Small business strategy question: Who is your perfect customer?

This is part of an ongoing series about 100 strategy questions that small businesses can ask themselves.

When entrepreneurs first consider this question, they might quickly answer by describing their target market. But that is not necessarily the correct answer.

Your target market is not your perfect customer.

Rather, your perfect customer is a responsive and profitable subset of your target market.

That’s how I ended up writing exclusively for the financial and real estate industry for a long time: I thought my target market was entrepreneur website owners who wanted articles and blogs and ebooks. I was only partially correct. I had many entrepreneur website owner customers but my most responsive and profitable ones were the financial and real estate professionals who needed ongoing work. So I transitioned the freelance writing side of my business to help them.

You find out your perfect customer by re-engineering your past sales to discover who really bought from you. Then you figure out who was the most responsive and profitable and you adjust your sales and marketing to reach them. That perfect customer might eventually become your newly refined target market (or they might not) but knowing the information will help you to shape your business.

To figure out who your perfect customer is, take a look at your previous sales. If you’ve been in business for a while and if you have a lot of customers to choose from, select a cross section of customers from the last quarter or the last six months. Try to get a small enough list to make it manageable but a big enough list to get a good representation. (As a freelancer, I had the advantage of looking at everyone I had worked with in the past year for the clearest picture).

List out the characteristics that are common among each of them. Then, list the characteristics that are common and different compared to your target market. Consider some of the following things:

  • Among your customers, what characteristics are common among those who were the most profitable (that are not shared among those who weren’t as profitable)?
  • Among your customers, what characteristics are common among those who spent the most (that are not shared among those who didn’t spend as much)?
  • Among your customers, what characteristics are common among those who went through your sales funnel the fastest (that are not shared among those who went through your sales funnel more slowly)?
  • Among your customers, what characteristics are common among those who bought more than once (that are not shared among those who didn’t)?
  • Among your customers, what characteristics are common among those who referred the most (that are not shared among those who didn’t refer as much)?

By doing this, you’ll start to get a picture of what your best customers are like because you are comparing their common characteristics against those who didn’t make it all the way through your sales funnel or those who aren’t as profitable.

Once you know this information, you can target a more narrowly defined market and you can refine your marketing and sales language further and you can create products and services that more accurately serve the needs of your perfect customer.

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