Strategy, Growth, Customer Focus

Pioneering Strategy Knocked Airbnb Off no. 1 Spot

Market domination for Tujia.com

Tujia.com has become the largest vacation rental site in China and has outranked the established industry leader Airbnb. In her article China’s Home-Sharing Site Surpasses Airbnb Shu-Ching Jean Chen explains how Tujia.com, a tech start-up 5 years ago, has grown and now dominates the market. At the end of 2015 Tujia.com was listed as a unicorn tech start-up, being one of very few privately held startups valued at over US$1 billion. According to the article the key to Tujia.com’s success has been a pioneering marketing strategy.

How did Tujia.com do it?

Pioneering, because Tujia.com has made different choices than Airbnb. Pioneering also however, because of how Tujia.com came to make those choices. A closer look at this strategy shows that its focus is on understanding who their customers are and what they are buying. Tujia.com has spent time getting to know their customers and built up knowledge of their customers. Then, Tujia.com used this knowledge to define their company strategy and offering. This led them to make other choices than Airbnb and the market loved it.

By focusing on their customers they identified two key aspects that characterized their customers; Chinese tourists don’t trust industry intermediaries, and they often travel in large groups and like to eat home-cooked Chinese food. So, when designing their offering, to gain the trust of Chinese tourists, Tujia.com chose to manage all properties themselves instead of using intermediaries. And, the accommodations they offer are suitable for large groups.

In contrast to other market players, Tujia.com designs its company strategy and offering to closely match the characteristics of their target market. Tujia.com is using basic marketing, customer-centric principles in a marketplace where this is increasingly hard to find.

True, smart, but basic marketing!

Knowing what your customers are buying seems basic. So much so that it’s value is so often underestimated and more importantly not used. However, using customer knowledge in structuring their business and designing their offering is what has enabled Tujia.com to grow exponentially.

You wonder, when Airbnb was looking at the characteristics of their customers, did they consider country of origin to be relevant?  Did they notice that Chinese customers were not in their top income generating customers and wonder why? Why were Chinese customers were not choosing Airbnb, what did they choose instead? Is the fact that Chinese tourists like to travel in big groups really a revelation, hard stuff?

In this blog, my second in a 4 part series on understanding your customer, I want to bring across the value of knowing what your customer is actually buying. Not only is it crucial to know who your customer is (1st blog Know Thy Customer) by at least being able to describe your top revenue generating customers in terms of relevant characteristics like size, industry or country of origin, you also need to know what they are buying. As your type of customer will evolve or change over time, so will what they buy, change. And because of this it needs to be understood and monitored.

customer focus

Know Thy Customer?

Know thy customer?
Would your customer agree with you?
Business failures and business publications say chances are you don’t.

In my blogs I want to talk about sustainable business growth, how to achieve it and what it is based on. Instead of models or tools I believe an understanding of your customer to be the often overlooked foundation.

Why is that foundation overlooked? Why is it hard to fundamentally concentrate on using an understanding of your customers to make your decisions and create growth?

In my previous blog I described how 4 questions can help you to focus on your customer. In this blog I want to talk about the first.

This first, maybe painfully basic, question, asks you to consider who your customer actually is. I will first explain what I mean and finish by illustrating how focus, even only on this first question, will lead to growth, regaining lost ground, improving customer satisfaction etc.

In considering who your customer is you will describe the make-up of your customer base. This means knowing the characteristics of your customers (probably top 20%) that are responsible for 80% of your revenue. Characteristics as in size (small or large year order value), geographic location, industry etc. Be discerning and choose those relevant to your business and industry. Analysis might then show that 80% of your revenue is brought to you by small customers, geographically concentrated around your place of business and spread equally over three industries.

This analysis is pushed aside, why is that?
Simply because we believe we know the type of customers we serve and industries in which we are traditionally strong. We consider it a given. We have set it up and moved on to other business decisions and concerns.  But things change.

Your customer base will change over time. Due to choices you make or those made by your customers and competitors.
That is a given!
That is why it is perilous not to stop and consider who your customers are. It needs to be done, not once, but over different time periods, taking multiple snapshots of your business.

