Want to create a new market? Focus on what others overlook

Don't look where the light is. Look where the keys are

Originally published here

Traditional marketing can teach you how to sell more. It knows how to reach not only your non-customers but even anti-customers. It offers many valuable tools to identify unmet customer needs, even those customers themselves aren’t aware of.

You may have heard Andy Grove’s phrase, “Snow melts from the edges,” and read Rita McGrath’s book Seeing Around Corners, in which she urges businesses to look for innovative ideas on the ‘fringes’ of their markets.

But here’s what everyone misses: if you want to create a new market, start with your most loyal customers.

We should look for the keys where they are.

“We don’t sell machinery. We sell business”

John Smith (name changed) was the CEO of XYZ company (this also isn’t the real name). XYZ sold air compressors and was the local market leader.

XYZ had ambitious plans for 2017, but John Smith wasn’t worried. The largest clients had already placed pre-orders for the year, and these orders were significantly larger than those in 2016.

The first alarm bell rang in February 2017 when a few minor clients canceled their pre-orders. By mid-March, a few more clients canceled the orders, and among them was ZYX, the biggest and the most loyal one.

When Smith called the CEO of ZYX, the CEO said: ‘We got an offer we couldn’t refuse. You sell your compressors, John, but those guys give them away for free.’

‘For free?’ John couldn’t believe his ears. ‘Not literally, of course,’ the ZYX CEO replied, ‘but they offered a very attractive installment plan. Visit their website, and you’ll see it for yourself.’

Smith opened a browser and found his competitor’s homepage. It read: “We don’t sell machinery. We sell business.”

Sometimes, it’s not a gang of AI-wielding startup kids that disrupts your market—it’s your old competitor, casually rewriting one of the industry’s so-called ‘axioms.’

Timeless. Logical. Outdated

You can visualize your market this way:

· Indifferent customers – those who buy your product out of habit.

· DIY customers solve the same tasks as your customers or your competitors’ customers but do this on their own. For example, I’ve met business leaders who believed their teams could build better CRM than what’s available on the market.

· Consumers of substitute products prefer alternative solutions that solve the same task but differently. For instance, these customers may outsource what others handle in-house.

· Unaware prospects have the same needs as your customers but don't realize it. For instance, managers might've never heard of a CRM.

· Unmet-need customers have specific needs no product currently meets. For example, they might dream of a CRM that sells for them (and who wouldn’t?).

· Anti-customers have deliberately decided not to buy your products or those of your rivals. They don’t need a CRM; they have Microsoft Excel.

I help businesses create their own markets. Do you need expert guidance to craft a winning strategy for your business? DM me.

Classical marketing theory teaches that if your market has reached saturation, you shouldn’t try to steal the clients from your direct competitors, it’s too hard. Instead, you can delve into the needs of other groups and try the following:

1. Turn indifferent customers into loyal ones

2. Convert ‘DIY customers’ into paying customers

3. Enlighten unaware prospects

4. Develop specific solutions for unmet-need customers or even anti-customers

And that’s how we end up with shampoos or detergents that are ‘15% better than everything else on the market.’

You can join a fight no one can win, or you can build your own sandbox.

Building your own sandbox

We’ve already discussed that nine characteristics define any market:

1. Target customers
2. Customer needs
3. Customer value (value businesses create for customers) vs Customer trade-off (what customers have to accept to receive the value).
4. Monetization of customer value
5. Sources of captured value
6. Place
7. Time
8. Occasion
9. Experience

In the XYZ case, its competitor offered clients the so-called ‘used-based pricing’ model. Clients get the equipment for free but pay for every cubic meter (cubic foot) of compressed air it produces for them.

The competitor changed just three points out of nine:

1. Customer needs – it shifted focus to cost savings

2. Customer value – clients get the equipment now but pay later, and they can turn fixed costs into variable costs

3. Monetization of customer value – clients pay for the equipment gradually but end up paying more in total.

The competitor didn't seek success in small market niches; it went for the low-hanging fruit—loyal customers.

Creating a new market based on loyal customers has a big advantage: they trust you. When you approach them and say, "Hey, let's try this!" they’ll at least listen.

Creating a new market based on non-customers of any kind is much harder.

Create a radically new solution for your loyal customers, build a strategy around it, and your competitors won’t stand a chance of keeping up.

Download my new mini-book The Plague of Strategic Goals for free here—a gift for my subscribers! Oh, and by the way, the same link also has free checklists (in case you haven’t grabbed them yet)!

––

Do you need expert guidance to craft a winning strategy for your business? DM me.

Read also: Bulls, AI, and Strategic Myopia

Visit my website. Join my free newsletter to read more groundbreaking articles on strategic thinking.

Check out my other newsletters: Strategy in Three Minutes and Life Strategy.

Buy my book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism.