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Who are our customers?

Module 1: Five questions every CEO must answer

Peter Ducker is widely regarded as the one of management’s greatest thinkers. His first question to CEOs is “Who are you?”. In other words, what’s your company’s mission, values, and vision? His second question is “Who are your customers?”.

One way to answer that question is to describe your current customers. But since your customers should be related to your mission, values and vision, take the time to compare your current customer to your ideal customer.

Take the time to compare your current customer to your ideal customer.

Understand your current customers

To identify your ideal customers, you need to understand the role your current customers play in your business. These steps can help you uncover which customers you’re most reliant on for revenue and profit:

  1. In a spreadsheet, list all the customers you have in one column, the revenue they generate in a second column, and the profit from each in a third column.
  2. Sort the spreadsheet from most revenue to least revenue.
  3. Now sort that list from the customers who produce the most profit to the least profit.

You should begin to see a pattern – a small number of companies generate most of your revenue, and a small number of companies generate most of your profitability.

Look more closely at each of the customers on that short list. Are there some who are strategic to your growth? Or to whom you are strategic to their growth? Of those, how many do you really like working with? Now that you have identified your best customers (who generate revenue, are profitable, are strategically important and with who you have a good working relationship), develop a profile of those customers. Think about how to be more proactive with your marketing and sales activities so you can find more customers like them.

In short, being able to answer who your customers are and knowing which ones are key to your company’s success will enable you to save a lot of money, hire fewer people, close more sales, make more money, and grow more quickly.

Finding them may seem like a needle in a haystack, but once you have determined who your ideal customer is, it’s much easier to find them than you think.

A small number of companies generate most of your revenue, and a small number of companies generate most of your profitability

Profiling your ideal customer

What are the titles, characteristics, and differentiators of these ideal customers? Are they in the same positions in similar industries, or in different industries but dealing with the same problem that your product solves?

Once you know who they are (title, industry, shared problem), you can begin to figure out where to find them. By joining clubs, attending conferences, getting involved in sports, and joining industry associations where you know your ideal customers will be, you’ll be able to get to know them – as well as how to market to them and who is willing to pay for your product or service.

Three perspectives: customers, influencers and channels

It’s important to think about who your customers are from three perspectives (customers, influencers and channels) so you can identify and profile your company’s primary and secondary customers.

The customer is the person who makes the decision to buy products or services.

The influencers are the people who influences the purchase decision. There may be a number of people influencing the decision, and you may need to spend as much time selling to them as you do the customer or the ultimate decision maker. There are two types of influencers:

  1. Internal — e.g. database manager who really wants his boss to purchase your software. Or alternatively, a project engineer who dealt with you in another company and doesn’t ever want to work with you again.
  2. External – e.g. a golfing buddy who really likes your product. Or a lawyer who advises against signing the purchase order agreement because of the wording of the failure to pay clause.

The channels are pipes or mechanisms to get to your customers. Some CEOs think that the distributor, wholesaler or retailer is the customer. While it’s true – you need to sell to the channel in order to get your products in front of your ideal customer – it’s your choice whether you think of them as a customer, or a channel to reach your end-customers.

Once you’ve identified who your customers are, it’s time to focus on this sweet spot

Primary and secondary customers

It’s useful to distinguish between your primary and secondary customers and to review the list from time to time to determine whether any of the secondary customers might become primary ones. Once you’ve identified who your customers are, it’s time to focus on this sweet spot. Develop a marketing and sales strategy to target individuals who fit your ideal customer profile and slowly weed out the rest. Chances are they are costing you money and you’ll be far more profitable with fewer of the right kinds of customers.

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