Hitting the Sweet Spot

By October 11, 2010blog

At RegOnline one of our biggest epiphanies was that our core business was NOT the bigger events (1,000+ registrations) but the smaller ones (250 regs). At about $5 million in revenue, we discovered that 90% of our revenues were coming from the small guys.

Up until then we spent a lot of time, energy, and money trying to attract the big guys. We had hired a bunch of outbound sales people, spent a lot of time on selling partnerships, and invested significant development resources to try to customize our system to accomodate the “big” guys.

It was liberating to realize the bigger guys were NOT our core. It meant we could simplify and refocus a lot of resources on our sweet spot. Which translates into making an even better product for our “small” guys and be even more profitable doing it.
Finding sweet spots isn’t easy and usually takes a couple million in revenues for it to start to reveal itself (if we are looking). I’ve been exploring the sweet spots with a handful of different companies in the past couple months. And here are a couple questions that have helped us:
1. What group of customers comprise the largest % of our revenues?
2. Which customers are most likely to be repeat/long term customers?
3. How profitable is each group of customers when we factor in marketing, COGS, and servicing costs.
4. What niche do our competitors miss that has a lot of unfulfilled demand?
Unfortunately, it’s rarely an obvious conclusion when looking at all this info. But it does start to facilitate lots of conversations that can eventually answer “How can we be an even better company by focusing on our sweet spot?”
Other examples:
PosterBrain – do we focus on consumers who order just a poster or two once a year or on more business-related customers who place larger orders every couple months?
SurveyGizmo – do we focus on the customers who are looking for more capabilities than SurveyMonkey offers, or on customers who are looking for a lower-priced option to their $100,000/year enterprise systems?
StickerGiant – do we focus on the customers who want cheap custom labels or on the customers who want high-quality custom vinyl stickers… or both because we ARE the StickerGIANT after all.

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