Who is your best customer?
My father, who has had an incredible entrepreneurial journey having taken multiple companies from conception to going public, often asks simple questions that have incredibly deep meaning. One innocuous sounding question that he asked me years ago, turned out to be one of the most important questions that has guided my last 20 years as an entrepreneur and consultant. I have also found that when I stop asking this question, things often start to go in the wrong direction.
So here it is:
Who is your best customer?
I was a few years in business and trying to grow the company. We had some marquis clients with big names but we were still a very small scrappy company. When my Dad asked me that question, I snapped back by naming our largest client…not realizing that I entirely missed the actual question. What ensued was an amazing conversation about (what is now called) our “ideal customer profile.” This is one of the most important things to get right whether your company is tiny or gigantic. It works hand in hand with your ability to drive value and guides every other action that you company takes.
So what is an ideal customer profile or ICP? I can tell you that it isn’t “anyone who has money and wants to buy your product! That was basically my approach in the beginning and it nearly pulled our company to pieces
First of all, let’s establish that your company will most likely need an ICP for each product, service and customer segment you serve. It may also be entirely different based on the industry, geographic location and buyer persona that you work with. One of the biggest failures that I see is having an ICP that is broad and mostly irrelevant. For example, “we serve enterprise companies with over $1B in revenue.” This is entirely worthless. An over broad ICP can’t provide the specific details to help drive advanced targeting and product development.
The goal of any ICP is to deeply understand who gains the most value from your solution. Here are just a few questions to start exploring a well rounded ICP:
What specific buyer roles are involved in your buying process?
How do each of these roles benefit from having your solution?
How will your product help that individual succeed, have an easier job, make more money, gain an advantage, be happier, be less stressed, get a promotion, avoid a big risk? You want to get really deep for each person that makes a decision or influences the buying process.
What kinds of companies use your product “out-of-the-box” and don’t need customizations?
Which customers have the lowest cost of sales or a acquisition cost?
Which customers have the shortest sales cycle?
Which companies have the highest renewal rate?
What companies have the highest lifetime value (LTV)?
Which customers have the highest customer satisfaction scores and are easiest for your customer success team to serve?
Which customers, and which roles, provide your company with referrals, introductions or promotions?
Which accounts have the highest margin?
What kind of accounts tend to grow the fastest?
This is just a short list but you can see that it is a wonderful rabbit hole that will help you really hone in on who you should be focusing on and who you shouldn’t. I also recommend starting a list with your NCP or Negative Customer Profile. This is a term I coined when I finally realized that some customers where very costly, unhappy, high maintenance and unprofitable. You have to recognize who those are and get rid of them quick.
The benefits to having a clear and well developed ICP are numerous and the impact is exponential! Imagine every employee really understanding who they serve and how their product delivers value? Marketing, sales, service, support, product design and customer success will all start to move in coordination instead of being at odds. In fact, I often advocate for putting these cross functional roles in an operating model organized by “PODS.” This creates real accountability and collaboration. I will cover org design in a future post.
The financial benefit can be absolutely astounding. Having customers that buy fast, love your product, spend the most, need the least support and stay the longest is a very powerful equation. The process of developing your ICP is incredibly rewarding, valuable and can be quite a blast. And don’t forget to include your best customers in this process. They will appreciate you asking for their opinions and they will then become your most powerful advocates.