Not Everyone Has to Be Your Customer

I’m sure you all know that, but knowing and doing are very different things. Here is a quick guide on when and how to let go.
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When I work with companies on sharpening the value proposition and refining the product strategy, one of our information sources for the process is their existing customers. Who they are, why they chose to work with the company, what value they are getting out of the product, etc. Eventually, however, we typically find a subset of these with a common problem and explore the opportunity in solving this specific problem rather than a wider, more generic one which the company usually starts with.

For example, I worked with a company who created a truly amazing chatbot that can have a real, natural, and meaningful conversation with customers of certain types of businesses. They started by going with it to a variety of companies – various industries, different sizes and needs – and a number of companies started working with them. At some point, especially when you want to start marketing more systematically and go beyond the initial introduction stages within your own cycles, this definition is too wide. Marketing needs to know exactly who the target audience is to be able to market to them, and they need to know what the value proposition is to be able to talk about it in a meaningful way. The product on the other side of this equation needs to support this specific use case, and often close gaps that are specific to this industry. All in all, focus is needed and brings a lot of value.

As the old saying goes, focus means knowing what not to do, and so our company finds itself having to narrow down its target market. In the example above, we decided to focus on a specific vertical and company type within this vertical as the target audience for the product (for now). Usually at this point, as we start closing all the details of the sales and product pitch, one of the founders asks “but wait, what if the prospect says ‘X’?”. ‘X’, of course, doesn’t work with the value proposition that we crafted up until now, and it usually means that the prospect, in this case, is not within the refined target market that we are now focusing on. This is where I find myself saying that in this case the prospect might not turn into a customer, and it’s OK. Understanding that not everyone has to be your customer is a defining moment for many companies. 

Easier said than done, though. Knowing that you have to do something and actually doing it are two very different things. So I decided to put in writing what I usually say to these companies and how to do it right.

You Don’t Have to Give-up on Your Existing Business

In the business world, every customer counts. As a startup, you usually work so hard to bring each customer, that the thought of losing them is literally painful. So the first thing for you to understand in order to be willing to take this step is that it doesn’t mean giving up on your existing customers. Not even the ones currently in the pipeline. 

While we are developing and executing on the refined strategy, the outer cycles of the company can continue with what they currently have, simply because that’s what they have. I am a big fan of testing your new strategy quickly and putting your refined value proposition in front of potential customers es early as possible to get feedback and initial validation for it. But to actually sell it end to end would take time: sometimes it involves massive product development or even simply a new demo, so you don’t want marketing and sales running around selling something before you can help them take the prospect to the next stage.

Instead, you should gradually move upcoming prospects towards the new pitch and product offering. Make baby steps until you are ready to make a bigger one. 

If It Worked So Well We Wouldn’t Be Here

Giving up on the bird in your hand for two birds in the bush is really hard, and is rarely good advice. But if we got up until here, it usually means that there is something really wrong with the bird in your hand. Facing a hard decision, people usually tend to forget how they got here and feel only the pain in losing something they already have, so simply reminding them that helps make the decision easier.

Your actions can vary depending on what is exactly wrong with your existing choice of the target market. Here are a few examples:

The bird is not really in your hand

That is, these prospects are not likely to become customers anyway. If the problem you started with was that you couldn’t convert well in your previous target audience, continuing to try won’t help you much. 

If this is the case for you, you shouldn’t waste sales and marketing resources on trying to sell something that isn’t really selling, or to the wrong audience. It most likely will continue to not work, so any effort you put into it is truly wasting your time.

The best thing to do here is to understand that they were never really yours and let go without fear.

There aren’t enough birds like this one

That is, you can have a number of customers for this specific use case, but the potential is very limited. In your market analysis, you realized that this target market is simply not big enough to get you to where you need to be to justify your funding and demonstrate the desired growth rates. 

If this is the case for you, you probably want to continue serving these prospects and convert them to customers where it’s easy. But understanding that this is not where your bread and butter would come from in the future, you shouldn’t make large sacrifices to win these deals. 

The bird needs too much care

That is, to support these customers you need to invest a lot of dedicated effort. It can be that your CAC is too high to justify the price you are charging, that a lot of one-off developments need to be done for each customer to be happy, or even that the technology is so heavy that you simply can’t move fast enough.

If this is the case for you, you should consider carefully before adding more birds to look after, since each comes with a price. At some point, you also want to stop feeding the birds you already have, realizing that some of them will go look for food elsewhere (that is, stop making one-off developments, even at the cost of losing existing customers). Of course, to do it safely, it is best to have the alternative already live and bringing revenue.

Create a Winning Product Strategy

Bottom line, the best way to help yourself feel confident with letting go of your existing business, is to have a great alternative.

With a solid, structured, and coherent product strategy – even before it is actually executed – you get to see step by step how you are going to achieve business success. Seeing it so clearly is so tempting that many of the companies I work with are already waiting to be able to shift everyone’s efforts to work solely on executing the new strategy. 

We usually do it gradually and make proper validations before taking on bigger bets. But when you have great success potential at your reach, this time with higher confidence, and you start seeing your smaller bets payout – not looking backward is easier than ever before.

My free e-book “Speed-Up the Journey to Product-Market Fit” — an executive’s guide to strategic product management is waiting for you

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