6 steps to create your Target Customer Profile and Why it’s so important

Some CEOs or Sales directors find it hard to identify their Target Customer Profile. Most have a simple customer profile based on company size, industry, and revenue, some just take lead after lead hoping that the next one will be a short close and a good deal.

To be successful in Sales, and in Business, you need a clear definition of your ideal customer. Knowing who to target and why makes everyone’s job easier. You can’t afford your company to waste time on leads that are not a good fit.

Your Target Customer Profile will drive your sales, it helps your Marketing and your business overall. It ultimately makes your sales more productive.

Following these 6 steps, you will be able to create your ideal profile, quickly and easily.

What is a Target Customer Profile and why you need it?

Let’s start with the definition of a Target Customer Profile (target customer/segmentation).

A target customer profile is the portrayal or attributes of a company whose needs are met by your product/service and will give value to your enterprise.

Companies that can be described as part of the profile are defined by two aspects:

First: their needs are met by your product or service, which means that your solution will answer a real need for them, not a superficial one. Your solution creates a true, tangible, measurable value for them.

Second: Target customers should create value for your company. By putting money in your bank account, become ambassadors your product/service, and become partners in business. The idea is that these dream clients will drive your business in a good direction and make your life easier in the future.

This a simple definition, for a more in-depth analysis, Woodpecker produced an excellent article on the subject.

Why is it important for you to know your Target Customer Profile?

Imagine your company as a Ship, your Target Customer Profile is your heading. Without it, you don’t know which direction you should take and you end up lost at sea.

Just as all the parts of your vessel from the mainsail to the rudder need to be aligned, if you want your company to move forward and truly perform you need a common goal, a shared direction for all your company’s departments.

A Target Profile as a perfect guide.

Sales departments gain clarity and learn how to separate valuable opportunities from the noise. Your sales reps become more efficient, reaching out to the right people with the right pitch. The lead generation routine of your sales rep is more accurate.

Your Marketing department is less distracted by the “noise” made by unqualified leads and starts focusing on your dream clients. Watch this video of Claire Hunsaker on how to use your Target Customer Profiles to identify the best inbound leads from your website.

Having a clear picture of your ideal client gives you marketing team focus when building campaigns.

Your Website and Your Blog are more optimized and generate more qualified traffic.

These are just a few examples of the benefits: for your company, your sales department, your marketing department to have an identified target customer profile.

To identify your target customer profile, you can follow this 6 step method.

6 steps to identify your Target Customer Profile (TCP)

Step 1: Group your revenue

In the first step, the goal is to separate your customers in 3 revenue streams: Large / Medium / Small.

This separation is used by many B2B companies because it clarifies your revenue streams. It’s not uncommon to call these different groups A, B, C customers.

You can use different metrics to separate your customers depending on your product or service.

  • If you are a SaaS company you can use the number of licenses per customer.
  • If you are a Consulting company you can use the annual revenue per client.

There is no magic rule to create this segmentation.

Many B2B companies draw the line between Large, Medium, and Small customers on their own because each business is unique.

Example: We are a Saas company selling software per seat with 400 paying customers.

We choose to divide our customers into 3 categories based upon the number of licenses/seats they have:

  • 1 – 5: Small customers
  • 6 – 20: Medium customers
  • 21+    : Large customers

Step 2: Identify your most important revenue stream

Once you have grouped your customers into three separate groups: Small/ Medium/ Large then you need to identify which one is your biggest revenue stream.

Picking revenue as the main criteria to identify your biggest revenue stream is based upon the assumption that revenue is the clearest sign to see if someone is satisfied with your product/service.

Is it the medium, the small or the large?

The group formed by your largest customers is not necessarily your biggest revenue stream.

In the same, idea even if you have 10 times more customers in the small customer group than in the large one, you may earn twice the amount of revenue from your large customers than your small.

If the 3 groups contribute the same amount of revenue in your bank account, just pick the one you want to focus on in the future (profit, fastest deals, etc.) or redefine your definition of Small/Large/medium until you have a slice significantly bigger than the other one.

Example: If I do the revenue pie of the previous SaaS company you can end up with a pie like this :

  • 60%     of the revenue is created by Large Customers
  • 25%     of the revenue is created by Medium Customers
  • 15%     of the revenue is created by Small Customers

Step 3: Within your most important revenue stream identify your best customers.

You now have a fair understanding of which group of clients is the most important for you, which group of clients brings you the most value. That is a clear indication of where you will find your ideal client attributes.

But not all your customers inside this group are relevant to you, you only want the more relevant customers to serve as a template for your Target Customer Profile.

To do so you need to select specific customers depending on what you want to achieve. Your goals may change over the years and the different phases your company is going through. Here is an article about 5 types of metrics you can track if you are a Saas company

Early Stage: If you are an early-stage company and you want to pursue high growth, you may choose the customers that have been the quickest to close.

Driving profits: If you have been growing for 5 years but never reached profitability and you want to become profitable you will choose the ones from which you make the highest margin.

Driving Loyalty: If you are a new brand in the market and want to increase your customer loyalty you should target your deals with the longest average life-time.

