Great companies do a good job of filtering out the wrong customers. I think we do it pretty well by filtering out potential clients with a budget that is too small (or too large), or a need for features that aren’t in our areas of expertise. It’s something we’re trying to get consistently better about as time goes on.
One of the best examples of filtering out the wrong customers is Costco. Their stores are intentionally designed to cater to people that make big purchases; if you just need to pick up a single item, Costco is never where you’d go. They may not have the item you want, and if they do it might be in a 50-pack. They’re not trying to help people that have to run and grab something quickly. They’re happy to give up that kind of business in exchange for a different type of customer.
Sol Price, the founder of Price Club (which later merged into Costco) said:
A business should be careful in the business it deliberately does without.
It’s easy to want to serve all things to all people, but that’s almost never in your best interest. Costco is popular because their prices are so low, but they keep prices low by ignoring certain things that they “should” do. A typical grocery store will have 20 different brands of peanut butter, in a whole variety of sizes, but Costco will generally say “Here is the peanut butter we have. It’s a huge jar, it’s fantastic, and it’s cheap. Take it or leave it.“
By doing that, Costco is able to keep inventory flowing quickly, which is a huge reason they can price so aggressively.
You know what your business does, but you should always be deliberate in what your business does without.
Leave a Reply