By Laurier Mandin
Every product has them. Those low-hanging fruit who are interested, eager to buy, and generally low-maintenance. Your ideal, right-fit customers.
They’re at the heart of your product’s Pareto Principle. The idea is that 80% of a benefit comes from only 20% of contributors: for example 80% of your profits will probably come from 20% of all customers.
The Pareto Principle at Work
Most business owners—especially with service based companies—will tell you the Pareto Principle can be clearly seen in their sales stats. If you’re in business, you’ve probably experienced it too.
What’s even more fascinating: if all things are equal and you market a product in a purely conventional, non-selective way, about 80 percent of sales would come to you via 20 percent of your marketing budget and effort. There is a law of diminishing returns in everything we do, and nowhere more than in product marketing. And as I’ve seen many times, the inverse is often true when it comes to problems. 80% of your significant, profit-eating problems are likely rooted to only 20% of all customers. On a graph it’s like a pair of bell curves running in opposite directions.
Bad customers don’t merely harm your bottom line, but they drive out your good customers and make your staff miserable. They habitually write negative reviews, always want a bargain and are never satisfied for long.
I haven’t seen a good explanation of why this dynamic is so, but I believe it’s a matrix of human behavioural characteristics, logistics, timing, and overall fit with the product. Certain buyer types are horribly mis-aligned with any given product, others are so-so fits, and only a handful are ideally suited to it. That last group will be naturally predisposed to a positive experience. As you venture more and more deeply into the less ideal buyers, they become increasingly resistant to buy, have a harder time adopting, and encounter bigger issues in using the product.
Getting from 80/20 to 90/10
In launching any new product, we should strive to push our targeting into a laser focus on ideal-fit customers—and beyond. If 80/20 is the natural curve (and the beginning of significant dropoff), imagine we focus on the top ten percent, and put everything we’ve got into targeting, nurturing and servicing those ideal-fit customers exceptionally well? And then, what happens if we take steps to deliberately disqualify and eliminate the bottom ten percent—the worst-fit customers who begrudgingly buy and would almost certainly be your biggest source of problems? We get your product’s 90/10 rule.
Is this cherry-picking? Absolutely. And there’s nothing wrong with it. There is no harm in focusing all your energy on the best-fit customers, and leaving the problem children alone. That’s a philosophy adopted by businesses like Airbnb and Uber. They don’t want ungracious operators or troublemaker patrons—so they rule them out by policy. Later on in your product’s life cycle, when you’ve saturated the market for ideal buyers, the others will still be available—if you want them.
Wrong-Fit Customers are Plain Bad
Bad customers don’t merely harm your bottom line, but they drive out your good customers and make your support staff miserable. They habitually write negative reviews, always want a bargain and are never satisfied for long. You end up spending the majority of time servicing the buyers who least appreciate it—meanwhile right-fit prospects are neglected and quietly trickle away. For an established brand, identifying your top 10 percent of customers can be quite easy. It’s usually a matter of studying your metrics. But in the early days of launching a new product (when targeting precisely can be the most important), finding that sweet spot can be tricky. It takes a blend of research, strategy and creative thinking, and when resources are scarce and the stakes are high, it can be some of the most important work we do. At Graphos we’ve broken it down in a strategic framework we call the PowerAudience Focus Strategy™. The whole thing takes hours of planning and substantial research, but here is the essence of it:
Identifying Ideal Customers
Your ideal customers will usually be the ones who need your product most and are ready to buy with minimal contemplation. It’s what they’ve been looking for, directly solves a problem and they quickly see it as the right fit. It does exactly the job this customer needs. Since your product is designed to do a specific job, finding those ideal customers involves understanding, envisioning and defining the buyer types most readily associated with that job. Specialized, vertically oriented products are easiest: it’s much easier to pinpoint an ideal buyer of a specialized industrial tool than the ideal buyer of a soft drink most people on earth would enjoy. If your buyer is typically found in a specific vertical (industry category), there may be even more precise sub-categories to target within the vertical.
Begin Close to Home
Logistics are important for physical products, so most pilot or test market launches that involve shipping should begin close to home. Unless you always drop-ship, ideal buyers are usually situated in the same country as your fulfillment center or warehouse, in places to which shipping and logistics are easiest and most cost-effective. As your ideal customers, the product suits these people’s need exceptionally well, with a shallower learning curve and smoother on-boarding than other buyers would experience. There are also fewer issues with culture and language. All of this automatically translates to easier transactions and support, less misuse, higher motivation to achieve a successful outcome, and greater overall satisfaction (read: positive online reviews), as well as fewer costly returns. Recognizing every customer as a real human being—not a statistic in your web analytics—is critical to targeting ideal buyers and eliminating the misfits. Every one of your customers is a living, thinking, experiencing individual. That means you should craft in-depth personas around the optimum ones, including not only where they live and their job function, but what they cherish, barriers they face and enough other elements that shape them into real people you can clearly visualize and refer to by name. Each will still be unique, yet having realistic human personas allows you to reference them internally in crafting campaigns, and speak to their Five Ws and one H: who they are, what they will do with the product, where they live, when they need the product most, why your product is a fit, and how it will accomplish what they’re hoping to achieve.
Maximize High Lifetime Value Customers
For many products, specific personas will be power users who will buy the product again and again–and again. For these special customers, the fit is absolutely perfect and they can’t get enough of what you’re selling. They are your customers with the highest lifetime value, and because each one drives you closer to your 90/10 goal, you need to know what they look like. And in many cases, you can empower personas to identify themselves. In your lead generation, you can have prospects who submit a form self-identify by persona—including negative ones for that bottom ten percent—allowing your marketing automation (such as email nurturing or dynamic web page content) to deliver custom messaging to each one. Your brand messaging should be skewed toward attracting and nurturing the highest-value personas. It’s possible to create campaigns that target not only geographically, by industry sector and by age, but place the crosshairs on specific overlapping interests. Likewise, retargeting can show follow-up ads only to people who visit multiple pages, specific pages, or scroll beyond a specified point on a page, to focus budget on the most interested prospects. Finding and leveraging your product’s 90/10 rule takes more effort and more skill than conventional marketing, for sure. And boy, is it worth it.
