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Every company needs to identify a unique sweet spot where they can win against even their strongest competitors. A sweet spot is a concept (or zone) designed to serve a specific group of customers with unique products or services that satisfy their requirements. Every element of a sweet spot, including products or services, your employees and especially your marketing, all works together to create a total business model.

Successful companies must leverage their strengths to create a customer-relevant position in the marketplace. For instance, if a retail company’s strength is selling upscale merchandise, then its sweet spot should be built around that attribute. Similarly, if a manufacturing company can produce low-cost mass production parts,  then it should build its sweet spot around that strength.

Companies both large and small struggle day after day to generate even small profits; think Kmart, Sears, the Big Three auto makers, and most of the major airlines. You probably have personal knowledge of many struggling small companies, such as that restaurant in your neighborhood that never seems to be able to fill its tables during what should be the busy lunch or dinner hour. Unfortunately they are not capitalizing on their sweet spots.

We’ve helped many executives to an understanding of the significance of their sweet spot, that  has propelled their company to sustained, profitable growth. One of our clients transformed itself from a small regional plating business to the premier company in the industry. It now offers a full range of services, from acquisition of customer-specified parts to providing complex finishing. Another client undertook four turnaround projects to devise sweet spots that put their company head and shoulders above its competition.

Sweet spots are not niches
A niche is a narrow segment of the market often referred to as a vertical market. A sweet spot is a total concept built on a company’s strengths and passions/purposes.

Companies with growing sales and profitability have usually found  a sweet spot. A segment of the market that they “own” and that their competitors can’t touch. Think Amazon.com, eBay, Nordstrom, and Southwest Airlines.

Three great companies that have created and thrive in their own sweet spots are Wal-Mart, Target, and Walgreens. Wal-Mart’s sweet spot is built around the tag line “Always low prices. Always.” Every element of Wal-Mart’s culture focuses on cost reduction and efficiency. They are one of the few “lowest price companies’ to make big profits. Next on the price continuum is Target. Most of the products in the stores are slightly more expensive, but the company has built a sweet spot around being a cool place to shop. Walgreens is at the top end of the price scale, offering the highest priced products. Its sweet spot is “convenience” of access, and location. In some cities they have nine stores all within one square mile, because they have capture the needs of their target market perfectly – their sweet spot. It’s easy to get in the store, easy to get out, and the items people want are almost always in stock.

All three of these companies sell a significant amount of the same or easily substitutable merchandise. For example, they all sell Crest toothpaste, often in stores located on the same street. Customers who are strongly motivated by price are likely to buy their toothpaste at Wal-Mart. “With it” people purchase their toothpaste at Target. The Walgreens’ customer is willing to pay a little more for their toothpaste as a trade-off for convenience.

Know your customers
Before you can create a profitable sweet spot, you must have a clear vision of where your company can find their sweet spot based on a rational analysis of where your core and must-have customers will permit you to go. That means you need to know the rules of your company’s core and must-have customers. Core customers are the loyalists who provide 80% or more of your company’s profit. They can describe why they prefer the services or products your company sells over those of your  competitors.

Must-have customers are people who have the same characteristics as your core customers but are currently buying from your competition. A growing, profitable company is always seeking out their must-have customers and converting them to become their core customers. Often, all it takes it letting must-have customers know that you can satisfy their needs. Add your USP tied to their needs and they will come.

Guessing is gambling
A powerful market research tool is to use high quality “blind” research to determine where your potential sweet spot is and what your core and must-have customers think about your company currently.

Of course, for research to be effective, you must ask the right questions to the right people! We can’t emphasize enough how important it is to confine your research to your core and must-have customers! Asking anyone else will corrupt your data and could send your company down the wrong path.

To formulate the right questions, you need to have a good idea of the kinds of answers you’re looking for. Understanding what you need to know will enable you to structure research questions in a way that will give you information you can actually use. You can do this using our proprietary “Ideation Process.” For instance, if you want to know why your most loyal customers stay faithful, you will need to ask questions such as:

  • What do you like best about the products or services this company offers?
  • How can the products or services be improved? How will that benefit you? What would that be worth to you?
  • If you needed a new supplier for these products or services -  who would you go to? Why?
  • etc.

By asking your core and must-have customers the correct research questions, you can learn how to use your company’s strengths to create your sweet spot. This key information will help you and your executive team make crucial decisions and implement strategies that will attract must-have customers that can easily be turned into core customers. The only kind of customers you really want!

Magic happens when management matches the company’s strengths to the rules of their core and must-have customers to create a sweet spot. By building their business around a sweet spot that offers the right merchandise or services, they benefit from differentiation and they are no longer going head to head against the biggest competitors in the industry. The end result is a healthy company with loyal customers who will provide profitable, sustained growth for the future.

Robert Gordman is president of The Gordman Group and author of The Must-Have Customer: 7 Steps to Winning the Customer You Haven’t Got

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