Delighted that this blog is a guest post from Steli Efti, CEO of Close.io, startup selling guru and all round top man. Thanks Steli.
Not all customers are created equal, and selling to the wrong customers is one of the quickest ways to kill your business.
But who are the “wrong” customers? Or the “right” customers, for that matter? Many founders and salespeople aren’t sure, so they make educated guesses.
But here’s the problem: At best, those guesses are usually incomplete. At worst, they’re 100% wrong.
The customers you sell to are too important to leave to chance, so let’s take out the guesswork. We’re going to take a look at a simple system to identify your ideal customers with pinpoint accuracy.
But first, let’s talk about what’s at stake when you sell to the wrong customers.
The dangers of selling to the wrong customer
1. Bad Data
Data is the most valuable tool you have for diagnosing and resolving problems in your business.
But data is only as reliable as its source. If your product is in front of the wrong people, the data will be be inconclusive at best, and harmful at worst.
2. High support costs
Selling your product to the wrong customer is like giving a hammer to a seamstress.
They might be able to get the job done, but they’re going to have tons of questions, require a bunch of attention, and ultimately get frustrated when your product doesn’t meet their needs.
3. High churn rates
Churn measures the ultimate sales failure: Customers who have tried your product and decided it isn’t worth paying for.
If you’re selling to the wrong people, they’re going to figure it out eventually. And when they do, you’re going to bleed customers at an unsustainable rate.
4. Damaged reputation
When your customers churn, they aren’t going to be happy. As far as they’re concerned, it’s your fault for selling them a solution that didn’t meet their needs. And they’re right.
In a social media-driven world, it doesn’t take long for bad reviews to get around. When they do, and they will, you’re going to develop a reputation you might not be able to recover from.
5. Poor morale
All of this will eventually lead to poor team morale.
Salespeople won’t be motivated to sell when the majority of their accounts churn. Developers won’t be motivated to develop a product everyone complains about. Support won’t be motivated to support when most of their tickets are users wanting refunds.
The solution: Create an ideal customer profile
You can avoid that mess by making sure you sell to the right customers.
But how do you know who the “right” customers are? Simple: Create an ideal customer profile.
An ideal customer profile is a tool that describes a fictitious individual or organization that gets significant value from your product and provides significant value to your business in return.
The profile is highly effective, but it requires at least 10 current customers. Without them, there won’t be enough data to create an accurate profile. If you aren’t at that stage yet, check out our guide to landing your first 10 customers.
Now, here’s how to create your own ideal customer profile in three steps.
Step one: List your best 10 customers
Your best customers are those who are the most successful with your product, not necessarily the ones who pay you the most money or “like” all your social media updates.
When compiling this list, make sure to separate happy customers from successful customers. Happy customers like your product, but successful customers need it. Your most successful customers should receive measurable, quantifiable value that proves they get more than they pay for.
Step two: Identify their defining attributes
Create mini profiles for your top 10 customers that describe their defining characteristics; things like industry, location, and annual revenue. Not sure where to start? Here’s an outline to get you going:
Step three: Define commonalities
Place your 10 mini-profiles side-by-side and look for similarities. What characteristics do they have in common? In most cases, you’ll find a handful of key elements that most (if not all) of your most successful customers share.
If you’re having trouble finding commonalities, it probably means you weren’t detailed enough in step two. Go back and dig a little deeper. Identify more defining characteristics. If you need to, get on the phone with your customers and ask them a few questions.
Create your ideal customer profile by compiling all the shared traits into a single form. This new profile should now serve as a benchmark for all incoming leads.
If you find a lead that matches the profile, you’ve found a high-value deal. But if you come across someone who wants to buy but doesn’t match the profile, you know to let them go; they’ll end up being more trouble than they’re worth.
Types of ideal customer profile
You can arrange your new profile however you see fit, but here are a few common formats you might want to consider.
A detailed, long-form profile (5-8 paragraphs) makes it easy to identify high-value prospects. It also makes it easier to identify low-value prospects, which can save you major headaches in the long run. I recommend starting with a more detailed profile like this, then creating a simpler version for your sales reps to memorise.
The summary profile is usually little more than a 3-5 sentence paragraph detailing only the most important characteristics of your ideal customers. By keeping the profile short, you make it easier for your reps to memorise.
Structuring your profile as a list makes it easy to review on the fly. If you organise your list well, your sales reps can quickly and easily find the information they need to make on-the-spot decisions.
My challenge to you
If you don’t have an ideal customer profile, set aside a couple hours this week to create one. And if you already have one, set aside some time to update yours. If you can, make it a company-wide project.
Bring everyone together to get insights from all sides of your business. If sales and engineering have two totally different ideas on who the ideal customer is, that’s something you need to know and resolve.
Create a profile, then follow it exclusively for a month. Compare every incoming lead against your profile and, if they don’t match up, let them go.
If you aren’t impressed by the quality of customers you’re onboarding by the end of the month, forget about it. Shred your profile and go back to the way you were doing things.
But trust me: You won’t be going back. Once you’ve had some success with your profile, come back and share your experience in the comments below.
I’ll look forward to hearing your success stories. Until then, get back out there and crush it.
About the author
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.