How to identify your ideal customers

This Week's Edition

• Introduction
• The Article - How to Identify Your Ideal Customer
• Tactic of the Week - STFU (aka the Power of Silence)

Introduction

In 1984 or thereabouts when I was working as a software support representative for Burroughs (later Unisys) I went on my first sales course. It was called "Selling for Support People" and it was actually pretty good (I've been on dozens since & this one stacked up well).

I always reckon if you take away - and use - one thing from a training course it hasn't been a complete waste of time. The one thing I remember from that course, and still use today in my business and personal lfe, is the power of silence.

So that's what my Tactic of the Week is about.

The article is, as I promised a couple of weeks ago before I got diverted, is about how to identify your ideal customer(s).

Here it is and if you're wondering where the picture was taken (which I'm sure you're not) it's Sydney's Strand Arcade. As usual it has little if anything to do with the article.

As always, if you find this useful please "like" it and (if you have time & the inclination) please share it so more people can see it. And I will answer all questions and comments, positive and negative.

How to Identify Your Ideal Customer

So a couple of weeks ago I said it's the height of stupidity to try to sell stuff to people who don't need what you sell.

It's like trying to teach an octopus to play the flute; it will never work, it upsets the octopus & you end up wet and out of breath.

Plus there's no need. If you want to teach someone to play the flute why not start with people who - I don't know - WANT to play the flute? Or teach octopi to predict the winner of the election.

Assuming you sell something that meets a business need your objective is to find people who have that need and show them how your way of solving their issue will give them what they want. It isn't brain science or rocket surgery (or whatever the expression is) - it's obvious.

Caveat - this article and indeed this entire newsletter is all about selling high value ($250k plus) products and services to senior executives in medium to large companies.

If you're going to do this you need a couple of things. The first is a profile of what your ideal customer looks like - that is their characteristics. Not surprisingly we call this...

Your Ideal Customer Profile (ICP)

Selling is quite hard work and can be stressful. It isn't as hard as digging ditches or working in ICU and it isn't as stressful as being an air traffic controller. But it isn't easy.

My philosophy is to make it as easy as possible. A well thought out ICP makes a massive difference. So what do we need to consider when developing an ICP?

• Location.

A while back I spoke to a sales director (it was a fancy title for someone covering the entire country himself) in the USA who was having problems getting meetings with prospects at the right level. I asked who he sold to and he said "any company with more than 500 employees" (it was a cross functional SaaS solution). I asked him what region he covered and he said the entire USA.

We agreed there were probably a lot more than 10,000 such companies in the USA.

I then asked him how many sales he needed to make quota - the answer was five - and how many he could actively target effectively at any one time. The answer, we agreed, was 50 to 100. So I said to him "Pick 50 to 100 companies in New York (where he lived), pick an industry or two where you have credibility and focus on them. As they drop off add more."

It worked.

It's much easier to sell to companies in the same town than it is to companies a thousand miles away. It's easier for you to meet them face to face - and most companies prefer to buy from a company that has a local presence.

• Size - revenue and/or number of employees and/or other stuff

Revenue

When I sold ERPs to publishers it cost a minimum of $250,000 to buy & implement our software (in 1994 dollars). That priced many smaller publishers out. We determined that unless a publisher had revenue over $10 million they probably couldn't afford us. So we targeted ones with revenue over $10 million.

(Occasionally a smaller one would approach us. We'd explain the costs up front - and why - and a couple of them decided they wanted to buy it from us anyway. They had ambitious owners. But we didn't waste time chasing the majority who would never spend that much).

So you don't want to sell to companies that are too small. Or too big. Some large companies won't deal with small companies unless they sell something unique they can't get from a bigger company.

When I worked for TMS (the publishing software company) Pearson Education used our software in Australia, NZ and Asia but they wouldn't consider us in Europe for two reasons; a) they thought we were too small (we had 50 people) and b) we were based in Australia (see location).

Once we were acquired by a larger Swedish company those objections disappeared and I ended up selling Pearson Education our ERP for all of Europe.

But it isn't just revenue you need to consider.

Employees

Some things - for example software - are sold by seat or per employee. Some very large companies in terms of revenue don't have many employees, certainly not ones who use software, for example (e.g. an automated coal mine).

If you charge per employee you want to target people who have a lot of employees.

Transactions

I have a client who sells AP (Accounts Payable) and AR (Accounts Receivable) automation software. They charge a small amount for every invoice or other document they process. So they need to target companies who have a lot of transactions to make it worth their while.

A miner turning over billions that digs up tons of iron ore and sells it all to one or two customers is highly unlikely to have a lot of AR invoices.

But they could have thousands of AP invoices.

• Industry

If you sell an industry-speficic solution (as per my publisher example) then obviously you target that industry. But "industry" is a bit of a loose term, as I explored in an earlier newsletter.

