Understanding your perfect customers and acting on that knowledge
We’ve all heard of Pareto’s law (the 80-20 rule, the Pareto Principle, law of the vital few and the principle of factor sparsity). If you haven’t here’s a brief explanation:
The law is claimed to appear in several different aspects relevant to entrepreneurs and business managers. For example:
- 80% of a company’s profits come from 20% of its customers
- 80% of a company’s complaints come from 20% of its customers
- 80% of a company’s profits come from 20% of the time its staff spend
- 80% of a company’s sales come from 20% of its products
- 80% of a company’s sales are made by 20% of its sales staff
Therefore, many businesses have an easy access to dramatic improvements in profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or retraining the rest, as appropriate
You can read more about Pareto’s law here: http://en.wikipedia.org/wiki/Pareto_principle
In this article, I will focus on the “perfect customer” and the goal of being profitable, productive and proactive (triple P) – rather than just being busy.
Why do I want to find more of my perfect customers?
It may sound like an odd question, but it’s really important that we have the end goal in mind before starting this exercise.
Your perfect customer is one who generates exceptional income for your business, doesn’t place undue demands on your time (like the customer who ALWAYS has the “urgent” job), complains only when a complaint is due, and pays on time.
Imagine if all of your customers were like this.
You can probably think of your top 5 customers right now, just based on the criteria above.
Imagine if you had 20 more customer like these 5!
That’s the goal of this process.
Discovering your perfect customer
Let’s look at your customer base and ask yourself the following questions:
- Which of your customers combined generate 20% of your income?
- From this short list, which customers generate very little complaints or demands?
- From this even shorter list:write down the 10 similarities of these companies
- the people that work for them
- how you originally found them (or how they found you)
- what products you sell to them (if similar)
- the industry they work in
- etc. etc
Get ready to map your perfect customers
Once you have a list of similarities, you’re ready to map your perfect customer.
Good business vs Bad business Any good business owner will tell you that not every customer is equal, and not all business is good business. Let‘s look at a scenario quickly. A new customer (let‘s call her “Anne”) calls up, they‘re wanting widget ‘A’, need it today and can only pay 80% of your retail price; because that‘s what your competitor is charging. You need to stop a machine that‘s currently producing widget ‘B’, in order to start producing widget ‘A’for this rush job. This causes downtime of the machine of 1 hour while it is reconfigured to run the new job, and waste of 1% of the widget ‘B’ job from stopping it in the middle. You then complete the widget ‘A’ job, and call Anne to advise her that the job is ready to collect. Anne arrives to collect the job, and complains about the colour as it “looked different” on her computer screen.
So you spend 20 minutes giving this customer a lesson on colour management. She begrudgingly accepts the job and leaves, never to return. The final tally is not in your favour: Waste: 1hr and 20 minutes Loss: 20% Gross value of widget ‘A’ and 1% of widget ‘B’ Potential Damage: Bad press from an unhappy customer
So even though you bent over backwards to make this customer happy, the end result is you probably lost money and reputation on this job. The reason I have highlighted this, is this is not an example of a perfect customer. Even if this example was one which was a regular occurrence with an existing customer who was part of your list in the first question above – this customer should not appear in your second list.
What if I don’t have anyone on my second list?
Never fear! Use your gut.
You know who your best customers are. They’re the one that you really enjoy working with, the ones you already give discounts to, and the ones who buy more than one of your product lines.
So, start by thinking about them.
Survey your perfect customer
Once you have the information, let’s get a little more by calling each one of the “perfect customers” you already have to get some more knowledge. Let’s ask them some questions to find out what’s really important to them.
You may even choose to do this as a survey. There are a number of really great survey systems online. Survey Monkey is one, and it’s free up to a certain number of users: https://www.surveymonkey.com/
Follow the steps to really understand your perfect customer and what makes them tick:
- Call your customer and ask them if they could answer a questionnaire or complete a survey for you
- Complete the survey with “mappable” questions – questions with a selection of pre-filled answers or Yes / No responses
- Make the questions easy to understand
- Make sure the survey is as short as possible
EXAMPLES OF QUESTIONS
What’s the main reason you choose to purchase from us:
- Turn-around time
- Value for money
- Customer Service
- Quality of product
What is the one thing we could improve upon:
- Turn-around time
- Value for money
- Customer Service
- Quality of product
Do you buy any products from companies that are likely to be in competition with us?
If we were to improve our turn-around time, would this affect your attitude towards us positively?
- Not really
Mapping your perfect customers’ “genome”
Now you have some answers from your perfect customers, it’s time to work out how to find more.
An example below:
- 30% of customers surveyed are in the construction industry
- 20% are in the medical industry
- 10% are in the travel industry
- 35% are in the 20 – 50 employees bracket
- 85% say that quality is the most important to them
- 50% use the services at least once every month
- 70% purchase multiple product lines
Based on the survey results, we may choose to do a mail-out with a high quality marketing pack using mailing data to:
- Construction companies
- Medical companies
- Travel companies
With the following criteria:
- Employees between 10 and 150 (I like to extend the range, just a little)
- Are within 80 kilometers of our main location
Mailing list data can be found here: https://mailinglists.com.au/
Contacting customers who fit your criteria
Remember that your criteria will be very specific, and therefore you most likely will end up with a very small number of possible targets. It’s important to be diligent and professional in making contact with them so as few as possible fall through the cracks.
The best possible way, in my opinion, to do this is to follow the following steps:
RESEARCH YOUR LIST
If you need to find out the best contact to send it to, then do your research first.
- Check their website – generally companies will list their Managers and Directors on the “About Us” page
- Linkedin profiles are always good to work out who’s who in a company
CALL YOUR LIST
If you couldn’t find the name of the Manager online, a VERY simple script is required here
Hi, it's John Smith calling from ACME. I'm wanting to send out some information in the post, and need to know the name of the Manager so I can direct it to them. Great, thank you for that. Is it possible to speak with them, very briefly?
Once you have the name, it’s a really good idea to talk to them first, so you can introduce your company and tell them what you’re sending out.
Hi, <Manager Name>, it's John Smith here from ACME. How are you today? We specialise in <types of services> for companies in the <Name of Industry>, and have some excellent success stories. I'd like to send you out some information in the post. Can I confirm that the best address to send it to is <Address> That's great! Thanks. I'll pop this in the post tomorrow. Would Wednesday or Thursday be better for a follow up call next week? Great - talk to you then!
Think about your perfect customers and write a few stories related to a situation within the following structure:
- What was the problem your customer was experiencing
- How you went about solving the problem
- The outcome – benefits like reducing waste, increasing profit, or efficiency or quality
Tell a story using no more than several sentences and use this in your marketing pack.
Send your pack
Remember that this pack is going out to a small number of prospects. This is not mass marketing, but very tailored and very niche.
Design the pack to even include the logo of the business you’re sending it to. Make it REALLY personal and focus on quality.
Follow up with a phone call
Once you’ve sent the pack, give them time to receive it, and follow up with a phone call.
The end goal is to get in front of them for a meeting to discuss the benefits of working with “a company who understands their industry”
Do it right, and win the game!
If you can do this right, you can have a business full of “perfect customers” where you spend your time being profitable, productive and proactive (triple P) – rather than just being busy
Next up in my blog articles, what to stay tuned for…
The Customer is Not Always Right — “Firing” High-Maintenance Customers. This article is a follow on to the one above. Once you have a stable of “perfect customers”, you don’t need the High-Maintenance ones anymore.
Applying the 80-20 rule again – which 20% of your customers are consuming 80% of your time. How to make these customers profitable, or fire them for good.
See our other post on increasing wallet share from customers