Marketing is much more effective when you are reaching the right people. Businesses must identify the right customers to avoid wasteful spending and maximize profits. Here are seven tips on how to figure out who your ideal customers are.
Look at Your Existing Customers
Start by examining the customers you already have. Pay special attention to those who buy repeatedly, spend more than average, refer friends and family, leave positive reviews, or require fewer customer service resources. Look for patterns. Do they work in the same industries? Do they have similar household incomes or belong to the same age group? Whatever traits you can find can be helpful for figuring out who your ideal customers are.
Utilize CRM software to look at things like purchase history, service frequency, average transaction size, and customer location. You can also potentially use AI to analyze data and find useful insights.
Perhaps an HVAC company wants to determine which neighborhoods drove the highest profit margins last summer. They can cross-reference CRM software data with consumer demographics and behavior using AI. This could reveal, for example, that households with specific income profiles in a particular neighborhood spent three times more on high-ticket preventive maintenance. The company could then use this information to send homeowners in that neighborhood an email with spring tune-up special offers.
Determine the Challenges Your Ideal Customers Face
What needs do your products/services address? Your ideal customers are among those who are experiencing these challenges.
"People often make a purchase for one of two reasons: They have a desire they would like to be fulfilled, or they have a problem that they need to be solved," says Rebecca Patterson at Forbes.* "If you can identify a challenge your ideal
client currently faces and 'bridge the gap' from their problem to a solution, it's likely you will find yourself in high demand. For instance, if you find yourself feeling like you have aches and pains, you are likely to seek the services of a physiotherapist. If you find your vehicle running low on fuel, you will visit a fuel station in order to fill up."
Identify Your Most Profitable Customers
Profitable customers are ideal, so evaluate factors like profit margin, lifetime customer value, frequency of purchases, cost to acquire the customer, customer retention, and referrals. Some customers may generate large sales but also require frequent service calls or extended support, while others spend a little less but require fewer resources. Look at which customers are consistently generating profits while remaining loyal. They may deserve more marketing attention.
Create Customer Personas
Use the information you collect to create customer personas. These are essentially descriptions of your ideal customers that can help your marketing, sales, and customer service teams communicate more effectively with the audiences who are most likely to buy.
SCORE** provides this example for a bicycle retailer: "Mike is a 55-year-old professional with a household income of $150,000. He’s married with adult children and lives in the suburbs. Fitness is a priority for him, and he spends $5,000-$10,000 annually on high-end bicycles and accessories. He wants functional products, high quality, and to convey status."
Look Beyond Basic Demographics
Don't limit your attention to demographics like age, gender, and income. These can be useful, but it may help to look further. Examine factors like products/services customers purchase first, how often they return products, whether they respond better to email or text messages, what time of year they buy, or which marketing campaigns generated the most sales.
These things have to do with customer behavior, so they can help explain what is motivating people to choose your business. This can be valuable information when figuring out who your ideal customers are.
Study Those Who Didn't Buy
You can also learn about customers by studying the ones who didn't buy from you. Review leads who requested quotes but never became customers. Look for patterns like price sensitivity, geographic location, business size, service requested, and marketing sources. Figure out which types of prospects rarely convert so you can reduce spending on less effective marketing channels and focus more on channels and targets that are a better fit.
Get Feedback
Get feedback from people. Conduct surveys and send follow-up emails to gain more perspective on what is and isn't working for customers and prospects who didn't convert. Pay attention to online reviews (and try to get more of them). Even casual conversations can give you valuable insight.
Ask people what made them contact your business. Ask why they chose your business over a competitor. Ask what prevented them from buying or what made them buy. Ask how they heard of you.
Knowing who your ideal customers are allows your business to be more efficient with marketing budgets while improving relationships with valuable customers. Pay attention to who is buying and how they are engaging with your business to help make sure you are putting your resources in the right places.
** https://www.score.org/articles/how-identify-your-ideal-customers-and-get-more-them/