I also sold ERP software to consumer electronics distributors. We chose that niche because we had some software modules (rebates, spare parts) and functionality (kits, methods of placing orders on overseas factories) that were specific to consumer electronics distributors. We also had several big consumer electronics distributors as customers, so we had relevant references.

But there weren't than many in Australia of the right size. So we also looked at similar companies - ones that weren't actually consumers electronics distributors but that sold to the same customers or that had similar issues. For example, Makita was a hardware distributor but they bought our software because they had very similar issues to Sanyo, JVC & Pioneer.

Even if you sell something that isn't industry specific, such as Human Resources software, you may want to focus on some specific industries. Beacuse each industry can view cross-industry issues through a different lens.

For example, companies that have big fly-in fly-out workforces face very different HR issues to major consulting companies or government departments or schools. So the functional solution is the same but the emphasis and needs are very different.

Another reason to focus on specific industries (particularly ones where you already have customers) is that people tend to move from company to company in the same industry and this can help you when someone from a customer moves to a prospect.

On top of that, people like to get references and examples from other companies who are like them. A reference or referral from a company in the same industry and the same country carries much more weight than one from a different industry that's based overseas.

• Business issues

What business issues do you address? If a company doesn't have any of the particular issues you can help with why would they even talk to you?

In my example above, if you sell softweare to help a company with their Accounts Receivable and they don't have any substantial AR then don't bother.

• Existing customers

The best way to start looking at an ICP is to look at your existing customers. Obviously they bought from you for a reason. What was it? That's why it's obvious to start by looking at your existing customers.

Another is covered above. If you have a good relationship with your customers, chances are their people will know other people in the same industry and they can help with information, references and referrals.

• Competition

What are your competitors like in different industries and with regard to different business issues? This can make a difference - for example.

The client I mentioned above has two (actually more, but let's stick to two) related but different solutions. One covers Accounts Payable automation. The other covers Accounts Receivable (including Collections, and Cash Reconciliation) automation.

Pretty much every company has AP. But they have a lot of competitors in AP and many companies already have an existing AP automation solution.

On the other hand lot of companies don't have any substantial AR (especially B2C companies). BUT there is virtually no competition in that area. When my client finds someone with problems in AR, Collections and Cash Allocation they have a very good chance of winning the business.

So we have different ICPs and different strategies for companies with AP, companies with AR and companies with both.

ICP Summary

The more closely you can identify your Ideal Customer Profile the more likely you are to succeed. There are many other factors you can take into account but the ones above are a good start. Especially your existing customers.

BUT ........

To quote Deborah Conway, "It's Only the Beginning".

We don't target a profile. We don't call, email, message or otherwise try to communicate with a profile or even with a company. We talk to individuals who work for companies. So the big questions are:

1. How do we find companies that fit our ICP
2. Who do we target in those companies?
3. Why do we target them?
4. How do we target them?

These questions, and many more, will be covered in future episodes of.... Soap.

No, sorry, I mean in future newsletters. Stay tuned. Meanwhile...

Tactic of the Week - STFU

Many, if not most, people are intimidated by silence.

If nature abhors a vacuum, as I was taught in physics, then people abhor silence in a conversation. This is particularly an issue in sales.

If you ask a prospect a question and they don't answer quickly the natural inclination is to fill the silence. This lets them off the hook and often results in them not answering.

What's worse, we often listen with half an ear because we're thinking about what we're going to say next. So we hear a pause and we jump in prematurely. This a) annoys the prospect; b) means you can miss important information and c) makes you look a dork.

Conversely if a prospect asks us a question we feel obliged to answer quickly. We can get flustered and all of a sudden they're interrogating us and we're on the defensive.

How do we fix this? We need to become comfortable with silence.

When a prospect (or anyone else) is talking, give them time. If there's an "uncomfortable" silence don't jump in to fill it. Observe it. Say to yourself "Oh, there's a silence. I wonder how long it will last." This removes your natural instinct to blather on and nine times out of ten the other person will fill the void and continue.

You can kick this along and keep them talking (and remember in sales she who asks the questions controls the conversation) by grunting, saying "yes" or "and" or "because" and otherwise encouraging them to keep going.

If you're asked a question don't rush to answer. You can say "that's a great question" or "why do you ask that?" - anything to stop yourself from rushing in where wise men fear to tread.

But take your time. Slow down. There's no prize for being the quickest salesperson in the west. Many people - prospects included - take time to process what they want to say and they can hestitate while they're thinking. Let them.

Sometimes when I'm giving a keynote I'll say "let me ask you a question" then I'll pause. Once, when I was scared of public speaking I'd feel pressure to keep talking. Now I watch the audience. After four seconds they're waiting. After six seconds they're starting to think "has he lost the plot?" After ten seconds they're starting to squirm - embarrassed for me perhaps.

They I'll say "are you uncomfortable with silence?"

It gets the message across. Try it. Ask a question then just wait. And wait.