals he received for larger projects—his biggest jobs consistently came from other customers. He now focuses on his target market, bidding exclusively on large projects.
Knowing who your best customer really is may surprise you. Having an objective tool that pinpoints who you are really attracting to your business, what they choose to buy from you, and what the top performers are will set you up for success. What would happen to your business if you had these answers, instead of working on old assumptions?
Still, old habits die hard. It took time for Ray to fully digest the significance of identifying his real best customer. He would often revert back to currying favor and accepting little jobs in order to honor the long standing relationships his father had forged. But as he refocused on his product-market grid, he gradually shifted his activities to attracting the markets that truly represented his best customers. Ray now has only a few, highly-targeted projects (only those that fit the product-market grid’s “best customer” designation) with increased revenue and profitability, as well as the time to seek out and attract more of those best customers.
By targeting the right customer base in your marketing and dedicating your service to satisfying their needs, you will delight your best clients and transform your business.
Create a Product-Market Grid for your business and you may be surprised who your best customer is!