Every eight minutes a small business dies. Back in 2010 this added up to nearly 700,000 businesses, and it will mean one more by the time you’re done reading this article.
You’ve seen all the studies done on why small businesses fail and as you’d imaging, every area of expertise has a stake in this number; not enough marketing, not enough sales and certainly not enough research. And let’s not forget, not enough capital, not enough experience and so on.
I’d like to start a series around a critical success factor for small business success — identifying your ideal customer. When you consider this one activity, you’ll notice that it actually impacts several of the failing points most small businesses fail;
- Not enough customers — if this sounds like you, consider that you’re trying to sell to EVERYONE and when you try to sell to everyone — nobody sees themselves as your customer, so they don’t buy. FOCUS on an ideal customer and you’ll see an immediate shift in the flow of profitable customers.
- Not enough marketing – If you’re trying to sell to everyone, then you will need lots of different marketing programs to address all of their needs. This will LOOK like not enough marketing, when in fact — it’s too much marketing. Focus on an ideal customer. This will naturally focus your message and your marketing.
- Not enough money – Again, if you’re trying to sell to a broad group of people, then your offer will have to be priced at the lowest level for all of them to buy. Focusing on a single target customer will allow you to feature specific attributes of your product or service and charge more for the value that they bring.
How to find that one customer type to focus on
Focusing on just one kind of customer seems counterintuitive. You think that choosing one kind of customer will limit the number of customers you can sell to, but what happens instead is that by choosing one customer type, you actually stand out just for that customer type and more of them come out of the woodwork.
Of course, if you’ve never tried to do this, it will feel uncomfortable and challenging, but I don’t want you to worry — because this is truly the physics of marketing at work. Let me show you a few simple ways to identify your ideal customer.
All you will need for this exercise is some index cards or sticky notes and a list of your customers.
- Go down your customer list and put each customer’s name on a sticky note or index card – one per card.
- Now, as you are going through the deck, look at each customer name, place them in a pile. Notice I didn’t tell you the names of the piles — YOU decide. It looks like this; “Customer A” goes into this pile. “Customer B” are they like “Customer A” or different in some significant way? If they are similar, then they go into the same pile, if they are different – they go to a different pile. I the end you will end up with lots of different piles.
- Go through and combine the piles so that you have about 7 of them. You can have less, but try not to have more.
- Now, notice the piles that you created? The groupings that you’ve intuitively chosen may surprise you. You might find that you have a pile with companies from a specific industry, or you might have created piles based on how these customers use your product, you might even have created piles based on how these customers interact with you. None of these is more right than the other, but the groupings you’ve chosen are a start to segmenting your customers and choosing your ideal.
Use this exercise as a starting point and then have some fun with it. See how many different ways that you can group your customers. If you are struggling with creating groups and have access to the data, try grouping them by profitability — this will show you which customers value you the most and work best with your system. Or, try grouping them into three piles based on which you like best. So you would have the “Awesome”, “Meh”, and “Pain in the Neck” customers.
The biggest problem small business owners have is not distinguishing from one customer to the next — don’t be afraid to focus — it can mean the difference between life and death to your business.