Once you have picked your criteria, just to select your 10, 20, 50 best customers depending on the size of your portfolio.

A good rule to follow is the Pareto rule which states that 20% of your customers make 80% of your turnover.

The objective is to have enough customers to see patterns but not so many that it becomes confusing.

Step 4: Analyze your best customers to identify your Target Company Profile

In B2B sales, identify companies as potential customers must happen before knowing the individuals to engage. Identifying your Target Company Profile needs to be completed before clarifying the ideal buyer in that business.

If you are working in B2C or dealing only with self-employed customers, skip this section and go directly to Step 5: Identify your Target Buyer Profile.

Your objective at this stage is to analyze these customers and find patterns, common traits among them. For each one of your best customers, you need to answer these questions.

You will see patterns begin to emerge once you have completed this for each of your best customers.

For each section, pick the most common traits to build your Target Company Profile.
Example of a fictitious Target Company Profile :

Name of the Company

                          Target Company Profile

Industry type (IT, Bank, Food, Telco)

IT

Type of customers (B2B or B2C)

B2B

Number of employees

20 to 50

Country

United Kingdom

Annual Turnover

5 to 10 million €

Market position (leader, challenger, new-entrant)

Challenger, among the top 10 / top 20 of their market

Growth (Recession, Stagnant, Moderate, Hyper-growth)

High Growth (20% to 50% YoY)

Step 5: Analyze the actual buyers within your best customers

Working in B2B, specifically medium and large companies, knowing which company to target is half the job. You still need to identify the actual buyer.

The actual buyer is the person who will take the decision to buy your product and not necessarily be the one that signs the agreement. Read this post on Reddit about how to identify and reach the right person to call within a company.

To build a complete Target Customer Profile, you need a Target Buyer Profile. This is the most common traits, including company position, demographics, psychographics, and behaviour amongst your best buyers.

For each of your best customers, you need to identify the actual buyers, the person who took the decision, and fill this table.

Actual Buyers

                                         Target Buyer Profile                                                        

Role

 

Job title

 

Distance from the CEO (N-1, N-2)

 

Sex

 

Age

 

Education

 

Personality (Outgoing, Introverted)

 

Behaviour (Action-oriented, Cautious) / DISC profile

 

Drivers (Power, Money, Fear, Efficiency etc.)

 
Other relevant things for you (experience in your field, experience from your product type, etc.)  

The common traits of your best buyers emerge. Your Target Buyer Profile.

Note:  Many in B2B doing a TCP miss out on the buyer’s personal behaviour and psychographics but these are vital to know how to communicate to your buyers, who are likely to buy or not, who can you expect fast deals from, profitable deals from, etc. For example, you can talk the same way with a dominant person and someone who avoid conflicts.

Step 6: Create your Target Customer Profile

In this final section, you will be able to wrap it up and create your final TCP by merging your Ideal Company Profile and your Ideal Buyer Profile and remove irrelevant data.

A final Target Customer profile might look like that :

Target Customer Profile

Industry type (IT, Bank, Food, Telco)

IT

Type of customers (B2B or B2C)

B2B

Number of employee

20 to 50

Country

France

Annual Turnover

5 to 10 million €

Market position (leader, challenger, new-entrant)

Challenger, among the top 10/top 20 of their market

Growth (Recession, Stagnant, Moderate, Hyper-growth)

High Growth (20% to 50% YoY)

Role

In charge of the maintenance of the  SI infrastructure

Job title

DevOps

Distance from the CEO (N-1, N-2)

N-2

Sex

Male

Age

25 to 45

Education

Bachelor in Information System

Personality (Outgoing, Introverted)

Outgoing

Behaviour (Action-oriented, Cautious)

Cautious

DiSC Profile

Blue

Drivers (Efficiency, Performance)

Efficiency

Now that you have your profile, you become more effective in all areas of the business:

  • Sales
  • Marketing
  • Customer success
  • Customer support
  • Product development

You can even pursue the segmentation and do the exact opposite choices to create your Least Ideal Profile. It is important to know who to avoid.

Segmentation in three parts: Do or Die, Don’t Touch, and Neutral.

  • Do or Die: This is your Target Customer Profile, focus your energy on them
  • Don’t-Touch: Don’t spend time on them, if they want the product it’s cool if they don’t, you lose nothing.
  • Neutral:  Businesses you engage but should do not prioritise

One piece of advice: do your Do or Dies!

Recommendation: We recommend this exercise includes the whole management group, all functions of the company are impacted by having the right customers.

I hope that you see the benefits for you and your company in identifying and targeting your Ideal Customer Profile.

You just need to gather your management group and go through these 6 steps method. It is time for you to have a clear heading for your vessel, the journey is long and full of obstacles.

You have seen that it is not difficult, and should be updated every 6 months (if you are a young company) / 12 – 24 months (if you are a mature business) to keep it in sync with the market and the evolution of your service/product.

For leaders who want to drive their whole company in the same direction, their Target Customer Profile is the key to success.

 

Andreas LAlangas Blog image

 

 

Andreas Lalangas

CEO & Founder Salesbox