You might think that with a market capitalization now of over $1.1 trillion, Apple owns the vast majority of the smartphone market. Logical, but wrong. In fact, Apple had under 25 percent of the total handhelds shipped for most of 2019 and was actually the number two in the market that year.
So why do people admire and extol Apple as the leader in the handheld device market? It’s not because of their dominance in the overall market. It’s because while they don’t have the lion’s share of the market in volume, they do have the vast majority of profits.
While Apple had under 25 percent of the market by units, it took home over 60 percent of the total profit-share of the industry. By focusing on high-value customers and creating high-value products, it focuses on the higher end of the market where the majority of the profits lie. As a result, the remaining 85 percent of the handhelds shipped have to fight over the crumbs that remain.
Which would you like to have? A bigger percentage of the overall revenues or of the profit of your market?
Smart companies don’t worry about market share. They focus on capturing the most profitable segment of the market and leave the rest to their competitors. Here are several ways that they do it and how you can do it too.
Focus on Your Ideal Customer
Trying to sell everything to anyone is not a profitable or scalable strategy. Yet, I see many companies that chase anyone who has a budget to spend. Not only does it make your own operations difficult, but it also makes it impossible for people to know why they should buy from you and who to refer you to.
Figuring out who your best customer is and what their needs and fears are will allow you to align your business to what they want. This will also make it easy for you to target your messaging and sales strategies. And when people know who your target customer is, it’s much easier to refer you to the right prospects.
Create a High-value Product/Service
Once you have your ideal customer dialed in and well-understood, you can hone your product or services to meet their needs. The key at this stage is to understand both the practical logical needs as well as their emotional needs and fears. Remember, people buy based on emotional needs and justify based on a logical rationale.
Once you have them well mapped out, review all that you do to meet those categories. Re-design your processes and procedure to maximize the delivery of value to your ideal customer. By focusing on just this one most important segment, you’ll be able to keep things simple while delivering significant impact.
Differentiate Yourself in the Market
The key to strategy is to carve out a well-differentiated position in your market. If you want to command a better than the average profit margin, this is a must. If you don’t stand out from the crowd, you’ll be in a price war that will only undermine your profits.
Find two to three areas where you can provide superior performance relative to the key competitors and work to operationally deliver on these better and more consistently than anyone else in the market.
Strive for Operational Excellence
A great strategy is worthless if you can’t execute on it. Once you’ve developed a way to differentiate yourself, dedicate yourself to delivering on that strategy through bullet-proof operations. Consistently delivering a quality product on a consistent and reliable basis is what will make you successful in the market.
Develop standard procedures and operational playbooks to ensure that standards and processes are met. As you grow, these will help drive quality and efficiency as you add people and scale up the organization. Without these, quality will suffer as you grow.
Don’t Leave Money on the Table
Many of the companies I speak to end up leaving money on the table. They typically haven’t done enough market research to understand the market value of the products/services they provide, and instead use a cost-plus approach (raw materials plus labor plus fixed profit) to set their prices. If you have a well-defined position and a targeted offer, you should be charging far more than standard rates and getting much higher than the standard profit margin.
While it can be impressive to quote your total revenues and what percentage the market share you command, these things are vanity metrics. Real business leaders know that long-term, sustainable success comes from having a solid strategy that carves out the most profitable customers.
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