Regardless your business idea is only in your mind or the product is ready to be sold you can and you should look for your product’s ideal customer. That will be the one to start working with. You need to find out with whom you should spend time and money the most as you need to be able to start selling fast, so you can find those customers easy, so it wouldn’t be too hard to sell to them, so that they would be willing to pay and at the end they would be satisfied with your solution.
Ideal customer – it’s the customer to whom your product would solve their problem THE BEST way possible in that specific situation in combination with your possibilities at that moment.
That customer segment feels and understands the pain THE MOST. They will value your product’s/solution’s added value the most (why are they buying it and what it does for them). So they will be the most likely to pay the most. Even though your solution might be not the cheapest nor the highest quality, if it does fix the problem the best way, customers will appreciate that. This customer segment isn’t the only one you can work with. Look at this as if you have only 24h and 1000EUR, this customer is the one you should spend most of your resources on because the return on investment should be the highest. As well as the ideal customer tends to be the one who attracts others because he is very satisfied.
The difference between existing and new business idea is that I would recommend for those who don’t have the exact product on their minds yet to start with problem and ideal customer definition and only then define the product after you have found the biggest pain and the customer segment who does feel the pain the most and would appreciate the solution the most. Very often people do start with the product and then try to find a customer for that product. There might be a situation that that pain isn’t so painful and/or the customer group who would need a solution is too small or they are solving it well enough already. All these small things make it easier or harder to build a business. It would be great if you could find a segment and problem which is on their TOP3 daily problem list. That would make it much easier for you but bare in mind that then probably you will have a lot of competition.
Example: A good example is a water. Of course, it depends on a situation but if we think in extreme, an ideal customer for a water would be the one who can’t get it anywhere else and if he won’t get it, he will die. At that point, your product ‘water’ would be an awesome solution for him and he would value it very high. This wouldn’t be the situation where to focus on packaging, pricing, minerals, PH level etc. Your regular water would be a TOP1 problem/pain at that specific moment and, for example, in a desert where there aren’t many options where to buy a water. In this situation the waters added value would be “H20 reachable everywhere” and the focus would be on being able to deliver/buy everywhere.
A completely different ideal customer would be, for example, in Latvia, where there are very many alternatives for your “H20 reachable everywhere”. Here are a few options where to focus depending on with which customers you would like to work with and in which area do you feel more powerful and confident. You can go the low-cost direction (which isn’t the best option to try to be competitive in if you haven’t got a very good reason why you can provide a cheaper product. Because there always can show up someone even cheaper. Even if it’s just a short-term campaign from a competitor which might get you bankrupt.) You can do a research in what other situations people do use water and try focusing on a specific audience in a specific situation. Then adjust all the most important features and properties to be perfect for that audience and situation, like, size and form of the bottle, design, taste, cork or additives and minerals. All these small things differentiate you from all other products and there are different segments which do evaluate all these things differently.
Example: There is a mineral water Neptunas which is positioned for a specific customer segment – new parents. They highlight the feature that “This water is baby-friendly”. Even though there are many other waters which are baby-friendly as well, only this water is highlighting this feature as a priority.
So there is no point to try to sell ‘another’ regular water for everyone before if you haven’t found out which will be the segment to focus on and what are the features to highlight for them.
The number of customers may be very little at the beginning because of the narrow niche and detailed segmentation but that’s alright. The most important thing at the very beginning is to be able to find the most appropriate customer segment who will value your product the most so it would be much easier to reach them out, explain and sell.
Example: If I would provide cooking courses then probably my ideal customer TOP1 wouldn’t be any person who might like to cook. That would be a much more detailed description of that specific segment. For example (just guessing – not a real use case): “A person who does love to cook, he takes care of his health (working out), he is very busy person in working days and likes to invite his friends over to his place in weekends and stand out with delicious dishes, as their friends are also cooking. Let’s say it a man.” This just an example of how the segment description could look like. Where it’s described how does his everyday life looks like, what is important to that segment and what situation could be the one he might need help with. So the sales slogan could include information I know so that person can reflect that to himself. For example: “Surprise guests with sophisticated and healthy home-cooked meals!”
The ideal customer might change depending on product development status, company’s size and resources. So you do evaluate your ideal customer once in a while because the situation might (probably will and should) change and your opportunities are changing with it.
Example: If we take the same water as an example. Maybe, selling a water would be much better where there is a very hot place and very little competitors (somewhere close a desert) BUT at this point, I am based in Latvia and I haven’t got much money at this point so probably I should start selling locally first. (Customer segment which is closer to where I am is more ideal for today). I could rethink this after 1-2 years when I will have more resources available.
Defining and focusing on your ideal customer DOESN’T mean limiting yourself. It gives you a benefit of being able to focus. It gives you a chance to prioritize your customer segment list in order where the TOP1 is the most ideal customer for today. So you can optimize your resource spendings if you have 24h a day and for example 1000EUR. It will be cheaper to reach your focus group than trying to target everyone. They should be more welcoming and more ready to buy and you will start earning money earlier.
After you have defined the TOP1 customer segment you have to adjust all the product features, communication to that group. So they understand the best the message and value you want to deliver.
*https://www.razer.com
Example: If we take headphones as an example. You figure out that you want to focus on gamers. Then, probably, instead of saying that it has Dolby digital high-quality sound for good music, you could use something regarding what will improve their experience playing games. For example: “Immerse yourself in the game with complete wireless freedom featuring the Razer ManO’War wireless PC gaming headset with gaming grade lag-free 2.4 GHz wireless technology. Hear every detail, every position of your enemy when you have high-performance 50 mm Neodymium magnet drivers and immersive 7.1 surround sound.”
