Many sales directors and CEOs find it difficult to create an ideal target customer profile. Most of them base their customer profile on company revenue, industry, and size – which are not satisfactory.
To succeed in business, you must fully understand your customers. This means that you should know the type of people to target and reasons for targeting them.
This simple strategy will help you save time and money in the long run.
Why Do You Need a Target Customer Profile?
A target customer profile helps to portray customers that rely on your product or service to meet their needs.
These specific customers are of great value to your company.
The solution you provide them will address a real problem, not just a superficial one. It should be measurable, tangible, and applicable for it to benefit them.
Knowing your target customer profile is key to knowing the direction your company should take.
With this profile, all aspects of your business will be aligned to a common goal.
It also enables your sales department to learn how to separate viable opportunities from those that are not. They will know how to use the right pitching strategy when reaching out to the right people.
Creating a Customer Profile
Since you want your sales staff to concentrate on your target clients, creating a customer profile is the way to go. The profile will help them to be more accurate when developing marketing strategies such as personalized mailing campaigns.
Here the six steps to follow when creating a customer profile:
1. Group Your Customers in Revenue Streams
As a businessperson, you should understand that your customers differ in terms of how they buy your products or services. They make purchasing decisions based on their interests or previous purchasing habits.
Either way, all of them can’t fall in the same category when it comes to the purchasing behavior.
The goal of this step is to group your customers into three revenue streams – small, medium, and large. Most B2B companies use this strategy to clarify their revenue streams.
Different metrics can be used to group your clients depending on the service or product your offer. For instance, you can use the annual revenue per client metrics if you run a consulting company or a SaaS company.
A good example for the revenue streams for a SaaS company with 400 paying customers is as follows:
- 1 – 5: Small customers
- 6 – 20: Medium customers
- 21 and above: Large customers
Note that the numbers represent the licenses sold by the SaaS company.
2. Identify the Most Important Revenue Stream
Your business will generate revenue depending on the marketing strategies you have in place. With the right amount of cash flow, your business can grow rapidly and continue meeting the demands of its customers. You should understand the role that the customers play in making your company profitable.
After grouping your clients in the three revenue streams, identify the stream with the most figures. You’ll use the revenue generated on each stream to make this selection.
For this step, it is assumed that revenue is an indication that your clients are satisfied with a certain service or product.
Keep in mind that your biggest revenue stream is not necessarily the group with the largest number of customers. Even if you have 10 times more clients in your small group than the large one, the revenue earned from the large group may be more than that earned from the small one.
Pick the group with the highest potential if the three groups generate the same amount of revenue. Alternatively, you can change the attributes of the revenue streams to create three new categories.
For example, you can group the three streams as follows:
- Large customers contribute 60 percent of the revenue.
- Medium customers contribute 25 percent of the revenue.
- Small customers contribute 15 percent of the revenue.
3. Identify the Best Customers within Your Most Important Revenue Stream
This step assumes that you have a clear understanding of your most important revenue stream.
Not all clients in this revenue stream are of value to your company.
You need to pick the most relevant clients in order to know your target customer profile. To do this, you must choose specific clients based on your business goals.
The goals you have for your business may change from time to time. If you are running a start-up company, your most relevant clients are those who make the company more profitable than it was when you started.
If you’ve not grown profitably within the first five years, consider selecting customers with the highest margins to become more profitable. You can target your company’s long-lasting deals to improve the customer trusts’ if you are new in the market.
The Pareto rule, which states that 80 percent of your turnover is contributed by 20 percent of your customers, can help you identify the best customers. Select the customers based on the size of your company’s portfolio. The target customer profile can only be accurate if you pick the right number of customers.
4. Analyze Your Best Customers
Small and growing companies are the potential customers in B2B (business to business) sales. On the other hand, if you handle B2C (business to consumer) sales, skip to the fifth step below.
To effectively analyze your best customers, you must find their common traits and patterns. For each of your best client, you need to know the driving forces behind their pursuit for your products or services.
Choose the most common patterns and build a customer profile for each section. Your company profile can be in the following format:
- Name of the Company
- Target Company Profile
- Industry Type
- Type of Customers (B2B or B2C)
- Number of Employees
- Country
- Annual Turnover
- Market Position (new-entrant, challenger, leader)
- Growth (hyper-growth, moderate, stagnant, recession)
5. Analyze the Real Buyers within Your Best Customers
If you run a B2B company of any size, having a clear view of the type of clients you’re serving isn’t enough for you to build a customer profile. You still need to know who the actual buyers are. The actual buyers are customers who decide to buy a product or service and not necessarily sign the agreement.
You’ll, therefore, need to build an actual buyer base in order to build a target customer profile. The profile should include traits such as psychographics, demographics, and behaviors that your best buyers share. The target buyer profile can take the following format:
- Actual Buyers
- Target Buyer Profile
- Job Title
- Distance from CEO (N-1, N-2)
- Sex
- Age
- Education
- Personality (ongoing, introverted)
- Behavior (cautious, action oriented)
- Drivers (money, power, efficiency, fear)
Other relevant factors to add to the buyer profile include experience from the product type and experience in the field.
Including the buyers’ information (such as psychographics and behavior) can help you learn how to communicate with your customers better. You’ll get to know where to expect fast sales and buyers who regularly use your products or services.
6. Create Your Target Customer Profile
This step shows the typical format of a target customer profile.
You will get to create your customer profile by merging your target buyer profile with your target company profile. You will also have to eliminate irrelevant data from the two profiles.
The final target customer profile can take the following format:
A Target Customer Profile
- Industry Type
- Type of Customers (B2B, B2C)
- Number of Employees
- Country
- Annual Turnover
- Market Position (New entrant, challenger, leader)
- Growth (hyper-growth, stagnant, moderate, recession)
- Role
- Job Title
- Distance from CEO (N-1, N-2)
- Sex
- Age
- Education
- Personality (ongoing, introverted)
- Behavior (cautious, action oriented)
- Drivers (money, power, efficiency, fear, etc.)
With this target customer profile, you’ll be more efficient in several aspects of your business. These include product development, customer support, customer success, marketing, and sales. Enlist the help of staff when creating a customer profile for more effective results. Discuss with them your prospects and listen to their suggestions.
A good customer profile should depict the basic buyer information that you and your staff have agreed on. Including irrelevant data in it may reduce your chances for improving your product development, service delivery, and customer support.
Great Customer Profile: On Your Way to Customer Success
After going through the six steps explained above, you now understand why you should have a customer profile and how to create one.
It’s important to involve your company’s management team when creating and executing the six steps above.
The customer profile will give your company a new image as you strive to reach greater heights.
For small and new companies, customer profiles must be updated after every six months to keep up with the needs of incoming customers. Large and monopolistic companies can update their customer profiles after every 12 to 24 months to meet the needs of the evolving products/services and customer base.
As a business manager, your company can only be successful if you drive it in the same direction as your customer profile.
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