So how does this lead you to sustainable business growth?
Identifying changes will give you actionable insights to capture opportunities and negate threats.

Imagine, in comparing snapshots over a 5 month period, you discover you have lost significant ground in a specific industry. By the way, you were not expecting any bad news as your total sales revenue is actually pretty stable at the moment. Further digging by you might show that the, what you believed, minor product change you introduced 6 months ago, because of internal efficiency gains or due to a change of supplier, has actually made your product unusable in this industry. Alternatively, you might find that a new industry specific competitor has emerged providing your customers in that industry with a better offering and thereby taking your customers. As you were running a new ad campaign in the same period, which attracted some new business, your sales remained level and you were unaware.

Now, there are a myriad of reasons why companies are not considering who their customers actually are.
A common one was described in an article by Bain & Company in the Harvard Business Review recently. Their research shows that a distancing from the customer is causing what they are calling the stall-out. It is a slump in revenue and growth. It is sudden. According to their research even the most successful companies find themselves in this position where they do not know what is happening at customer level. This research focusses on larger companies. I don’t think anybody is happy to assume that smaller companies are immune.

Whilst distanced from our customer we will often look to the latest trend for creating significant impact on our business growth. Something that is creating a lot of noise and thereby getting our attention. Some time back that was social media. Now it seems to be customer experience. However, a trend by itself is no substitute for an actual understanding of your customer. Executing a trend whilst being distanced from your customer will set the trend up to fail. This is shown again and again. And is now happening with customer experience ( CX is Hitting A Brick Wall). Sure, a trend will get you some growth. But nothing compared to coupling the right tool or trend to an understanding of what is happening with your customer!

Social media and an excellent customer experience, by themselves, are not going to make your products suitable again for that specific industry. They are not going to help you regain the customers lost to a competitor whose offering more closely matches your customer needs. The only thing that will give you a solid foundation is making the choice to stay in the industry and making the necessary changes. Making the required readjustment to your product so that it is again usable in this industry. Alternatively, reassessing you offer and changing it so that it has a tighter fit with the needs of your customer in this industry thereby not leaving them vulnerable to competitors. Both will require you to look at your customers and make changes accordingly.

After you have done so, more activity in your social media to communicate the good news to your customers will absolutely have a positive effect. Also, improving the experience your customers have with your company will go a long way to removing the frustration of those customers that were hit by a product change out of the blue!

Actions without understanding will, probably temporarily, increase your revenue but also further cloud your vision to what is happening at a customer level. It will lull you to sleep thinking your business is stable only to be confronted by stall-out as Bain & Company calls it; a sudden fall-off of revenue and growth. Without knowing why.

Ask yourself this question. Start doing the analysis.

Let me know what you find! I am keen to see what insights it brings you.

Understand your customer, create growth

Is growth a priority for you? Without wanting long strategy sessions and re-discussing your initial business idea? Without spending money on “marketing” or advertising and not being really convinced that these will deliver? Are you sure that your business provides a unique product but growth is hard? I have found that the answer to this situation can be deceptively easy;

A deeper understanding of your customer.

No.
I am not saying that you should then spend money on market research.
Instead, ask yourself some basic questions.
Yes, the basic ones!

What kind of customers do you have?
Which product is he buying from you?
What problem is he solving in buying your product?
And why is he buying it from you instead of from your competitor?

Easy questions?
Maybe not so much, when answering them from the perspective of you customer. The key is the eyes of the customer; what does he see when he has any kind of contact with your business? Experience shows you could be in for a surprise here.

I’ve seen this at the companies I’ve worked for and very often in the companies I see online or interact with in a different manner; this opportunity. The opportunity to get a closer fit with their customer and in doing so, grow, increase profits.

Companies are often not aware of this gap, between themselves and their customer. Their focus repeatedly turns inward. It’s human. You focus on what you know. And your business is what you know. It’s easier. It’s a trap.

Are your losing customers?
Are you feeling the pressure from your competitors?
Are you finding it hard to break into a new market?

You can change this. You will see quick results by considering the above questions and focussing on the one that is hardest for you to answer.

In my next blog I will talk about the first question, understanding what kind of customer you have.

Are my thoughts helpful to you in your business? Let me know, I would love to hear from you.