Even though it might be a very similar product to other 1000 different products (regarding the quality and features) – highlighting the value it will provide to your specific customer segment makes them special.
Customer segment ranking
There is a customer development expert Lincoln Murphy’s who has created an ideal customer segment ranking model. This is a mix of Lincoln Murphy’s and Guntis Coders’s version of ICP (Ideal Customer Profile) Framework, where you can create an ideal customer segment list and priority their order.
On the left side, you write down in a row your potential customer segments and their sub-segments/situations if you have. Then evaluate each of the parameters with grade 1-10 (1 is bad and 10 is good) for each segment. After you have rated each segment sum up the numbers and see which of the segments has the highest value. This is how you can order your segments in priority order and don’t worry if you have selected the wrong segment (math shows) and say “No” to low rating segments in cases you have to choose to serve or not to serve a customer.
Let’s take a look and explain each of those parameters.
1. Problem/Need – Readiness – How good this segment understands/feels the pain? Is there any specific situation they feel it the most? Are they aware of the problem? Have they had that problem already? How often do they have this problem? Is it critical for them?
Example: If I would have 2 segments: A ‘regular’ person and active person who does work out. Probably the one who is working out will understand the need of the water much better and you would rate them with higher grade as they would be more likely and more frequently buy a water from you. Or if you would like to sell a nerve-suppressing medicine. It would be easier to sell to someone who already has had a stressful situation very often and they are aware of the importance of being chilled a person who hasn’t had a stressful situation yet.
2. Communication / Reaching out / Selling – How easy and cheap will be to reach out that specific customer segment? Is it easy to find them? Will you be able to get them to interviews at the beginning? Are they using media where it’s easy to put ads? How long time it will take to sell them? How many meetings you will need? Are they willing to spend money?
Example: If I do have a customer segment which is social network active versus a person who doesn’t consume internet and TV, radio as much. Probably I would prefer the segment who are using the internet more frequently as I will be able to deliver my messages to them easier.
3. Money – does the client have the money. Is he or she the one who makes the decision and pays? Do they have a budget for your type of the products/services?
Example: there is the chance that the client segment is completely OK – they understand the problem in which they often get into, BUT they are not wealthy clients. There is a category which I would evaluate lower, for example, students/athletes, they do sports, they understand the meaning of water, but they do not have money. Instead, there are so-called “working athletes” which would be more wealth so evaluated higher.
4. Practical obstacles – are there any kind of obstacles which would make it very difficult or impossible for the client to buy/use your product/service? Although the problem is clear, they are reachable, they do have money, but still, there is something that interferes to buy/use the product/service.
Example: it can be something very practical or technical. It can be the location if that is how you divide your segments, or the problem is that you sell your goods on the internet – but a specific customer segment just does not like to buy anything on the internet – they do not like to use a credit card. In those cases, the evaluation of that audience rating will drop. Or clients who buy water only in the gym, because they do not like to take the bottle of water with them when they go to the gym. Then this group (at least in that moment) will be evaluated lower because you do not cooperate with the gym (yet), but it may change over time, for example in a year.
5. Alternatives – During the interviews, you can (should/must) find out what they are doing to solve the problem and to meet their needs. How good are they in this? How satisfied are they with the existing solution?
Example: to evaluate alternative of this moment and if it satisfies the existing group. If people drink the tap water and it completely satisfies its needs, then this group should be evaluated with lower grade, because it will be much harder to sell them your water compared to those who order their special water on the internet from the USA and wait for the delivery at least 7 days. Both of them are solving the problem with the water, but it is done completely different. I need to be sure which one of these will value more my offer.
6. Extra sales/ potential – how big is the chance that you will be able to sell them later more. What is their potential?
Example: If private athlete buys a water only for himself, then athlete/trainer is more likely to buy your water for him and the whole gym, to sell it there.
When all sections are evaluated, the last step needs to be done – to sum up all the grades, that is how in an objective way you can prioritize all segments. At the top will be the segment with the highest grade (points) and will be the ideal customer at the moment. The ideal customer can change – it depends on the possibilities and situation at the exact moment. At the moment when the product will become more functional, production volume and distribution channels will increase, and also other things that can improve one or another segment will change, then it will be the moment when reevaluation needs to be done. It is possible that, for example, segment No.1 which now is losing on “practical obstacles” at that moment will be the best segment and can be evaluated as a TOP1 ideal customer.
Also in interviews with the potential customers should be discussed how the problem/ need occurred, what was the situation, what was done to get out of this situation. The same water can be needed in different situations. For athletes one of the situations can be that they drink water during workouts when the greatest emphasis is on that water is needed for the workout, because it is one of the most important elements in energy distribution processes in your body; another situation is when it is hot weather. In both of these situations water is needed but the motivation probably will be different.
In the conclusion, we found out that the ideal customer is the one whom you can help today in the exact moment the most. He knows the problem and understands it very well, it is easy to find him, reach out and talk to him, he does not have any problem to buy and consume your product/service, he has the money and at this moment he does not solve existing problem as needed.
What is next? You should go and speak to the people so you could understand if your potential ideal customers are as good as you have thought, what makes one or another group better than others, also – what is that ideal group of people – where do they live and what do they do? What are the keywords they understand the problem and your product with? What will they value the most?