Find Your Ideal Customers

The Question

Right now companies of every size are reeling from an exodus of once-loyal customers. Even Yahoo, the formerly acclaimed Internet giant, can’t seem to keep its head above the water. But what is driving this exodus?

Faced with this question, some companies have the luxury of blaming their dwindling customer base on the economy. But not Yahoo. Theirs was never an ordinary B2C model that could be affected by the consumer price index.

Don’t get me wrong, Yahoo’s revenue model was (is?) B2C, but they didn’t start in retail. Their business was built on the same model as Google’s: Serve users with loads of valuable, free content, and charge other businesses a premium to market to those users.

So why the exodus for Yahoo? If they’re offering free content of value, what separates them from Google or other similar search providers?

The Answer

I marvel every time my wife and I walk into an upscale boutique. I love watching the clerks take a “casual” glance at her ring finger before speaking to us. The best ones do this before we even get through the front door, and I assure you it is not a coincidence. Quite the opposite, actually.

When these clerks are trained in sales, they’re taught to observe as many characteristics of the prospect as possible. Things like the size of the diamond on a woman’s ring, or the nature and price of your wardrobe are telling signs to a trained eye. These signs reveal, in a general sense, how likely you are to spend money.

To boil it down, they know their ideal customers. They know that some people come into a boutique just to gawk and fantasize about being able to afford an $8,500 pocketknife accented with wooly mammoth tooth. Those people aren’t going to spend money. On the other hand, their ideal customers will walk in and expect to be served and sold to. If all the manpower in the boutique is tied up serving unlikely customers, then the people who come in ready to spend money will get frustrated and leave.

My point is this: the reason so many businesses are watching their customer base shrink to nothingness cannot be blamed on the economy. There will always be someone willing to spend $8,500 on a pocket knife. The reason is that businesses have stopped trying to understand and serve their ideal customers.

Let’s go back to Yahoo. I almost feel bad for them. Back in the day, they knew their ideal customers. Everything they did was tailored to serve information consumers. But where they dropped the ball – where so many companies drop the ball – was by not focusing on those customers. Rather than working constantly to improve the quality of information available to their information consumers, Yahoo invested their resources in attracting other types of consumers – gamers, movie fanatics, music lovers… you name it.

Of course, Google was powering Yahoo Search for a while. But they wised up, and realized that Yahoo’s biggest revenue driver – information consumers – wanted better information, without the tacky ads and popup boxes everywhere. By this time Yahoo had long since stopped focusing on their ideal customers, and shifted to the more greedy model of “Make as much money from as many people as possible”.

Enter Google.com, and the exodus of nearly every ideal Yahoo customer.

The Lesson

The lesson today is that you need to focus your resources on your ideal customers. You do yourself and your business a major disservice by looking for more ways to bring unlikely customers into your store. You would do better to check the ring finger (so to speak) of everyone who comes into your store. Spend your energy selling to the people who you already know will buy, and let Yahoo deal with the rest.