How to Identify Your Best Target Customer

Identifying your target customer is a critical element of any marketing plan. Understanding your target market and getting a really clear picture of your prospective customer helps you properly define and market your product or service as effectively as possible.

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Maybe you already have a well-defined software or service product... Or perhaps you are just in the process of re-defining or launching your portfolio. Either way you need to be sure that you really understand the specific profile of your best target customer for each product in your suite.

The current changes in software business models make this even more challenging. Vendors are considering multi-level product strategies with licensed software sold direct, and a lower-end Software-as-a-Service (SaaS) offering, smaller licensed components or addons, and perhaps some customization or software consulting thrown into the mix also... all to broaden the customer base and drive recurring revenue. At the same time, ensuring sales are not cannibalized with channel conflict.

How can you be sure each product is positioned, priced, marketed and sold correctly? First and foremost, you must develop a detailed target customer profile for each of your products. Do not assume that you have one profile for all your products! They may well be quite different.

How do you develop that target customer profile?

Start by looking at your current customer base. Which have been your best, most profitable customers? You must measure "best" by the business value they have brought you - direct profits, or indirect profits through referrals to other customers. Sure, some customers are great to work with, never have complaints or issues.... and only buy when they get deep discounts, and never upgrade! Always use the profit measure when figuring out the type of customer you should be going after.

When you go through your current customers, and identify the most profitable ones, you will probably find some common characteristics that stand out. Those characteristics make up the profile of your ideal customer - that is who your value proposition should speak to, your marketing should be directed to, and your sales should focus on.

But what if you are re-directing your business model, or branching out into a new space such as Software-as-a-Service. In that case, you don't necessarily have existing SaaS customers to base your profile analysis on. You could take one of two approaches to put together a preliminary profile - but make sure you test and tweak it when you've had the product on the market for a while and have real customers to base the analysis on.

First, take a look at your current customer base again (this time include both those that have been buying your software product, as well as your sales prospects that did not turn into customers). Now consider which of those customers or prospects would have been interested in the SaaS offering you are planning - interested enough to become a customer. Perhaps they told you as much during the sales cycle, or perhaps you have knowledge based on their requirements that SaaS would have been a great fit for them. Go through the same exercise as above, but this time with these "best prospect" candidates. Approach a few of those customers and see if you can interview them to gauge prospective interest in this new product offering and help to clarify your profile analysis. Identify those common characteristics to put together a profile for the best prospect for this product offering.

A second approach may be needed if the SaaS (or other new business model) offering you are considering is just so far from your current product and customer base that you just don't have any "real world" customer examples. Then you are going to need to make some more assumptions in order to put together your best customer profile. You should go through the same types of exercise, but now it will need to be a little more hypothetical. See if you can identify some potential prospects that you could actually interview (informational interview at this stage, not sales pitch) to gather more details on the characteristics of your ideal target customer.

Once you have the target customer profile or profiles defined, you can use these common characteristics to put together a lead qualification checklist to qualify your new customer leads as they come in. This is an excellent way to focus your marketing and sales efforts right from the beginning on those customers that best fit your customer profile.

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