Strategy

Free step-by-step guide to find the ideal customers for your SaaS business

Am I marketing my product to the right audience?

That is the most impactful question you can ask yourself as you chase growth for your SaaS product. The more precise your targeted audience is, the faster your business will grow.

This process. The process of finding the right customers (or customers) gets easier as you have transactional data and product usage analysis to work with, but in the early days of your SaaS startup, it is much more difficult since you are pretty much shooting in the dark.

You could target a particular audience type, and find out much later that you were off on your audience targeting by a fair bit. Or you could ignore audience targeting altogether, resulting in a watered down impact from your marketing efforts. The struggle on identifying what you need to do is quite real, specially when you are lacking crucial data.

But, early stage startups need early sales - wherever it may come from. So, often, startups and founders resort to casting a wide net to target a broad market. The process, however, is inefficient, and results in them spending a lot of time, money and bandwidth on acquiring customers who add little value to the business in the long term. Worse still, these customers could lead these startups down a completely different direction with respect to their product roadmap. All bad options.

So what can you do to find the target audience you should be gunning for? This is where developing an ideal customer profile comes in handy.

What is an ideal customer profile? Is it different from buyer persona?

Buyer persona is a term we are all too familiar with. Hubspot presents a descriptive note on what buyer persona means:

A buyer persona is a detailed description of someone who represents your target audience. This is not a real customer, but a fictional person who embodies the characteristics of your best potential customers. You’ll give this customer persona a name, demographic details, interests, and behavioral traits.

customer profile 1

Your ideal customer profile is much more specific. Ideal is the crucial aspect of it. While a buyer persona helps you identify who could possibly be interested in buying your product, your ideal customer profile is targeted on a very specific segment of your customers. The golden goose! Customers who will help you grow your business the fastest.

There are four important traits your ideal customer has:

  1. he spends more on your business each month than an average customer
  2. he sticks around for longer, increasing the lifetime value of the customer to your business
  3. his product usage experience and behavior is more immersive
  4. he doesn’t clog up your support and tech bandwidth

The fourth point may feel not as crucial as the rest, specially the first two, but it is extremely critical. In the early days of your startup you are always fighting an uphill battle. You have low resources, limited bandwidth, and way too much to do on your plate. So every bit of bandwidth that is occupied in catering to individual customers, specially if they are not the right customers, ends up hurting the business a lot.

The product usage experience is important because it is an indicator of how much value the customer is getting out of your product. The higher the perceived value of your product is to the customer, the more he would use it, the longer he would stick with it. More revenue, higher LTV.

What is the primary challenge in identifying the ideal customer profile, and how can you address that challenge?

Data. Or the lack thereof.

Every single one of the traits we just discussed needs you to have customers, and data about the customers. That analysis just can’t happen in vacuum.

So what do you do?

You start intentionally by casting a wide net, but feeding every single customer through the data analysis filter that helps you identify your ideal customers. And as soon as you see trends emerging, you start executing on strategies to find more ideal customers as your data currently portrays them as.

Your ideal customer profile may change (and in all probability, it will) as you gain more customers. So this analysis is something that needs to be ongoing, recurring exercise, with you correcting course in your targeting and execution as and when required.

What will the exercise to identify your ideal customers look like?

1/ Segmenting your database and grouping customers based on common traits they possess

It doesn’t matter whether you have a hundred customers or a hundred thousand, sift through your database of existing customers to identify ones who possess as many of the traits we talked about earlier.

The intent is to find common identifiers and intersections between customers that fit this profile. Are they all using your product for the same/similar usecase? Is one plan more popular than the rest? What inclusion makes that plan popular? Is there a common geography your ideal customers are from? Industry? Functional role?

You are not looking to dive too deep into your customer profile here. The idea is to find broad commonalities that can be used to apply to an even wider base of potential customers.

One thing you need to always keep in mind is that the identifying traits of your ideal customer profile (high MRR, longer lifetime, higher LTV, engaged product usage) are non-negotiable. Only after you have used these identifiers to thin out the herd should you try finding the broad commonalities.

