Finding your ideal customers

I have previously spoken in this series about the importance of a marketing plan. So the answer to “who are your customers?” should be clear. But it will take more work to define who your ideal customers are.

When starting, companies are grateful for a sale – any sale. Any small validation that someone wants what you have developed and is willing to pay for it.

But successful companies know all customers don’t have the same value. In fact, some customers are the wrong customers for you - because they cost you money.

A few examples:

• They don’t pay on time and create cash flow problems
• They return products and require a lot of customer service
• They are never satisfied. They complain and provide negative feedback on social media 
• The price they request barely covers your cost, let alone margin
• They are transactional and not interested in developing a relationship
• They have little loyalty and will move to whichever company offers a lower price.

They don’t care about strategic value and won’t provide you visibility into their long-term strategy – even if they have one. Businesses who want to grow must disengage from these customers and spend their time cultivating the right customers.

Figure out your ideal customers

The right customers value what you offer, pay on time, share your values and are looking for a long-term relationship.

Here’s an exercise for B2B companies (companies that sell to other companies) to help you identify ideal customers:

1. On a spreadsheet, list all your customers in one column. Then enter last year’s revenue from each customer in a second column and yearly profit in the third column

2. Sort the spreadsheet from highest to lowest revenue

3. Highlight the customers that generate the top 20 per cent of your revenue and move them to a separate spreadsheet

4. Highlight the customers that generate the bottom 20 per cent and move their data to a separate spreadsheet

5. Re-sort the customers based on their profitability, from the highest to lowest

a) Put a number (1=high, 2=medium, 3=low) next to every company on each list, indicating the potential for doing more business with that customer

b) Circle the customers, on both lists, you really enjoy working with

6. Study the three lists.

a) Think how you can add more value, develop a deeper relationship and increase sales with your top 20 per cent.

b) Identify any customers on the other list which have the potential to move to the top 20 per cent and develop a gameplan for each one

c) Look at the bottom 20 per cent list and think hard about whether it’s worth your time and effort to keep them as a customer

7. Look for the small number of customers on the top 20 per cent list that provide you with revenue, profit, strategic alignment and joy.  Those are your ideal customers.

The exercise should provide a good idea of what to look for in a customer and the information necessary to develop a profile of your ideal customer.

Ask yourself why they are buying from you? Where are they located, what’s their title, what is their sector? Having a clear profile of who they are will help you identify them quickly and attract more like them.

Once you’ve identified your ideal customers, go deeper. Are there specific target companies you should send marketing material to? Can you produce content about your product and have it published in a magazine your target customers read?

Your salespeople should be able to identify these potential new customers, schedule a meeting and help them understand your point of difference.

Of course, it's possible the above exercise indicates you have few ideal customers. In this case, develop a marketing campaign to increase exposure and help your sales locate new leads.

Once identified, validate your product with these prospective customers and close the deal. Sales are never easy, but it’s much easier when you are trying to sell to someone who is – or has the potential to be - an ideal customer. 

Dr Jana Matthews, Growth Expert and Founding Director, Australian Centre for Business Growth