Finding your ideal customers

Key points

• Focus less on customers who aren’t a good fit.
• Prioritise customers who value, trust, and stay with you.
• Define ideal customers to guide future growth strategies.

Who are our ‘ideal’ customers?

Once you have done a marketing plan, the answer to “Who are our customers?” should be clear.  But it will take more work to define “Who are our ‘ideal’ customers?”

When starting up, companies are grateful for a sale – any sale, i.e., a small validation that someone wants what you have developed and is willing to pay for it!  But successful companies know that “all customers are not created equal”!  In fact, some customers are actually the wrong customers because they cost you money.  Here’s how you lose money on the wrong customers:

• They don’t pay on time and cause cash flow problems.
• They return products and require a lot of customer service.
• They are never satisfied. They complain and may even provide negative feedback on social media.
• The price they require barely covers your cost, let alone margin.
• They treat the sales process as a transaction and are not interested in developing a relationship.
• They have very little loyalty and will move on to the next company that offers them a lower price.

These kinds of customers do not care about strategic value and won’t provide you visibility into their long-term strategy – even if they have one. So, if you want to grow, you need to begin the process of disengaging with or “firing” the kinds of customers noted above, then spend your time and energy finding customers who will help your business grow.

Find a strategic partner

The customers you want, the “ideal” customers, are those who value what you offer, pay on time, share your values, and are looking for a long-term relationship because you and they are strategically important to each other.

Ideal customers are those who see you as a strategic partner. Ideal customers value what you offer. They bring a smile to your face when their names are mentioned. They pay on time and are looking for a long-term relationship.

Spend your time and energy finding customers in this fourth category. These ‘ideal customers’ will help your company grow.

The ‘finding your ideal customers’ exercise that’s illuminating for CEOs

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

1. On an Xcel spreadsheet, list all your customers in one column. In the next two columns, list the the yearly revenue and yearly profit for each customer.
2. Sort the spreadsheet on revenue, from the customers with the highest revenue to the lowest
3. Highlight the customers that generate the bottom 20% of your revenue and move them to a separate spreadsheet.
4. Now re-sort the list of remaining customers, i.e., those customers that generate 80% of your revenue, on the basis of their profitability, from the highest to lowest profitability
5. Now number each company from 1-3 (high, medium, low) in terms of their strategic importance to your company’s growth (and your growth to their company growth).
6. Finally, circle the customers you really enjoy working with.

Study the list closely and look for the small number of customers who provide you with revenue, profit, strategic alignment, and joy when working with them. Hopefully there will be enough companies for you to analyse, so ask yourself these questions:

1. Are these companies in the same sector? If so, what one?
2. Do the “customers” in these companies have similar titles?
3. Do we know what problem we are solving for them?
4. Do we know why they buy from us?
5. Would they be willing to be a reference customer and/or introduce us to other customer like them who might need our product or service?

Now to find more of these ideal customers

Once you have identified who your ideal customers are, what their profile looks like, and their titles, then think about where you can find more customers like them. Do they go to certain tradeshows you should begin to attend?  Are there specific target companies (or titles of people within companies) to whom you should send marketing material about your company and its qualifications? Can you write an article about your product and the problem it solves, and get it published in a magazine that your target customers read? Can you get one of your ideal customers to introduce you to another person or company you have identified as “potentially ideal”?

Once you have figured out who you want your salespeople target, it’s relatively easy for them to identify and contact those potential customers, schedule a meeting with them, discuss your product or service, and help those prospective customers understand your differentiators – and why they should buy your product or service rather than your competitors’.

Of course, it’s always possible that the exercise we outlined above does not enable you to identify any “Ideal Customers”.  In other words, some customers may be providing a lot of revenue but are not very profitable. Or perhaps those customers that are profitable may not be strategically important to you. Or those that are strategically important may not be providing much revenue or be enjoyable to work with. If this is the case, then you have a serious problem that needs to be addressed immediately, because you do not currently have the kinds of customers you’ll need in order to grow!

Marketing and sales will play a role

Once your marketing team figures out who your ideal customers are, they need to develop a marketing campaign to target them. Your sales team then needs to figure out how to get in front of and talk with these potential “ideal customers”, validate that your product or service really does meet their needs, and then convince them to buy it from your company, i.e., close the deal. Although sales is never “easy”, it’s much easier when you are trying to sell to someone who has the potential to be an “ideal customer”.  So, take the time to do the analysis, then develop a strategy for knocking on the right doors, supported by reference customers who are willing to talk about why they think you are an “ideal vendor or supplier” – and watch the sales begin to climb!