Posted: August 10, 2011
How to identify your ideal customers
Bigger isn't always betterLarry Turner
How do you answer the question, "Who are your customers?" Many of the businesses we work with typically answer with a very broad and vague description, and their marketing reflects their answer. Even those companies that can more sucinctly articulate what their ideal customer looks like rarely implement this into their sales and marketing activities.
A good example is a company I recently started working with that has a product line only applies to US companies that currently sells internationally. Their sales and marketing approach has been a verical focus by industry and marketing to everyone in that industry. An interesting fact that I was surprised to learn is that only 1 percent of US companies engage in sales outside of the United States. This means that 99 percent of their business development activities and resources are wasted on companies that currently don't export!
Think of your ideal customer and how many non-potential customers that you are wasting time and money with marketing efforts. It may not be as dramatic as the 1 percent/ 99 percent example, but I guarantee there is excess cost and time on activities not focused on your ideal customer profile. Some things to think about as you focus efforts include:
Use Historical Successes
Review your current customer base and identify those customers that have been the most profitable. In this effort, you will need to go through a customer profitability exercise. Don't be fooled into the largest customers are the best. In many cases, your larger clients may be receiving discounts, they may be more demanding of your staff's time, and they may also be slow pay.
Get ouside help to drive your customer profitability project to make sure you get it right. One you rank your customers by profitability group them by type. This may be by industry, size, or other demographic common to certain groups.
Many times when I ask business owners about the types of customers they want to work with, they give an answer that is difficult to identify when trying to buy a list for marketing and sales. I get answers like "I like to work with customers that get it" or " I work with customers that value the relationship." While these are important, they don't help you develop a starting point for your business development efforts. They are important as a part of the qualification during the sales process, but it doesn't help you develop the list to start your programs.
Stick With the Profile
It is easy to deviate from your target market profile after you are running the program for a while. Stay focused and true to the profile that works and your efforts will pay off much more quickly than taking a broader "shot gun" approach. We only have so many people and a limited amount of money, so spend them both wisely.
It is hard to narrow your prospecting focus, but doing so will allow you to grow much more quickly. Start with your current customer base and clone those clients who reward you for being a good partner. Don't get caught in the trap that the largest customers are the best and most profitable.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms." For additional information visit www.RoundhouseAdvisors.com