WESST Blog

The Ideal Customer Profile – Profit by Serving the Right Customers

After creating the business development plan and calculating your daily cash flow break-even point in sales (my previous post), the third thing I believe the smart business owner must know is their ideal customer’s profile.

Many businesses don’t take careful enough aim with their marketing and advertising.  As a consequence, they get the results they do with amazing accuracy. The problem is that the results are often far from ideal. Business owners who carefully define their ideal customer will attract far more of them for lower cost and, arguably, less effort.  The trick is simple – know what you’re looking for.

If you’ve been in business for a while you know not all customers are of equal value. The questions are who are your best customers and why? How do you know your marketing and selling activities are yielding more customers like your best customers? These questions underlie the need to clearly define your ideal customer profile. Look for common demographic patterns among your most-profitable customers. This could include items like where they live, their age and other items you’ve anecdotally gleaned during the course of regular conversation. (Caution: Note that your favorite customers are not necessarily your most profitable customers. You’ll likely need to spend some time figuring out just who are your most profitable customers. This work is as much a matter of the head as it is of the heart.) Although varying business-to-business, we suggest an ideal customer profile contain specific, observable attributes that have proven to produce both profitability and joy for you – the business owner.

For a management consultant like myself, here are some of the ideal customer profile characteristics I believe important to my personal and client’s success:

• Client is willing to listen to advice and are warm and personable
• Business has a potential for product or service differentiation through innovative marketing
• Business has a scope for improved productivity through innovative management planning and control
• Business owner and employees are technically competent.  (e.g. I don’t know how to help a cabinet maker make a better cabinet.  My role is to help this client build a better cabinet-making business.)
• Client can refer other businesses

Bottom line?  Unless you’re pursuing customers who fit your ideal customer profile, you’re likely growing a business filled with sub-profitable customers.