Narrow Your Competitive Focus to Increase Profitability
Size Up the Competition
Stop competing on price and start emphasizing attributes that matter to different types of customers
By Andrea Hill
(Originally Published by MJSA July 2023)
The term Ideal Customer Profile (ICP) is not new, but it’s certainly appearing more frequently in B2B sales and marketing discussions. This is good, because understanding your ICP is key to profitability. But too often the discussion is one-sided, focusing on customers without commensurate focus on capabilities. That is a mistake.
Imagine four businesses that seem comparable, at least on the surface: They produce similar products using similar production capabilities and sell into the same market. If all four businesses compete for the same customer, the only thing they will be able to compete on is price.
The way to stop competing on price is to start emphasizing attributes that matter to different types of customers. In the example of the four businesses, one company might invest in attracting customers who prefer higher levels of service, another may focus on attracting customers who demand extraordinary efficiency, and a third may commit to becoming known for its design capabilities.
Now imagine the fourth company looks at its three competitors and thinks, “I’ll beat them all! I’ll give even higher service levels, greater levels of efficiency, and better products and steal all the customers.” This is the company that will struggle the most and likely fail.
If that seems counterintuitive to you, consider what each of the competitors did to stand out. The first company invested in systems, talent, and training to create a customer service operation and culture noteworthy enough to stand out. The second company reorganized production and invested in manufacturing and logistics technology and equipment to turn around orders and deliver them faster than the competition. The third company invested heavily in market and trend analysis capabilities and product development talent. To outcompete all three, the fourth company must invest even more than each competitor in all of those areas to stand out.
But that would be unnecessarily expensive, because customers don’t equally prioritize all the capabilities and no business needs all the customers. Companies that are clear on their differentiation and to whom that differentiation matters can intentionally pursue more of the right customers and comfortably say no to the wrong ones.
Imagine you are the company that invested heavily in customer service. A customer like Walmart, that will make huge demands in terms of operational efficiencies, has made an inquiry. Before you say yes to that customer, consider if you can serve that customer well and what impact serving them will have on your operations and other customers. Also consider if the Walmart-like customer will place much value on your relationship-driven customer service capabilities.
The full benefits of understanding your ICP come from understanding what you do differently and to whom that matters, and then targeting those customers with your sales and marketing efforts. What follows is profitability.
Next, imagine that you are the company that invested heavily in production and logistics efficiencies. A customer like H&M, which has constant on-trend new product development requirements, has made an inquiry. Sure, they will appreciate that you deliver orders on time, but what they really require is a top-notch, finely tuned product development and product lifecycle management partner.
