Characterizing Customers

Quick Summary: Take time to identify the characteristics of an ideal customer.

Abstract:

Products and services are developed with a specific market and customer set in mind. Taking time to identify the ideal customer characteristics can have a significant impact on the offering itself, and be equally important in determining who and how to approach prospects.  To help define the ideal customer profile, it is helpful to identify a number of factors, by their extremes, to better understand the variances between prospect opportunities. 

At first glance, it may seem easy to characterize customers based upon the experiences that we have had in dealing with them.  Customers that make repeated purchases at regular, predictable intervals, at premium pricing levels, that are willing to provide excellent references, and require little or no post-sale support, appear to be the ideal customer and, in fact, they are.  Unfortunately, in most instances, those customers are rare.  When a new prospect appears on the radar screen, it is often hoped that they will fall into our definition of an ideal customer. Sometimes our most optimistic hopes are realized, but in the majority of cases, prospects either fall by the wayside or somehow fall short of our ideal.

Rather than hoping prospects fall into the definition of an ideal customer, a more pragmatic approach to characterizing prospects allows the proper level of expectations to be set, and will also help in formulating plans to transition a prospect to a customer.  One exercise that can be used to characterize customers is to consider extreme characteristics; both “good” and “bad” in terms of how well they meet the desired ideal profile.  By defining the two extreme cases or “rails,” all prospects will fall somewhere between those extremes. Identifying between six and twelve characteristics usually provides enough granularity to provide meaningful results and actionable plans.  The process is remarkably easy, by considering extremes of the identified characteristics and then deciding where the ideal customer lies between the extremes.  Below is a table that lists some of the potential characteristics that can be considered.  The items listed are only examples.  For each company, many different characteristics should be considered.

 

Opposite Customer Characteristics

Single purchase opportunity

Likely to make multiple recurring purchases

Product or service viewed as a commodity item available from multiple sources

Product or service is totally customized for each prospect

Purchased one time

A contractually committed, long term, periodic payment revenue stream

Products can be shipped from standard stock inventory

Products are custom-built to each prospect’s requirements

Product or service requires no training on its installation or use

Product or service requires on-site, extensive training and custom installation

Low price appears to be most important factor in the purchasing decision

Other factors, besides price, represent the major purchasing criteria

Sales can be made via the Internet or other similar means and require no direct prospect interaction

Sales require repeated, in person, multi-level selling over an extended period of time

Prospect views the offering as “nice to have,” but feels no compelling reason to buy

Prospect views the offering as critical to their operations

The prospect has to budget or identify funding sources before making a commitment

Funding for the offering is a budgeted and expected item

The procurement process involves rigorous adherence to standard procedures

Procurements can be made within a short period of time when approved by a single key decision maker

The prospect must be first educated about the need for the proposed offering

The offering represents a direct solution to a problem that the prospect has identified and needs to solve now

The offering will require the prospect to make some fundamental changes in their current operations

The offering is a direct replacement for an existing system that will have minimal or no impact on the prospect’s existing methods of doing business

The prospect will require some lengthy field trials prior to making a purchase commitment

The prospect is satisfied that the offering will effectively work in their environment without requiring any pre-purchase trials

The product will be “as-is” with no future enhancements or upgrades required

The product is expected to be upgraded regularly

The prospect has no experience with the vendor and may be cautious in making a commitment to them

The vendor has a proven track record of performance with the vendor and is confident in dealing with them

The prospect may not have sufficient resources or know how to effectively utilize the offering, possibly requiring extraordinary support

The prospect is staffed appropriately with seasoned personnel who will not require support

The prospect is small or a new company in a market segment with little reputation or influence

The prospect is a well-established, admired, market leader in their segment

The prospect is willing to be a public reference and support written testimonials or case studies

The prospect requires their use of the offering be held in confidence with no publicity

 

In defining the characteristic extremes, no value judgments should be made regarding how well they are applicable to the company’s offering.  After the characteristics are defined, the company can then decide how “close” they would like a prospect to be to a particular rail or extreme as listed in the table.  Next, as a prospect appears on the company’s radar, the prospect’s characteristics can also be identified as part of the qualification process. Obviously, large differences between the prospect’s characteristics and the company’s ideal prospect need to be carefully examined.  Once understood, specific engagement strategies can be developed, or it may be decided that the differences are too great to warrant pursuing the opportunity.

Finally, the exercise may reveal some fundamental flaws in the company’s ideal customer definition.  Those flaws may become obvious when some number of potential prospects fall well outside of the company’s ideal definition.  Without a definitive process as outlined above, it is easy to fall into the trap of disqualifying prospects with the rationalization that “they don’t understand” or “they are not ready” or some other blame-transferring “logic.”

Expect the definition of the ideal customer to change over time.  For example, a new company may define their ideal customer as one who resides in their local market.  At the other extreme, a company with a well-established national or international distribution organization may define their ideal customer as one that has a presence and need in multiple areas that they already cover.

The table shown above can be incorporated into a spreadsheet or word processor document to form a tool that can be used evaluate prospects. A tool modeled after this article has been developed and is available in the RDKC Tools collection included in Volume Eight.

Article Number : 5.030301   

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