2/ Talk to your ideal customers

You have a list of your ideal customers now. Pick up the phone and speak to them. Do not. I repeat, do not consider surveys to be the same as a phone call - specially in this process. You would be surprised how much extra insights you can gain when you are speaking to your customers just trying to understand how they use your product and why. No matter your apprehensions, get over them and start conducting interviews with these customers.

The deeper the conversations go, the more value you will get out of this exercise.

One thing you should never do though is trying to lead the conversations. Let the customers drive the conversation. Just go with the flow. And fight the impulse to try to educate the customer on how to best use the product. If the customer is having issue with a particular aspect of the product, make a note of it, and figure out if you can fix it in a way that’s better, easier, simpler, and above all, more intuitive.

Ideally, you should interview a few customers from three segments - the most valuable ones, the ones adding medium-high value, the ones adding the least value. Do it in a 50-30-20 split. For every 5 most valuable customers you talk to, talk to 3 medium value customers, and so on. Or you can go reverse and follow a 20-30-50 split. It is a good idea to throw in a few interviewees from the pile of customers who chose never to upgrade after their trial expired, as well as customers who have churned out.

What you are looking for here is to gather as much insight as possible into:

  • how are they using your product
  • why are they using your product
  • before they started using your product, what were they using to do what they are using your product for
  • what are the challenges they are facing when getting their job done
  • what could have been improved
  • what did they love the most
  • what did they hate

Personally, I stay away from questions like how big is the team, or the company, what their role is within the organisation, what is their marketing spend etc. I see little value in those questions, and they often result in the important trends that would have emerged otherwise getting all muddied up.

Think of a simple example. If a business has $1,000 of monthly marketing spend budgeted for softwares, you may think of them as a non-ideal customer, but if you are absolutely delighting them with the value you are adding in solving their primary challenge, almost always you will find businesses will be able to go beyond their planned expenditure. For them, getting an increase in marketing spend is an easy trade-off vs losing out on the value they are getting out of this product.

3/ Compile the interview, highlight important aspects of each, and identify emerging trends

We know who we have interviewed, we know what we interviewed them for. It is time to identify items that:

  • kept on coming up again and again
  • had (or can have) the most impact for the customer
  • delight the customers the most

etc.

These are what will set the stage for everything going forward. The list of features you would work on, the improvements you will make, the support docs you would create, the marketing copy you would use.

For example, if I find out that a good portion of my customers download the traffic data from their Benne Analytics dashboard every week and then send it to different stakeholders, that is a good indication that it needs to be made simpler. At this stage, I would either make it a part of the core product, or provide a simple Zapier integration that could automate this process for them helping them as well as future customers who would inevitably be following this behavior themselves.

Your customer interviews, if conducted well, would be full of such insights. So take the time needed to do this part of the exercise well, and with an unbiased mindset. Let the data drive you wherever it may.

4/ Incorporate your learnings into your marketing initiatives everywhere

Now that you know what matters to your ideal customers the most, and how they are using the product, you can create better landing pages, ad creatives, blog posts. Everything.

And it will all be in terms and phrases your customers would be able to instantly relate to. The result? Better engagement with your outreach, and higher conversions.

Wrappin’ Up

Want to take it a notch up?

Use these customers to speak on your behalf.

Treat your ideal customers like investors and send them detailed monthly reports on how your business is progressing. How you are improving the product to be more valuable for them. Include the pain-points they highlighted in this emails and detail out your progress in solving them. If they think they are with a business that prioritizes their product usage experience and value they get out of it, they will not only stick by your side longer, they will also be vocal proponents of your product and your brand. And nothing brings by more customers as existing customers raving about your business.

Oh. And no matter what you do, be honest, empathetic, compassionate and respectful to your customers when you are doing this whole exercise. They are helping you improve your product, and your broader business. Respect the time they are putting into it. Don’t be this guy:

That’s it for today, see you tomorrow.

Cheers,

Abhishek

Thoughts and feedback? Talk to me.

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