Pokemon Go is all the rage right now. “Gotta catch them all!” This may work for Pokemon, but it does not work in business. But why!?! isn’t that how we get the most profit, by trying to get the most customers? Well, yes and no.
While I was in college, one of our assignments was to make a business plan for a mock business. One group sold chocolate. Their target market was anyone who likes chocolate. On the surface that sounds reasonable. They were, after all, selling chocolate. So, what’s wrong with this strategy? Who wouldn’t want to appease everyone who likes chocolate, get a bunch of new customers, and make a profitable business, right!?!…wrong!
Not all chocolate is the same. A Hershey’s chocolate bar is very different than a Godiva chocolate truffle. They also attract a different kind of customer. The person who likes Godiva chocolate is willing to pay a premium for high-quality ingredients. That customer is very different from the customer who is picking up a Hershey’s bar in the checkout line. So, what would happen if both these brands changed their strategy to appeal to ‘anyone who likes chocolate’. They would both flop!
Not everyone wants every kind of chocolate
If Hershey’s tried to be like Godiva they would have to raise their prices, change their recipes, and re brand their bars. This would alienate their customers who want an inexpensive bar of chocolate. ‘Oh, I guess they don’t want my business, they jacked up their prices!’If Godiva were to decrease their prices, change their recipe, and re brand their truffles they would alienate their customers who want a high quality indulgence. ‘This is not what I paid my hard earned money for’. When you try to please everyone, you alienate your loyal customers.
When trying include everyone does not work
A great example is Target. A recent decision to allow persons into the bathroom of the sex they identified with, sent their stock prices plummeting. (You can find some numbers here)
This decision may have included the .02%-.05% of the population which identifies as transgendered. However, it alienated many women, who account for 85% of consumer purchases according to Parker in this recent study: Marketing to Women: Surprising Stats show purchasing power and influence
Target is adding additional single occupancy bathrooms into many of their stores. This is to accommodate their customers who do not feel comfortable with the new Target bathroom policy. There’s a key fact Target’s critics are completely missing
Once this roll-out is complete a more in-depth cost benefit analysis can be done. A few questions to ask would be: Does this bring back the customers who left due to the bathroom policy? If so, are our profits back to where they were before the policy change or are they higher? If profits are higher, are they high enough the justify the expense of the additional bathroom installation?
**** My decision to include Target in these examples is purely because they are a good example of the point I’m trying to make. You can’t please everyone. I’m not trying to be political here. ****
Many years ago Cadillac made a little ‘hot rod’ called the Cimarron. The Cimarron was a poorly executed attempt by Cadillac to gain the market share of economy car buyers. You can read more details about it here.
So, what’s so bad about Cadillac trying to appeal to the budget conscious consumer. Why not increase your market share when you can right? That’s how you make money! That’s how you blow away the competition! Well, they alienated their customer base. Cadillac’s are sweet luxury rides for those who can afford them. Driving a Cadillac says ‘I’ve made it big, and I have the ride to prove it!’ If you can afford said Cadillac, gas mileage and economy are not in the fore front of your mind when considering this purchase.
Cadillac does big luxury cars very well, its one of their core competencies. They have a reputation for this. So…why tarnish that reputation with the Cimarron? This isn’t what they do, it isn’t even their niche?
Why did they do it!
The economy was bad during that time, and desperate times called for desperate measures. However, from a business standpoint, it was not a good decision. By making an economy car, Cadillac associated its brand with economy and inexpensive. This alienated its customer base and tarnished its brand.
So, how does this translate to you? How do I avoid the mistakes made by Cadillac and Target? There are a few things you can do.
Know your target market well!
First, and foremost, know who they are! Know what makes them tick. What are their wants and needs when it comes to your products and/or services? Why do they come into your store versus your competitions? Make sure you are ensuring that they feel valued and appreciated. Listen to them. Know what keeps them coming back.
Know your competition
Make sure you know who they are, and who they aren’t. You need to compare apples to apples. Here’s an example, purses. A customer purchasing a coach purse has very different expectations, than a customer buying a person from Wal-Mart. They need to be catered to differently. They have different needs and wants. If you try to charge coach prices at Wal-Mart it will back fire. If you try to knock down the price of a coach purse, (and the quality, and the service) it will backfire.
Learn from these mistakes
You know that saying, ‘history repeats itself’. Well, you don’t need to be repeating history here. Know what they did wrong, and don’t try to repeat it thinking ‘well I can do this better’. Don’t make decisions out of desperation to try to gain more market share. Don’t be that guy!
I know sometimes its hard to say ‘I want every chocolate eating customer!’. However, there is a lot of competition out there, and a lot of different types of chocolate 🙂 Know your customer, and make chocolate for them. I hope this has helped you grow your business, or at the very least, avoid a mistake 🙂