SaaS102 #13 Why We Should Focus on Customers, Not Competitors?
“Be afraid of our customers, because those are the folks who have the money. Our competitors are never going to send us money.” – Jeff Bezos, chairman and founder of Amazon
I’ve noticed that many people fall into a trap when recruiting people for SaaS jobs. That trap is to spend a lot of time researching what our competitors are doing, and what kind of people they are hiring.
In my view, this kind of thinking is a mistake. What I would like to focus on in this article is:
Why should we focus on our customers and not our competitors, regardless of whether we’re working in recruitment or working with products?
Why should we focus on customers when working with products?
Product managers in our company often come up to me excitedly and say, “Teddy, we are thinking of adding feature X. This feature is really awesome, there’s a huge market for it and it can make a lot of money.”
When I hear this I will reply with the following questions:
- “OK, I believe you can create this feature. I also believe this feature will sell. But can you tell me who your target customers are?”
- “Which country or region are your target customers in?”
- “Are your customers small to mid-sized retailers, or international companies?”
- “If your customers are international companies, are they selling clothes or electronics?”
- “Are you planning to sell to 100,000 customers for 200 US dollars each, or to 200 customers for 100,000 US dollars each?”
If you can’t answer these questions clearly, then you haven’t actually thought clearly about who your target customers are.
And if you haven’t thought clearly about who your customers are, then it will be very difficult for your product to meet your customers’ needs.
The following are some examples of ways you can meet your customers’ needs (once you know who your customers are):
- If your target customers are in the United States, France, and Germany, then your product should be available in English, French, and German.
- If your target customers are small to mid-sized retailers, then your user interface should be as simple as possible.
- If your target customers are international companies that pay a high unit price, then you need to go deeper with features and make the final product more refined.
For different target customers, you need to create very different products.
That’s why we shouldn’t rack our brains thinking “what features should we create?” We should first spend time thinking clearly about who our customers are.
At the least, we should draw up 10 different profiles for what our target customers might look like. We should then think about what kind of features could meet the needs of these target customers.
Why should we focus on customers when we recruit people?
We also have to focus on customers when we are recruiting staff, and not just when we’re developing products.
Recently we have been recruiting people at the vice president level to join our team. We already have people in vice president positions in the technology, products, and data fields. But when hiring people at the vice president level for areas such as sales and marketing we’ve come across some challenges.
My background is in software engineering. That makes it easy for me to tell what kind of software engineering staff are valuable, and what kind of IT vice president we want to hire.
But my background isn’t in sales. So it’s hard for me to tell what kind of sales staff are valuable, and what kind of sales vice president would be most suitable for our company.
What’s even more important is, I’m very careful with the people we hire. I hope that every person who comes to our company will continue to work with us, and that it will be a relationship that allows both the employee and the company to grow.
What I won’t do is casually try out any employee, and then replace them if it’s not working out.
So after two months without finding a suitable employee, I took this problem to our investors. I asked Tiger Global, who made more money for their investors in 2020 than other top hedge funds, for advice. They came back with their own question, which was a real eye-opener for me. They asked:
“Suppose you hired an incredibly capable sales vice president that could get any customer in the world to sign a contract with you. Can you tell me who the next 10 customers you would want to sign a contract with would be?”
According to conventional recruitment thinking, if I want to hire somebody, I should first draw up a profile of what kind of person I am looking for in terms of educational achievement, experience, ability, and so on. Then, once I’ve hired that person, I let that person go and talk to customers and create value for the company.
I might even look at what my competitors are doing when creating this employee profile. I’ll see what kind of person my competitors want to hire, and then compete with them to hire the same kind of person.
But actually, we should think about it from another angle:
Since the reason for hiring for this sales position is to gain customers, then we need to think about what kind of customers we are looking for. What kind of person could help us to win those customers?
So, we need to first draw up a profile of our target customers. Then, we can use the profile of our target customers to draw up a profile of the kind of person who could help us reach those customers. Once we’ve completed those steps, we go out to find and hire the right people.
