Replicating Your Ideal Customers
In this Moment of Clarity I show you how to create an Ideal Customer Profile with a downloadable worksheet.
Everybody knows that 20% of customers provide the lion’s share of revenue.
The real question is how to replicate this 20%.
Let’s face it. There are great customers and not so great customers. I’ve never agreed with the sentiment that “the customer is always right,” because sometimes the customer is the wrong fit for the goals of the business.
We are all familiar with the 80/20 rule, where 80% of revenue comes from 20% of customers. For most companies, the customers that spend the most money, are ongoing buyers, are low maintenance, etc. are within this 20% depending on their unique Ideal Customer Profile.
Creating an Ideal Customer Profile is crucial to understand, define and realize more opportunity from the best customers for your business and reduce wasted resources on customers that are only marginally profitable or resource intensive. It also makes the process of targeting more precise and effective.
Where to start: Historical data
I advise most of my clients to pull customer data from their financial and customer systems including listing customers by: (this can vary according to the type of business)
- Yearly spend
- Geographic area
- Project size or scope
- Distribution channels
- Product or service
- Cost of acquisition
- Price points
Having this data greatly increases the shaping of the Ideal Customer Profile and more data is better. The idea is to align common attributes of customers that provide the best mix of demographics and psychographics.
Basing your decisions on actual operating data is a sound way of creating realistic and effective marketing and sales plans.
For start-ups or other companies that aren’t able to produce historical data, it is usually possible to get statistics and some sense of how the industry buys using secondary research. Look to industry associations for reports on industry dynamics and trends. Some of these reports are only available to members or are available for purchase.
MAPS™ Ideal Customer Profile Worksheet
Once you’ve analyzed your data and have a good sense of what customer behaviors and parameters are best for your business, it is important that you document this information. This is crucial so that it can be communicated and distributed to everyone and anyone involved with customers.
The Ideal Customer Profile is split into two main areas:
- Psychographic Personas
Demographics are quantifiable characteristics of a given population. Companies use demographic data to identify key buying groups. For example, a software services firm may be interested in expanding to markets with larger numbers of tech companies that implement multi-million dollar systems. Using demographic profiling we can target those markets specifically.
Demographic profiling is also used in segmentation. Segmenting target audiences is important to avoid wasting resources reaching people with irrelevant offers or the wrong messages. Segmenting allows us to group people together that share common needs, desires, purchase patterns, spending habits, etc. and more effectively communicate with them.
Your job here is to know as much as you can about your Ideal Customer’s age, education, ethnicity or national culture, job responsibilities, pay scale, organizational influence, buying power, pain (corporate and personal) and more.
Demographics can be segmented into several markets to help an organization target its consumers more accurately. With this type of segmentation, an organization can categorize the needs of consumers.
A common approach is to target potential customers by company size. However, this doesn’t necessarily deliver any sustainable competitive advantage. Instead, I recommend companies segment by behavior or needs in addition to the basic demographic criteria.
Psychographics is the study of consumer interests, lifestyles, likes, dislikes and is often combined with geographic and demographic information in order to create a detailed consumer profile.
Another example, your target segment consists of decision making IT professionals from Fortune 500 companies with about 5 to 10 years of experience. Understanding that Mr. X is out there frustrated with his current solution. He complains on LinkedIn.
You can offer him a guide on “Better Reporting Solutions for IT Pros” or “When ERP Implementations Go Bad.” Tapping into hundreds or thousands of Mr. X’s using databases and social media by offering value in the form of your knowledge and experience can move Mr. X to your customer list.
Clarity uses Personas as our primary tool to define psychographic profiles.
A buyer persona is a profile of a fictional buyer, based on real-life information and characteristics. It helps you to understand who a prospect is, but also what keeps them up at night, how they spend their time and how they prefer to buy. It puts a “face” on the profile and “personifies” the target.
Customers can be grouped by similar psychographic variables such as values, beliefs, buying patterns, perceptions, type of problems, and many other variables. Psychographic variables provide insights into how and why customers buy. Although this information is valuable to know, it is harder to collect and find because customers’ preferences change over time and this type of information often must be collected directly from the source.
You can collect demographic information about your intended customer from the Census Bureau and other secondary research sources that track consumer information. Psychographic information may require using surveys, interviews, and other forms of primary research to collect information specific to your intended customer.
As part of your Marketing Plan, you will create an expanded profile of the potential customers who make up your target market.
The first page of the worksheet document gives examples highlighted in blue. The second page can be replicated for multiple profiles including decision-makers and influencers.
By identifying and knowing your customers, you can assess their needs and consider if your business concept will meet those needs. Research will assist you to determine the customer group most likely to purchase and use your product or service. This group will become your target market. Your target market may be businesses or consumers. By identifying your target market, its demographics, and its buying and spending habits, you will be able to focus your marketing and advertising efforts more effectively.