As marketers, we work so hard every day to attract customers.
So, the thought of turning customers away?
Eesh. Doesn’t feel natural.
But you darn well know which people your company can serve best…and which would be better served by a competitor company.
So, to help stiffen your spine to (figuratively) utter that difficult two-letter word to potential customers, in this article we bring you examples from a general contractor, a Sequoia-backed startup, and an online travel agency.
This article was originally published in the MarketingSherpa email newsletter.
Not everyone who enters your sales funnel should be there – because your company cannot truly serve them or can’t profitably serve them.
Successful targeting means saying “no” to these potential customers.
Could that help a competitor company? Perhaps. But it will also improve your company’s branding as well as its marketing and business results.
As I discussed with Flint McGlaughlin, Founder, MECLABS Institute, in the below podcast excerpt – you have to say “no” a lot so you can say “yes.”
To give you tips for profitably targeting potential customers by turning away those who aren’t a good fit for your company, we bring you three specific examples with results in this article.
First up, a general contractor shows the results it has achieved when saying “no” to certain customer segments by focusing on a specific niche and providing product and pricing transparency. Then, a Sequoia-backed startup shares how an analysis of product usage helped inform its customer segmentation approach. And finally, an online travel agency that shares its example of saying “no” to customer segments during the digital onboarding process.
SnapADU is a general contractor that focuses exclusively on designing, permitting, and building accessory dwelling unit (ADU) projects in Greater San Diego. An ADU is a smaller home on a residential lot with an existing primary residence. These small homes, also known as granny flats and mother-in-law suites, have become popular as intergenerational living is on the rise and as property owners look for sources of rental income. Since the state of California passed laws in 2020 making it easier and cheaper to build ADUs, the co-founders of SnapADU decided to pivot their general contracting business to serve the demand for ADUs.
“Initially it was difficult turning down the large remodels and custom home builds that were still coming our way from word of mouth. But we knew we had to specialize to become extremely good at getting ADUs designed and built efficiently,” said Mike Moore, Co-Founder and Head of Production, SnapADU.
Clients who build ADUs are typically homeowners who want to house a family member or add rental income to their property. There are different types of ADUs, including detached units that are standalone structures, attached units that are connected to the main house, or conversions and additions to the existing residence. When SnapADU first started specializing in ADUs, they would bid on virtually any type of project, which led to a high degree of variability and uncertainty in the projects taken on.
“It was difficult for us to scale our processes since each job was so different,” said Whitney Hill, Co-Founder and Head of Business Development, SnapADU. “We soon realized we needed to focus on the clients that we could serve the best, which included those who were willing to work with a standard set of plans and modify those. Starting from scratch with full custom plans, or renovating existing spaces, was simply too unpredictable for us – both from a sales and construction perspective."
The team continued to refine its focus, putting all standard plans on the website and offering transparent pricing to ensure they were capturing more educated leads who understood the cost to build an ADU.
Creative Sample #1: ADU plan with transparent pricing on general contractor’s website
Simultaneously, the team refined their sales process to only bid on jobs that were squarely within their expertise – detached ADUs with standard or semi-custom plans – and referred out the rest of the work to other contractors.
"We always want to try and help the homeowner, even if we aren’t the right fit," said Bob Sommers, Head of Estimation & Feasibility, SnapADU. “It’s just as important to be clear about the situations in which we are not going to be able to deliver successfully. Better for the client to know that upfront and for us to get them to someone who does specialize in that kind of project.”
Since further honing its client focus, the company’s average contract value has increased 25 percent and close rate on proposals has improved from 19 percent to 29 percent. Additionally, its construction operations have managed to scale 4x with the same number of employees, since refining the focus has also resulted in simplified estimation, bidding and procurement processes.
“The benefits of staying focused on your core are felt first in marketing and sales but continue to flow throughout the operation. Perhaps most importantly, we are able to ensure more consistent outcomes for our clients and deliver as promised on their project. It’s up to us to be selective on who we work with to ensure we knock it out of the park for them,” said Hill.
SnapADU currently has over 40 live ADU projects, on track for a rate of 80 ADUs a year and $18 million in annual revenue.
