American Executive - Where Business Leadership Begins

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

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. Likewise, if a manufacturing company can provide low-cost mass production of parts, it should build its sweet spot around that strength.

Companies both large and small struggle day after day to generate a profit; think about Kmart, Sears, the Big Three auto makers, and most of the major airlines. And you probably have personal knowledge of many struggling small companies, such as that restaurant in your neighborhood that never fills its tables during what should be the busy lunch or dinner hour. They are not capitalizing on their sweet spots.

We’ve worked with many executives whose understanding of the significance of a sweet spot 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 each company head and shoulders above its competition.

Sweet spots are not niches
A niche is a place. A sweet spot is a total concept built on a company’s strengths.

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

Three great companies that have created and thrive in 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. 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. It’s easy to get in the store, easy to get out, and the items people want are almost always in stock.

All three companies sell a significant amount of the same or easily substitutable merchandise. For example, they each sell Crest toothpaste, often in stores located on the same street. Customers who are strongly motivated by price are likely to buy toothpaste at Wal-Mart. “With it” people purchase their toothpaste at Target. The Walgreens’ customer is willing to pay a little more for 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 the company can go based on a rational analysis of where your core and must-have customers will permit it 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 a company’s profit. They can describe why they prefer the services or products your company sells over those of the competitors.

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

Guessing is gambling
It’s essential 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 today.

Of course, for research to be effective, you must ask the right people the right questions. We can’t emphasize enough how important it is to confine your research to your core and must-have customers. Asking anyone else will taint your data and could send your company down the wrong—and potentially dangerous—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. For instance, if you want to know why your most loyal customers stay faithful, you need to ask questions such as:

• What do you like best about the products or services the company offers?
• How can the products or services be improved?
• If you needed a new supplier for these products or services, who would you go to? Why?

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

Magic happens when management matches the company’s strengths to the rules of their core and must-have customers to create a sweet spot. They have built their business around a sweet spot that offers the right merchandise or services, and they are no longer going head to head against the biggest competitor 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 (St. Martin’s Press, 2006). He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .