How to identify the primary customer?

In the past five years, the operating environment has seen more external shocks than in the previous fifty combined. Constant change is pressuring businesses, and many companies have resorted to repeated cost-cutting. Yet cost discipline alone does not grow business; growth depends on successful sales and increasing revenue. 

The keys to growth lie with customers: particularly in identifying the primary customer, understanding their needs and aligning services accordingly.

The most important strategic choice

Selecting the primary customer is one of the most critical strategic decisions a company can make, if not the most critical. Every company has a variety of customers, and as network business models spread, customer segments may differ even more widely. Amazon for example, serves not only end-customers – who may be businesses or consumers – but also sellers, resellers and advertisers. Each of these segments contains multiple sub-segments.

Amazon has made the strategic choice to prioritise consumers as its primary customer. This decision shapes many other strategic questions where different customer segments have conflicting interests. For instance, hassle-free product returns benefit buyers but may not be in the best interests of sellers.

Who are my primary customers?

The primary customer is not necessarily the one that generates the most revenue or margin today. What matters is identifying the customer segment that creates the most value for the company not only now, but in the future. This requires assessing customers through three lenses: perspective, capabilities, and profit potential.

1. Perspective

The company’s core mission and purpose guide the choice of primary customer. If the culture and mission are not aligned with that customer, friction is inevitable. Amazon’s purpose is to be the world’s most customer-centric company. Choosing the end-customer as primary is therefore natural.

2. Capabilities

Differentiation and competitive advantage are built on a company’s capabilities. If customers value fast delivery and the company has refined its ordering and logistics to be exceptionally quick, needs and capabilities meet. Choosing a primary customer requires understanding what different segments value and how well the company’s capabilities match.

3. Profit potential

The third lens is profitability. Returning customers make Amazon attractive to sellers. Without satisfied buyers, the platform would hold little appeal for vendors.

Selecting the primary customer always requires segmentation and understanding the value created. In a changing market, this assessment should be continuous to ensure the company remains relevant as customer needs evolve over time.