Many companies begin—and many continue—without a clear sense of their target customer. Some resist clarifying the target; they want to appeal to as many buyers as possible, and defining a target implies excluding some customers. Others are unable to describe in more than a cursory way who does or will buy their offerings. We have to serve the entire market, runs one common belief. Or sometimes: We can’t afford to focus.

In practice, of course, product and service designers always make trade-offs. They sacrifice one feature or another so that they can achieve something else, such as a competitive price. But without a specific design target in mind, they may make these trade-offs without a good rationale. Asking customers what they want, with no constraints, doesn’t always help: Customers typically respond that they want “more” and “better.” Sometimes that leads companies to conclude that more is the same as better.

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Suppose that, instead of trying to serve everybody, you identify a specific set of customers you can serve better than anyone else—with better products, better service, lower cost, or some combination of all three. This is your design target.

Companies that take this route set out to learn all they can about these target customers, starting with who is buying, why they are buying and where the potential buyers are. They seek both qualitative and quantitative insights, and not just from one-off research projects but from a constant stream of feedback. They investigate the customers’ needs, their spending habits, their passions, their unmet wants. They figure out where competitors are missing the boat, and they determine which customer needs best match their own capabilities. All of these steps lay the foundation for loyalty and enthusiasm among those customers (see Figure 1).

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Established companies often need to refocus themselves by re-identifying their design target and rediscovering the trade-offs those customers are willing to make.

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So the [PetSmart] company looked closely at its most profitable and enthusiastic customers. The very best, it learned, were people who were completely devoted to their pets, treating them almost like children. These “pet parents” had distinct needs at each stage of their pet’s life cycle. They weren’t interested only in products; they also wanted services such as training, boarding and grooming. PetSmart realized that there was no one-stop shop that offered everything pet parents needed at competitive prices in convenient locations.

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Armed with such knowledge, a company can design offerings that become a priority for its core customers. It can test, learn and adapt as necessary, and then it can scale up. That’s what PetSmart did. Rather than trying to capture every casual pet owner looking for the cheapest price on two cases of pet food, it redesigned its stores to appeal to pet parents. It changed its décor for a more upscale look. It arranged its aisles by animal type and realigned its buying organization to match. It now offered a wide variety of services, including dog day care, grooming and in-store veterinary services. It also created fast-feedback mechanisms to allow for continuous adaptation and improvement. Soon the company’s sales and stock price were on the way up, with shares rising from below $10 in the early 2000s to about $60 in mid-2014.

By Mark Gottfredson and Rob Markey. Image: © Bain & Company.