MISTAKE #12: You think a piece of a larger pie is always more filling

Let’s step back for a moment and remind ourselves why we take the time to define one or more target profiles.  Let’s talk about why few products should target large segments of the population.   

Hopefully, I’ll convince you that in most situations, targeting a smaller segment of the population that has a more uniform unmet need allows you to offer a better product that ultimately translates into greater success.

In the most basic terms, the goal of defining a target audience is to find a group of people with a shared need or a common problem.  They are people that, when presented a message (i.e. your value proposition), will have a common response or outcome (i.e. they buy your product). 

Put another way, companies want to find a profile within the population that represents a large enough group of buyers (we quantify this as “potential”) with a high enough propensity to buy (we quantify this as “probability”). 

To further explain this, let’s assume you’ve defined a pool of prospects that represents exactly 100 people.  For simplicity, let’s also ignore the impact of repeat purchases over time and the fact that non-prospects could also buy your product.

With these assumptions, your product’s maximum volume forecast is defined by perfect conversion.  That is, 100% of the 100 people buy your product.

In reality, you won’t get 100% conversion.  You probably won’t get anywhere near that number.  50% is probably a stretch, but let’s use that number. 

So your volume forecast is heavily influenced by the size of your prospect pool and what effective conversion rate you assume will play out.

Companies look at this math and often decide the volume projection isn’t acceptable.  They want more sales and more profit.  In this example, let’s assume they ‘solve’ this problem by going back to their prime prospect group and start diluting it until they’ve increased it 10-fold and now have 1,000 people defined as prospects.

They conveniently assume the 50% converse rate stays constant, and now they’re suddenly projecting 500 buyers, a 10x increase over their original forecast of 50 buyers.

There is just one problem:  Those 1,000 people probably don’t share the same unmet need.  They probably aren’t all as able or willing to buy the company’s product after hearing about it.  One message or story isn’t going to appeal to all of them.

What I’ve observed suggests that diluting the prospect group exponentially dilutes the probability of getting them to buy.  So, while the potential has increased (from 100 potential buyers to 1,000 potential buyers), the probability has fallen at a 10x rate or more (from 50% among the tighter prospect group of 100 to 5% conversion among the larger group of 1,000).

In the process, the company has diluted how distinct and powerful its value proposition is.  They’ve taken an idea that could have relatively strong appeal among 100 people and made it have mediocre appeal among 1,000 people (which includes lower appeal among those original 100 prospects). 

And this ignores the likely lower levels of satisfaction, which translate to fewer repeats and less loyalty.

I’ve worked with numerous clients that have gone down this path.

They’ve taken a good idea, gotten greedy, and arrived at a plan with numbers that look great on paper, but never materialize in real life.

WHY A PIECE OF A BIGGER PIE ISN’T ALWAYS MORE SATISFYING 

Products succeed by winning the purchase decision and getting in the cart.  There are no points awarded to second place.  Or as Ricky Bobby puts it, “If you ain’t first, you’re last.” 

In retail, Ricky got it right.  The buyer’s second choice gets no more share points and no more profit dollars than the buyer’s 10th choice.  Both sit unsold on the shelf, hoping to jump into the cart of the next shopper that walks down the aisle.

This is because purchase decisions are binary.  A shopper either buys your product or doesn’t buy your product.  There are no partial sales.

The product bought is the one that best understood the needs of the prospective buyer and presented itself as the best solution.

Is this the situation you’re in?  Have you diluted the prospect group you’re targeting and diluted your product’s value proposition to the point that a lot of people might like it, but no one loves it enough to make a purchase?

Have you gone after a bigger pie, but ended up going hungry?

Are you not even sure who your prime prospects really are or what value proposition is most compelling to them?

Unless you’re one of the very few products that exceed initial volume projections, don’t be too quick to brush off this topic.  All the other effort you put into your product could be futile if you’re not targeting the right audience.

If this is a slippery slope you’ve fallen down and you don’t know how to start climbing out, let us give you a hand.