Who’s Not Buying It?

If you heed the advice of Jeff Bezos, founder of Amazon, you probably won’t go too far astray in business. In the latest issue of Forbes, there’s a list of quotes from Bezos on how he’s succeeded as an entrepreneur. They include lines like “We are willing to be misunderstood for long periods of time” and “If you want to be inventive, you have to be willing to fail.”

One thing Bezos stresses repeatedly is the need to focus on the customer. He counsels the business owner to “obsess over customers,” and to “determine what your customers need, and work backwards.”

Clearly, this has worked pretty well for Bezos, if creating one the biggest businesses in the world is any measure. But Peter Drucker might have added one more consideration: the importance of obsessing over noncustomers.

“Traditionally, business have researched their own customers and know, or try to know, as much as possible about them,” Drucker observed. “But . . . the most important knowledge is the potential customer.”

The math alone makes it so. “Even the biggest enterprise (other than a government monopoly) has many more noncustomers than it has customers,” Drucker wrote in Management Challenges for the 21st Century, noting that hardly any companies supply even 30% of a given market. “And yet very few institutions know anything about the noncustomers—very few of them even know that they exist, let alone know who they are. And even fewer know why they are not customers.”

Some businesses have neglected this only to see their downfall. In Managing in the Next Society, Drucker pointed to the department store as Exhibit A. “Nobody knew more about their customers than did these stores,” Drucker explained. “But they had no information about noncustomers. They had 28% of the retail market, the largest single share. However, this meant that 72% didn’t shop at department stores. And the department stores had no information on these people. And they couldn’t have cared less.”

Eventually, as people’s shopping habits changed, the department stores had fewer and fewer customers despite all their research. Or, as Drucker put it, “After a time, they knew more and more about less and less.”

Does your organization pay sufficient attention to its noncustomers?