Article 5.8


Within most firms, if a cross-section of employees are asked: "what type of customer is this firm specifically trying to sell, and why should they buy from us instead of some other competitor or some other alternative solution?" The answers are mostly weak to non-existent, and the attitude is often "how should I know and why should I care?"

With little strategic education, the answers could be informative, the attitude committed, and the following benefits possible:

    1. All employees could work together with more "alignment" and harmony instead of at departmental or individual cross-purposes.
    2. Individual responsibility towards serving the customer and doing something extra, if necessary, would increase. When people understand how they fit into the big picture and that their contribution, no matter how small, can make or break total quality performance for the customer, they gain personal relevance and importance. With an improved self-image, responsibility, pride and initiative can all increase.
    3. Big picture education also provides conceptual frameworks with which employees can organize and remember more information that is free-floating around the job, but usually unabsorbed. Increasing understanding boosts performance.


Explain that all businesses exist to fill customer needs at a cost to the firm that is less than what the customer values and will pay for it. The larger the spread between the price and the cost to deliver customer value, the more gross margin dollars the firm will have to: afford good compensation for employees; invest in progressive changes; and create profits to provide both a return on investment for shareholders and a source of growth capital. If sales and everyone's future are both to grow, then assets to support sales must grow and be financed significantly with reinvested profits.

There are, unfortunately, competitors who want the same customers. So, the firm must target customers with a tight enough focus to be able to be the best at serving them. If we can't define exactly what we are doing that is important to our customers and sustainably better than the competition, then we must sell price like most competitors do and hope we survive, but not prosper.

To explain the changing relationships between the firm, the customers and the competition the following diagram should help.

In the diagram, the first challenge (#1) is to pick a targeted customer group(s) that we think that we can distinctively serve the best. Because we can't read the customer's mind, we need to periodically ask them (#2) what their exact, but steadily shifting problems or needs are that we aspire to fill. With this market information (#3), we can continually rethink our firm's product/service offerings plus redesign our internal systems, jobs and skills (#4) to be able to deliver perfect-plus solutions (#5) - 105% of customers' total expectations.

Internal change (#4) is problematic for everyone, but today the customer is the King who pays our wages. If we don't continually adapt to serve them the best, then someone else will, and we will face economic decline and perhaps eventual extinction.

Many competitors (#6) will claim, however, to have the same or better solutions for our customers often at lower prices than ours. As a second major challenge, we must continuously strive to be more cost-effective than the competition (#7). This will give us the economic slack to be more price-competitive with them, if necessary.

Conventional business thinking in the US from 1900 to 1982 was to worry about the competition, volume and costs first, and the customer second. Since 1982, the successful firms have: targeted and delivered to the customer first; worried about costs second; and achieved volume growth as a by-product of capturing and retaining best, most profitable customers at a greater rate than those competitors who have less than perfect solutions.

Because many firms are still volume, cost and ego-driven first and customer-needs driven second, they are less effective at targeting, listening to and responding to customer needs perfectly. This type of firm also has more difficulty in both attracting good people and getting them to work in a motivated and coordinated way; employees are more excited to serve customers than to be an expense item.

If we can deliver 105% of what the customer wants and sell it, then a 90%-solution competitor will have to cut the price significantly to try to offset our excellent product/service offering in the customer's mind. If the competitor can't achieve the strategic people-harmony that we do, then they will also be higher cost producers. A strategically targeted and motivated firm will win in the long-run against competitors who must sell at lower prices with higher costs.


Because perfect quality goods and services increase customer satisfaction and lower mistake-curing costs while boosting morale, every firm should make quality part of their competitive strategy. The perfect goods/services package must still be tailored, however, to the targeted customer.

As we uncover new needs that our targeted customers will have, not all will be viable opportunities, because the cost of the solution will exceed what the customer will pay for it. Airline travelers, for example, complain about tightly spaced "coach" seats, but tests have proven that they won't pay for the extra room.

A common, unsuccessful strategy is to cut the price to be different and to lower costs to afford the price cuts by paying employees less or reducing quality in some other way. Price cuts are not a sustainable advantage, because any competitor, especially an entrenched one, can match price cuts immediately. And lower paid people will turnover faster and not provide sustainably perfect service which will then drive customers to the perfect provider.

Because customer needs are fragmenting, most firms must become niche marketers able to sell many different product/service packages to many different, but equally well-targeted customer segments. Separate marketing divisions with good database coding for customers will be necessary to keep firms internally - flexible, coordinated and unconfused. Firms that continue to go to market in one standard way will over-serve some customers, under-serve others and be niched to death by the flexible, multi-targeted competitors.


To make all employees strategically motivated and focused we need to write down and share with them who our targeted segments of customers are in priority order and what we are striving to provide them with in a sustainably better way.

We should also write down what operational strategies we are pursuing to give us sustainable cost advantages over competitors which will not hurt quality or value to the customer. Total quality improvement achieves both.

Ask all employees for their ideas on how to better achieve these two sets of written objectives. They will have some good ideas and questions. By working together on preferred future objectives, collective understanding and commitment will increase.

Have all new employees review these strategic objectives as a part of their initial orientation program. Then, if someone did ask them the questions at the beginning of this article, they would receive informed answers with a tone of belief and commitment.

Merrifield Consulting Group, Inc., Article 5.8