You can assign probabilities, take expectation values, con-struct decision trees, and so on. But ultimately, the goal is touse some sort of cost/benefit analysis to prioritize your list of growth opportunities. And if one or two on your list have a hugedemonstrable upside, you may find that your organization issuddenly willing to do what it takes to topple the barriers pre- venting you from realizing those opportunities.
Know Your Customers Inside and Out
Many companies, even if they do identify great growth opportu-nities, have a dreadful time trying to capture them. The problemhere is often the lack of a fine-grained understanding of cus-tomers—which is indispensable if one hopes to influence par-ticular customer behaviors. You can address this problem by crafting an in-depth pictureof the type of person who comprises a certain customer segment.The process starts with a description of that customer’s social,organizational, and physical environment. What constraints andopportunities set the context for this person’s behavior? Is she ina hurry? Is she at leisure? Is she with a family member? And soon. Next, we try to describe the desired experience that this cus-tomer associates with a particular product or service, bearing inmind that people really buy “bundles of experiences” more thanthey buy products. For instance, affluent teenage boys might visit Barnes & Noble not so much to purchase books as to beseen purchasing certain books—say, books by Albert Camus,Ayn Rand, and the like. And Barnes & Noble would want to beaware of this if these boys comprised a significant customer seg-ment. Finally, it is helpful to assemble a profile of the customer’sbeliefs—beliefs about himself, about the relevant product cate-gory, and even about particular products.These three factors—the customer’s environment, the sort of experience he is seeking, and his beliefs—combine to form aconcrete explanation of his behavior: Why he buys what hebuys, and why he does not buy what he does not buy.
Tell the Whole Story
The goal is to investigate your customer segments so thoroughly that you can truly “crawl inside the heads” of their constituentmembers. Managers at Barnes & Noble discussing “the seg-ment of affluent teenage boys” should all be able to envision the17-year-old budding intellectual as if he were sitting right acrossthe table from them. They should recognize this young man intheir friends’ kids, in their own kids—perhaps in themselves.They should know him not just in broad generalities, but in inti-mate detail. He spends weekday afternoons in a coffee shop(the local chain, not Starbucks). He supports environmentalcauses. He listens to Korn. He resents being under the thumbof his banal high-school teachers and fantasizes about the inde-pendence that will come with college admission. And whatabout his books? Well, they are not merely his “pastime,” they are his badge of alienation, of independence, of his status as anintellectual.If Barnes & Noble managers can see this customer, and thesegment he represents, at that level of detail, then they willknow how to market to him. For instance, they might want topromote CDs by college bands near the store’s philosophy sec-tion. And if you as a manager can picture this kid, then the peo-ple who run your marketing, sales, and operations will be able topicture him as well. Everyone at the company will be working inunison, because they’ll all have the same understanding of thesheepish, alienated, spoiled-rebellious teen who finds himself in your marketplace.So ask yourself: Can you tell this kind of story about yourcustomers? Can you relate to them, spot them at trade shows,guess what kind of bank they might use? If not, you may havetrouble inducing the sorts of behavioral changes you will need togenerate growth. Behavioral change is an intimate business. Itoccurs at the level of the human being, not at the level of “menbetween the ages of 27 and 35.”This lesson applies to those who sell to businesses, as surely as it applies to those who sell to consumers. Consider the gaspipeline business. Pipeline operators sell long- and short-termcontracts that give their customers the right to use their pipecapacity to transport gas from point A to point B. Simpleenough. You might imagine that this is a pure commodity busi-ness, in which the sale always goes to the pipeline operator withthe lowest price. Well, it can be that sort of business, but itdoesn’t have to be—not if you’re a pipeline operator who has anuanced understanding of his customer segments.For instance, think about the segment of “arbitrage mar-keters.” These professional traders buy, re-sell, and deliver gas totheir customers when they see a higher than normal priceimbalance in the market. If the price of gas in Eastern Ohio is20 basis points lower than it is in Upstate New York, an arbi-trage marketer knows, if he’s quick enough, he can makemoney. In a matter of minutes, he must find someone who willsell him the gas, persuade someone else to buy the gas, andthen contract with a third person to transport the gas. If he’s notquick enough, gas companies might adjust their price, or worsestill, a competitor will beat him to the punch. Arbitrage mar-keters need information about gas availability and pipelinecapacity and to talk to a decision maker at the pipeline company who can quickly say yes or no to a contract.Traditionally pipeline companies have regarded arbitragemarketers as nuisances and have been slow to respond to theirrequests, focusing instead on established relationships and long-term contracts with local distribution companies. A pipelineoperator who takes the time to understand the arbitrage mar-keter might behave differently. He would learn how much timearbitragers spend trying to find the market information they need to concoct the deal. He would learn that most of the arbi-trager’s requests come first thing in the morning, precisely whenthe pipeline operator typically holds his staff meetings. Hewould also realize that if you tell an arbitrage marketer “I have tocheck with our gas control people, we will let know later thisafternoon,” the arbitrager will hang up, hit the speed dial but-ton, and contact a competitor. He would also understand howmuch the arbitrage marketers resent the way most pipelinecompanies treat them.
No matter what, the problem always boils downto getting a particular customer segment tochange its behavior in a particular way.