Quality in Action Perspective: Customer Focus in Fragmented Niches
The lifeblood of business is profitable sales. A strange thing can happen in the life cycle of a growing company in a highly fragmented market: success may occur without knowing how customers make buying decision. Intoxicated by success, the company is too busy growing to pay attention to such matters. However, the nature of fragmented markets is to de-fragment and normalize. Indeed, it is a core strategy of many PE firms to acquire a portfolio company in a fragmented niche as a "platform," and complement organic growth with acquisitive growth. The frequent goal is a critical mass that attracts the attention of a strategic buyer. But what happens when another—or several other—PEGs have the same idea? Or for that matter, what about a behemoth that enters the market on a predatory basis as a de novo? It is critical for emerging middle market companies to not only learn how their customers make purchasing decisions, but to do so in a way that they can measure their execution for performance reasons. Moreover, when the customer buying decisions are more precisely understood, it should favorably impact training so that sales professionals are even more effective. The result may be both a competitive barrier to entry and negotiating leverage with a strategic buyer. However, it all begins with asking the most unlikely self-imposed question for a growing, successful company: “Why do my customers buy from me?” A postscript to these points is that customer buying rationale is a moving target. A differentiating product or service feature today may be diluted by competitive emulation. A sales force trained to detect and report changes in customer buying preferences may feed market intelligence to product development and avoid commoditization or antiquation. |