The customer alienation strategy that grew revenue by 145%
My wife, Sally, and I once owned a vacation rental cabin.
The Overlook was located in the Southern California mountain town of Idyllwild. It was already a vacation rental when we bought it.
Annual revenue increased by 145% by the time we sold it five years later.
Our growth strategy was counterintuitive. We deliberately made the cabin unappealing to the two largest customer segments in our rental market.
Why risk alienating potential customers?
We went all-on on giving our ideal customer an amazing experience. These customers had different needs than other groups.
Tailoring The Overlook guest experience to this group meant ignoring the needs of others.
I'm going to show you exactly how we identified our ideal customer and built an irresistible value proposition.
Step 1: Find you ideal customer
Customers can grouped by similar needs or characteristics. These groups are called segments.
Your ideal customer is the customer group your business serves best. They tend to be happier with your experience, are easier to serve, and are more profitable than other groups.
Finding your ideal customer can take a bit of research along with some trial and error.
Identify customer segments
Start by learning about the customer segments in your market.
We gathered intel from our property manager, reviewed marketplaces like VRBO and Airbnb, and talked to customers who rented other cabins in Idyllwild to get this data.
Two big segments emerged: romantic couples and budget groups.
Romantic couples wanted a cozy mountain cabin for a romantic getaway. The Overlook had four bedrooms and slept eight guests, so this wasn't a great fit.
Budget groups were extended families or groups of friends who wanted to minimize their cost per person. They favored larger cabins that could accommodate the most people.
The Overlook wasn't a great fit for this group, either. Our cabin had just four beds, one for each bedroom. Similar cabins had multiple beds per room, pull out sofas, and air mattresses to sleep up to sixteen guests.
There was a third, much smaller segment, the quiet getaways.
Quiet getaways were a single family or two couples who wanted a quiet mountain getaway. They wanted a home base where they could relax after a day of hiking or exploring the town.
The Overlook had many of the features these guests wanted:
Seriously, look at the sunset view!
Analyze your competition
Check out your competition to see how you stack up. These are the other options people consider when they are considering your product or service.
We researched the nightly rate of similar cabins, along with each one's capacity and core value proposition.
The Overlook's nightly rate was in the bottom half. This explained why the cabin attracted a lot of budget groups, which was a big problem. (I'll explain more in a minute.)
A closer look showed The Overlook was under-priced when comparing it to cabins with similar amenities.
Gather customer feedback
Customer feedback to essential to see which groups are happiest.
You can do this in any number of ways. While surveys are helpful, nothing beats observing customers first-hand and having direct conversations.
We visited The Overlook once a month to inspect it and perform maintenance. (Our property manager handled day-to-day cleaning and upkeep.) Many visits were timed so we could arrive just after guests checked out.
This revealed what furniture or other items had been moved, where guests created a mess, and what items were damaged or missing. We compared our notes to the guest profile of the people who had just checked out.
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Two things jumped out.
Budget groups were unhappy, unprofitable guests. They caused far more damage than other groups. Small items often went missing. A few even generated complaints from neighbors about noise, cars blocking driveways, or litter.
Despite all that, they complained more often. Our common area was too small, there was only one TV, there were only four beds, etc.
Our quiet getaway guests were different. They loved the cabin, left it in great condition, and didn't steal.
This was our ideal customer group!
It was the smallest customer segment in the market, but it also had the least amount of competition.
Step 2: Learn what problem they're trying to solve
Customers ultimately buy a product or service to solve a problem. Identify the problem your ideal customer is trying to solve, and you can craft an irresistible offer.
The Overlook's ideal customer wanted a quiet mountain retreat.
They valued the extra amenities we offered. Even things other groups saw as disadvantages became advantages for this group!
For example, many budget groups wanted to be closer to town so they could walk to dinner. The Overlook was a ten minute drive from town, and they didn't want to drive the dark, winding mountain roads at night.
Our ideal customers saw the advantage. They preferred cooking meals at the cabin. It had better views than cabins in town and also got more snow in the winter because it sat at a higher elevation.
Did I mention we offered free snow shoveling and plowing? Most other cabins charged for that.
Step 3: Promise to solve their problem
You can win your ideal customer's business by promising to solve the problem they most want to solve.
Let's look at those three segments again:
The Overlook was ideal for quiet getaways. Our brand promise became, "Welcome to your mountain retreat."
After year three, Sally and I made a bold move to double-down on serving this customer segment. We decided turned one of the bedrooms into a second game room.
Our ideal group had a maximum of six guests, so there was no downside for them. They appreciated a room where they could work puzzles, play games, or send the kids to play.
Trimming our capacity made The Overlook less attractive to budget travelers. This led to lower maintenance costs, less damage, and virtually no complaints. Perfect!
We kept going. Furniture, window coverings, and linens were upgraded. We even installed a new kitchen countertop that made the hickory cabinets really pop.
Another big move was installing air conditioning.
Very few cabins in the mountains had it. This gave us a huge advantage in the hot summer months. Our ideal guests appreciated having a cool cabin to come back to after a day out on the trails.
It paid for itself the first year.
The last thing we did was raise our nightly rate from $275 to $325. This further discouraged budget groups that caused so much wear and tear on the cabin.
However, our ideal customer didn't blink. The cabin still offered the best value proposition amongst our competitors.
Focusing on our ideal customer paid off. In five years, our annual revenue had increased 145%.
Conclusion: Focus on your ideal customer
You can't please everyone. Win more business by focusing on the people you serve best. These customers will be happier and willing to pay more.
Learn more about applying this framework to your business from The Guaranteed Customer Experience.
It's available in paperback, ebook, and audiobook on Amazon. You can also download the first chapter here.
Resources
Expert Customer Experience Management Training ? Mystery Shopping & Business Assessments ? Event Services
5 个月Great article! Knowing who your ideal customer is is always important because it helps you serve them better.
Customer Services and Operations Leader | Enabling outstanding customer experiences and value outcomes that drive business growth.
5 个月Great story to relate to real-world challenges in business. How many of us have encountered cases of a sale being made to a non-ideal customer and the pains that follow? (misaligned expectations, technical debt, increased costs trying to meet needs outside the company's product/service domain?). I'll remember this great example!
Musing on the intersection of leadership, life, and individuality | trainer, speaker, consultant, author | erstwhile fastest knitter in the U.S. | cat enthusiast
5 个月I once knew a marketing dude who used to say: You need magnets AND ejection seats. Sounds like that's exactly your approach, and I 100% agree that it works - but it does take courage to whittle down to that smaller market, even though, once one does it, it's SO effective.