Ask most leaders who their ideal customers are, and they say, “everyone.”
It’s natural to believe that everyone needs what you offer. After all, why would you want to turn someone who can pay you money away? That would be silly, right?
Yet, by trying to cater to everyone, you could cause more damage than good to your business. Here are three common challenges we’ve noticed in businesses that don’t define who their ideal customers are.
1. Poor Payment Collection
Plenty of business leaders complain that their customers are slow to clear payments (sometimes they take up to a year). Or they threaten to return unsold goods and stop doing business when they get called to clear outstanding dues.
In doing business with people who don’t need what you sell, you compromise on cash flow and your potential to sustain and grow.
Is there any fun in a business looking great on paper but struggling in real life?
2. Stocking Wrong Products
In an attempt to satisfy every customer, businesses manufacture, or stock more Stock Keeping Units (SKUs) or create new product lines. In the process, they spread themselves too thin to focus on growing their profitable products and lose market share for them as well. Inevitably, businesses have to fight the price war just to stay alive, a war that nobody ever wins.
Think about the impact of creating or stocking new slow-moving products on your company’s resources.
3. Poor Effort to Return Ratio
When the strategy is to cater to anyone and everyone, the entire company moves in different directions with no standard benchmark. Customer acquisition costs are high, it’s difficult to stem customer churn, the poor numbers don’t justify the effort, every metric takes a beating, and employee morale and productivity falls drastically.
When people don’t feel like giving their best at work, how much chance would you give the business to grow?
What is the Solution?
“The goal is not to do business with everybody who needs what you have. The goal is to do business with people who believe what you believe.” – Simon Sinek
Your real customers are people who need what you sell, for whom your offering is a means to achieve their goal (whether personal or professional), and who keep coming back to you because you “get” them.
Knowing your customer profile lets you build your business model to serve it better. Such information on customer profiles provides tremendous structure and insights for your company to determine where to focus your time, what kind of products to develop and sell, and align your whole company to achieve the common goal of customer satisfaction.
Revenue, profits, and scaling up are a byproduct of customer satisfaction, which comes when you know the segment of your audience well.
The key to knowing your customer is to build a customer persona. A definition of a persona. is:
“A semi-fictional representation of your ideal customer based on market research and real data about your existing customer.”
In other words, your ideal customer is based on the existing data of your most profitable customers. Their backgrounds, needs and interests, and more form the basis of how you build a buyer persona.
Knowing your customer persona allows you to streamline your sales and marketing efforts, your operational tasks, and business strategies to revolve around them. Since you also sell to people who have a real need for your product or service, they also clear their outstanding dues on time, purchase again and again from you, and send referrals your way.
Thus, you can improve the return on investment in your business exponentially merely by focusing on your target customer.
How to Find Your Ideal Customer Persona?
Identifying your ideal customer is simple but not easy.
It’s a task that could take a week or even a month. And you cannot do it just once and forget it. The definition of your ideal customer keeps changing periodically with changes in market trends. So you’ll have to keep returning to this task constantly and checking whether you have the criteria of your ideal customer right or need to change it.
Here are three ways to get you started on this important but often ignored activity.
1. Brainstorm with your team.
Your employees who interact on a daily basis with your customers are a great source of information on your ideal customers.
Your people can give you insights on common behavior patterns and the requirements of your customers. Involve them in the activity to build a buyer persona.
You won’t just get more insights; your people will also feel heard and motivated.
2. Map your existing customers.
Data is the most accurate way to insights into something that really matters, like information on your ideal customer.
Study your invoices to identify the 20% of customers who bring you maximum revenue. Identify trends in them like decision-makers, needs, and interests, purchase frequency, products bought, and so on.
You’ll be surprised how different your ideal customer is from the ones you cater to every day.
3. Speak to your top customers.
There’s a difference in what your top customers need and what you think your top customers need.
The most reliable way to ensure that both parties on the same page are to speak to understand your customers. Ask them why they buy your product, what they like about it and what are your areas of improvement. These insights will prove invaluable in sales and marketing and also in product development.
You might not like the answers customers give. But it’s a place where you can start. And it’s much better than hearing the answers which you like but are not true.
Identifying your ideal customer means you don’t just attract but also retain more of them. This leads to improved profit and revenue and better workplace culture – one where everyone aligns towards a common goal and feels fulfilled at work.
Thus, identifying your ideal customer is the first step to building an organization that can sustain and scales.