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This post is the third in a series focused on Performance Engineering for startups. It focuses on the growth fundamentals of customer and value proposition targeting.
To endure and scale, every company must figure out what problem they distinctly solve and who is willing to pay for it. That knowledge requires a foundational understanding of the pains our prospects are dealing with, how the product or service resolves these pains and the ways in which prospects with these pains are similar. For entrepreneurs, particularly for those who are working to stabilize and scale a business in an unpredictable market, this knowledge is at the heart of product-market fit. And the teams that have clarity about how their products and business uniquely produce value are best positioned to paint the target' and prioritize their resources, especially if those resources are limited.
After seeing it play out over and over with scaling companies, one thing is for certain. The ones that crafted a succinct profile of their most valuable customers, figured out what was most important to that subset of customers, and aligned targeting and messaging to those prospects ended up with the highest sales efficiency and scale. In this third post in the Performance Engineering series, we examine the fundamentals of growth: customers, targeting, and value propositions.
While there's never a bad time to revisit your customer targeting strategy, the silver lining of a slow market is that it is a particularly great time to take on the exercise.
Especially if it has been a while since you have studied your customer base, we recommend putting time on the calendar to do it soon. Doing so will help to ensure that you're focusing your sales and marketing efforts and dollars on the highest-yield prospects. And in an environment that feels like the sand is moving under your feet, controlling what you can is not only a source of resilience, it's also a source of comfort.
Although each of the areas examined below has a set of robust methodologies and frameworks that can be used, you can get significant benefits from just a few hours of effort on each and a simplified approach. And, at the very least, you'll come away with a much better understanding of your customers that you can apply to prospecting efforts.
Step 1) Segment the customers you have by the qualities you want more of, so you can pinpoint the kind of customer you want to increase.
Start to segment your customer list. You can begin with the traditional approach - geography, company size, industry, use case, etc. Now go back through and start to look at which customers are your best. Consider why they have been so good for your business. Perhaps they pay the most, have the longest contracts, or utilize the product the most. (Overlap will happen. That's okay.)
Through this process, you should be able to identify some potential patterns. Is there some clustering of customers in a specific segment that pays the most? Is there a distinct use case where those customers utilize the product more than any other?
These are the prospects you want to target and should give you the first piece of the puzzle - part of the who. Next, you need to figure out the why. Why do those particular customers use your products or services? We often think we know the why but being even slightly off on messaging can be costly. Broad value statements like, "using our product saves you time" is not enough to capture their interest and motivate them to act. You need to truly understand how those time savings create value for that specific prospect, in their specific job, with their desired outcomes. Gaining this detailed understanding of exactly why customers pay you for a product or service is the only way you can create targeted messaging that will truly resonate. And the only way to truly understand what is important to those prospects is to talk to them, and to talk with the people who talk to them the most.
Start the conversations with your internal team. Salespeople talk to prospects and your customer support staff talks to your buyers every single day. They not only know what people are using the product or service to do, but they also know how they would like to use it. Talk to them about the customer types you have identified and start to understand if there is anything unique about what these customers are trying to solve.
Next, talk to the customers that represent the ideal profile. (This point may seem obvious, but it is not always done!) Ask customers why they do business with you, what they don't use you for, what would make the biggest impact for them, and other questions that enable you to create a profile and a plan to nurture relationships with lookalike audiences.
You will be amazed at what this exercise can uncover. Maybe customers at mid-size companies have unique needs that drive product use, but that smaller or larger companies don't experience. Perhaps there are compliance requirements in a market segment that your product or service supports that you had not previously recognized.
An added benefit of this exercise is that you may discover ways to retain more of these gold-star customers. And as you are likely aware, retaining a customer can be five times more cost-effective than having to win a new one. What's more, if you can increase customer retention by 5%, it's possible to increase profits, at a minimum, by 25%. If you're trying to maximize the effectiveness of your budget and resources, organic growth is like putting premium fuel in the gas tank you're working to fill.
Now that you have done the work of segmenting the customers you want more of and have a better understanding of why they buy, now it's time to build a comprehensive customer profile.
You have two levels to the profiling: the company and the actual (human) decision-maker and buyer. Each one needs to be profiled because both inform your targeting and messaging. As you're working on an outreach plan, the products, services, and value propositions need to feel unique and personalized. For the company, the customer profile might include details like:
For the buyer inside that target company type (your decision-maker), map the qualities shared by influencers and decision-makers. The customer profile might include details like:
Once you have the information, building the Ideal Client Profile (ICP) is fairly straightforward:
Given the results from deep diving into your segmentation to determine what customers you want more of, coupled with the outcome of your company and buyer profile, you should be able to develop a comprehensive ideal customer profile (ICP).
Your ICP is the perfect customer - someone who wants to get your messaging, who has a problem that your product uniquely solves, and who has the buying power and budget to buy it. This exercise should help you prioritize, especially because you have more than one ICP. (Do not try and take on more than two.) Your ICP should always be the largest part of your efforts. The rest of the priority customer list should be populated by your target buyers. They comprise a broader group but are still hyper-relevant and therefore worth your time and investment.
One thing to consider as you rank and prioritize your ICP and target buyers is where each one is in their journey when you find them (e.g., are they in a moment of challenge that you can alleviate or a moment of delight that you can optimize?) For your sales team, the timeliness of your outreach supports 'highest probability' prospecting. It meets these valuable prospects and customers with what they need to hear, understand, and be asked to do to get them to convert or keep you.
Again, this effort may require conversations. There is no substitute for hearing the customer's voice as you seek to satisfy their needs and work to make them life-long customers.
You know who your most valuable customers are. You have a sense of who the lookalike audiences are and where to find them. You've developed your ICPs and target buyers, and you know where and how to connect with them. Now it's time to use that information to map the value of your products and services into value propositions that feel personalized to your audiences.
Hopefully, you've done sufficient research to see beyond the value propositions that you and your team believe are true. If not, or if the information you've gained through the research and conversations thus far is not quite sufficient, asking three simple questions can give you enough information to build simple value propositions.
Depending on how many products and services you have in the market, this full exercise may show that you have ICPs and target buyers for each one. And for each of those audiences, you will likely have slightly different value propositions. While the process may feel somewhat arduous, it is a source of knowledge that ultimately will save you time and investment in marketing and sales. It also provides a baseline against which you can continue to measure the evolution of your customer needs as you scale.
As with the steps that you've done so far, conduct research before you consider this phase done. Test the value proposition messaging before rolling it out widely. Doing so will give you confidence that it will meet the customer where they are in their journey and propel them to take the next step or action.
If they have not been intimately part of this entire process, it's now time to put this work into the hands of your marketing and sales team members. They can provide feedback about the fluency and usefulness of the messaging. They'll be more invested in using the resource, more aware of the target audiences they are striving to engage, and more consistent in communications efforts.
As with any good strategy, this is not a 'set and forget' step. Continually align teams via regular (weekly or monthly) growth meetings to reassess and confirm how the value proposition messaging is performing. You may hear of new priorities. You may even uncover new areas of business and organic opportunity.
Even in a 'typical' market, only 10% of companies make it past the startup phase. In a challenging economic environment, it's estimated that only two in five startups are profitable. By knowing why your company, products, and services are valuable and the audiences that need and value you most, you are positioned to exist in that rarified air. All it takes is a conversation, listening, and a little rigor.