Creative Sample #2: Live ADU projects displayed on general contractor’s website
“I just listened to the podcast and love the Southwest example! It's exactly how we think about customer segmentation at Mutiny,” said Ryan Narod, Head of Marketing, Mutiny.
The ideal customer at Mutiny is a B2B (business-to-business) Series A+ company (a company that has received a significant round of financing). That means the team actively says “no” to:
“When prospects request a demo on our website, we automatically pre-qualify them by enriching their contact information, using data like Alexa Rank to determine if Mutiny is the right fit for them,” Narod said. Only pre-qualified prospects are offered a calendar to book time with the team.
Over 30% of meeting requests used to be from B2C companies. When they made it clear on the website that they serve B2B and implemented the automation to disqualify B2C companies before those companies even enter the funnel, it freed up sales capacity/increased efficiency by over 30%.
A key success metric the team uses is the number of experiences launched in Mutiny, since it correlates directly with a customer’s success in the platform. They saw that small startups were launching zero to one experiences, bringing the overall average down to five to seven. When they started saying no to very small startups, they saw the average number of experiences launched skyrocket to 15.
But perhaps the biggest success metric of all is that the company has attracted its own round of financing – “an $18.5M Series A from Sequoia Capital and a roster of world-class CMOs from companies such as Airbnb, Salesforce and Snowflake,” said Jaleh Rezaei, CEO & Co-founder, Mutiny.
And it now has a customer list it can say “yes” to and truly serve. “We’re helping companies like Notion, Segment, Brex, Amplitude, and Carta grow faster,” Rezaei said.
By connecting travelers to its network of local travel designers and agencies, Kimkim helps travelers plan custom trips to more than 90 destinations around the world.
“It sounds counter-intuitive, but we have added a fair bit of friction to our onboarding process, and even made it longer in a few situations,” said Chris McCarty, Head of Engineering, Kimkim.
The online travel agency’s sweet spot is trips with two to five travelers. Often the price of the trip can become higher for solo travelers since the costs of hotels, guides, and transportation are not split. The website warns them of the cost but does not prevent them from continuing.
Creative Sample #3: Solo traveler select
Creative Sample #4: Solo traveler warning
The agency’s best itineraries are at least five days, which allows time to visit more than one place without feeling too rushed (depending on the destination). Again, the site warns travelers that Kimkim may not be the best fit for them if they want a shorter trip.
Creative Sample #5: Trip duration select
Creative Sample #6: Short trip warning
The site asks for a target budget range (or “I don’t know”) and tells travelers it cannot support low budget trips, given that the planning process requires the time and expertise of a local specialist which will add to the overall costs. For people looking for a cheap deal, Kimkim is not the best fit.
Creative Sample #7: Budget select
Creative Sample #8: Budget too low offboard
Finally, based on what the agency learns about the travelers from the onboarding, they may be asked to schedule a phone call to determine if they should be connected to a travel specialist. This helps the team filter out people who are looking for information only and are not serious about planning and booking a trip by working with a local specialist. Or it gives the team a chance to ask more questions to see if we Kimkim is good fit.
Creative Sample #9: Schedule call
“With all of these checks in place, it’s possible that more than half of travelers who start onboarding are not connected to a specialist in our network. But we don’t think that's a bad thing. We believe we are saving everyone a good deal of time not going down the planning process if it won’t be the right service that the traveler is looking for. And it gives us more time to then focus on the customers that are a perfect fit for what we are offering,” McCarty said.
“With all of the changes to the onboarding funnel we have seen some very nice improvements to conversion and average booking size,” he said.
For example, the agency’s specialist network experienced a 37.3% lift in conversion since the ratio of qualified leads went up when the company stopped sending some of the less-qualified leads. Separately, the team saw an average GBV (Gross Booking Value, full trip cost) increase of about 48.6%.
The team has discovered that it is more effective to focus on fewer, more highly qualified trips instead of trying to book the maximum number of trips.
“I think it’s important to note that we are not maximizing the total number of trips booked with this approach, as there are some people we filter out who may have actually been a good fit but didn’t pass our filters (e.g., we still have some solo travelers book trips). But our system is somewhat complex, and our travel designer specialists only have so much attention that they can give to a fixed number of trips,” McCarty said.
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