For example, if my target customers are in the United States, then the sales teams targeting those customers should also be in the United States. That way they can easily communicate with their target customers, and have a better chance of confirming sales deals.
If my goal is to make ten million US dollars, and my target customers are those big companies that can spend a hundred thousand US dollars on single deals, then I need to sell to 100 customers.
In that case, I’ll want to find some comparatively experienced sales staff with a track record of signing contracts with big companies. In this scenario, hiring a small number of sales staff is sufficient.
If I still want to make ten million US dollars, but my target customers are small to mid-sized companies that might only spend a thousand US dollars on single deals, then I need to sell to ten thousand customers.
In that case, I might want to hire a team of a thousand salespersons, and a sales vice president who can lead that sales team to sign ten thousand small to mid-sized customers.
For different types of target customers, we need to hire very different types of sales staff.
This is why we need to be focused on our customers even when we recruit staff.
Why we shouldn’t focus on our competitors
As we’ve explained why we should focus on customers, let’s look at why we shouldn’t focus on our competitors.
Firstly, focusing on your competitors won’t ever allow you to overtake your competitors.
If your focus is set entirely on looking at your competitors, then the best result you will achieve is:
Your competitor will create a feature, and you will copy that feature. Your competitor will target a certain market, and you will target that market, too.
When you work like that, you won’t ever be able to overtake your competitors, no matter how talented your team is. If your competitor launches a feature, you might be able to launch an equally good feature in just one week. But you’ll still be playing catch-up.
When you work like that, you become just a follower without your own direction. If your competitor starts heading towards a ditch, you’ll start heading towards that same ditch, too.
Secondly, you need to realize that you are selling your product to your customers and not to your competitors.
Your competitors will not tell you your customers' needs. But if you focus on your customers, then you have a chance to discover what your customers’ needs are.
Even if your competitor tells you what kind of customers they have, it isn’t useful. This is because:
Even if a company is your competitor, your company and that company will still have different customers.
For example, though they all are in eCommerce, Amazon, Shopify, and eBay all have very different target customers.
For its eCommerce business, Amazon targets younger customers between 18 and 44. The demographic Amazon targets is well-off enough to have good internet connections and smart devices, and to favor shopping for speed and convenience.
As Shopify enables eCommerce sellers to set up their own stores, its target market is businesses and entrepreneurs looking to sell through their own online store.
As eBay started out as an auction site, it occupies a different niche of the market. Its target customers include people looking to buy and sell unique individual items, sellers looking to make profits on auctions, and buyers hoping to scoop up bargains.
As their target customers are different, their product features are different, too.
If Amazon had copied exactly what eBay was doing, imitated their website, and tried to meet exactly the same market demands, the chances are we wouldn’t have heard of Amazon today.
If you really want to focus on your competitors, then you should focus on what the customers of your competitors want. You shouldn’t focus on what your competitors are doing. It is your competitors’ customers, after all, that you are competing for.
Summary
Whether you are working with products or in recruitment, your job is there because of your customers, and not because of your competitors.
So don’t focus your gaze on what kind of people your competitors are hiring, or what kind of products your competitors are developing, or even who their customers are. Don’t create products that are identical to your competitors’ products, and then try to sell to your competitors’ customers.
The reason behind the success of most companies is that they can sell to more customers, not that they can imitate their competitors.
If you focus on your competitors you will never be able to overtake them. Only by focusing on customers can we discover our customers’ needs, and create successful SaaS products.
About Author:
Teddy Chan is a serial entrepreneur with 20+ years of experience in SaaS and eCommerce. His latest venture is AfterShip, a SaaS post-purchase experience platform that empowers eCommerce retailers like Amazon, eBay, and Gymshark to improve their customer experience, drive sales, and increase brand loyalty.
SaaS 102 is a series of articles where I share my thoughts and experience with SaaS. My fundamental belief is that a great team with an average idea will always go further than an average team with a great idea. If you want to be part of this great and growing team, check out careers at AfterShip here—I’m currently on the lookout for superstar sales talent.