For some companies, defining their ideal customer is easy. If you make an app that tracks fertility, for example, your target market is very specific: women between the ages of 25 to 35, who are in long-term relationships, are likely college educated and who make a decent income. From that demographic foundation alone, you can derive enough information to inspire several complete marketing strategies.
But many of us, whether we own large companies, small businesses, or are solo acts, have a number of audiences we could appeal to. The trouble starts when we choose one, and choose poorly.
Don’t try to milk a steer – where businesses go wrong
The number one mistake I see SaaS founders make is failing to identify their ideal customers from the beginning.
If you haven’t defined your ideal customer, you won’t have the information you need to attract the leads who will become your best customers – the ones who love what you do, are a perfect fit for your service, and who will enjoy every minute of their customer experience with you.
Instead, you’ll get a grab bag of some happy customers, and some unhappy customers who will waste your time and drive you nuts when you attempt to deliver the kind of experience or results they want.
When you define your customer from the start, you can:
- Improve retention,
- Increase profitability,
- And Grow faster thanks to referrals from delighted consumers.
The alternative is spinning your wheels dealing with the consumer equivalent of bad relationships – they’ll try to change you, complain about you, and never really love you. This is your business; it ain’t no country song! Stop trying to milk a steer, cowboy. It’s time to find your herd.
Of course, many businesses think they have identified their target markets, but they don’t realize they’ve done so incorrectly until:
- Acquisition rates remain low
- Retention rates don’t rise (and no customer success initiatives seem to work)
- Sales cycles last too long
- Customer service is overwhelmed with requests
- Customers keep asking for services you don’t provide, or different features
What usually happens is the “target market” was based on an educated guess. Nearly every business starts out that way, but keep in mind – most businesses fail within their first year too!
How to ID your ideal customer
You’ll be starting from one of two places:
- Your business already has customers
- Your business is brand new, or still in the “idea” stage, and you don’t have any or many customers
Your business already has customers: If you already have customers, then you’ve probably noticed that some are awesome! Some are exactly the kind of customer you wish you could multiply by the thousands. Make a list of these customers, and then devote some time to analyzing who they are, what they are trying to accomplish, and why your product is such a good fit. What are their demographic details? Are there common personality traits (as in – they make decisions quickly, or they want all the facts before making a decision but are then extremely loyal)?
When creating this list and analyzing your best customers, be sure that they are in fact customers who are achieving their goals with your product. The customer who has been with you the longest but hasn’t logged-in in a year is not the kind of consumer you want to attract (he’s probably forgotten about the auto-renewal on his credit card).
Use the information you’ve gathered to begin building a detailed buyer profile, but don’t stop there. You’ll want to double-check your findings by actually interviewing a few of your best clients to find insights into their user experience you’ll never hear otherwise.
In these interviews, it’s crucial to find out why these customers looked for a solution and decided on yours, and why they’re still with you. Use the answers to these “why?” questions to validate your value propositions and develop customer-facing content and marketing campaigns.
Your business is brand-new: The questions you have to ask remain the same; the difference is that you don’t have a ready-made segment to survey.
One common self-inflicted roadblock is assuming that defining your ideal customer too early will limit your business. Nothing could be further from the truth. As Lincoln Murphy says,
“I think people forget that you actually get to choose your customers. You get to choose who you want to do business with. SO creating an Ideal Customer Profile isn’t limiting…it’s empowering!”
Moreover, this isn’t a one-time-only decision that will forever determine who you go after. Your ideal customer is going to be a (slowly) moving target, depending on what goals you want to achieve.
Now that we’ve leaped those hurdles, here’s how to start defining your target niche.
Begin by asking yourself:
- What problems does your product/service solve?
- Who has that problem?
- Who really needs to solve that problem or their lives will be RUINED? (It’s not just the problem, it’s the severity of the problem!)
- Will this customer immediately find value in your product/service once they buy it (and by “value,” I mean make progress towards their personal or professional goals)
Once you have a general idea of who has the problem you’re able to solve, it’s time to reach out to real people who fit that profile. This is where you’ll get into a Customer Development approach by using qualitative data gleaned from real-people interviews to get the details on your target market.
Then, make sure you’re targeting the right people by defining the wrong people.
- What type of customer would need the most help and customer support?
- What type of customer is unlikely to see the value in your product/service immediately?
- What type of customer won’t be able to make progress towards their goals if and when they buy your product?
By defining who your product isn’t for, you’ll get a better idea of who your product is for.
Target Acquired: What’s Next?
Once you understand who your ideal customer is – and isn’t – you’ll be able to derive insights into how best to reach them, how to express your value proposition, and how to deliver what they need once they’ve signed up. You’ll be able to refine your acquisition process so new customers can realize value faster, which leads to retention as well as upsell and cross-sell opportunities.
Essentially, knowing your ideal customer is the foundation of the rest of your business, and as your business grows, your ability to fine-tune your segmentation will grow with it.
Which makes the next step optimization. Make that your next hundred steps, because optimization is more about the journey than the destination.
As your “ideal” customers begin to come in, you’ll want to put analytics in place to tell you how they found you, who they are, what their customer lifetime value (LTV) is, and what actions they take that correlate with greater or lesser LTV. You may also want to look at which types of customers are your loudest advocates, or who are so engaged with your brand that they’ve become integral parts of your social media communities.
With this information, you can change your marketing strategies to attract certain types of customers, or refine your onboarding process to encourage desired actions that correlate with reduced churn.
Don’t be Surprised
Don’t be surprised if your ideal customer doesn’t make up the majority of your current user base – they probably don’t. Once you begin optimizing to attract and retain them, however, you’ll see their numbers grow as the numbers of your less-than-ideal customers shrink (and hopefully disappear).