What exactly is an “Ideal customer”?
Before we get into how to find your ideal customer and why doing so will make you more successful in your business venture, we need to define an ideal customer. Think of it this way: if you’re starting a running shoe sales business, who will you most likely be able to sell a pair of shoes to with the least friction? By friction, I mean anything that will slow the process down or cause you to need to put more time and effort into the deal to close it. In business, friction costs money, plain and simple. Higher levels of friction in the sales process mean higher costs per acquisition, or put another way; the more friction to sell a customer on your product, the higher percentage of the income you will earn off that sale goes back out in expenses. These expenses include things like wages for the employee making the sale, wasted advertising “impressions” because they need to see your ads more before coming in the door, wasted “clicks” on ad campaigns because they are harder to convert once they follow the ad to your landing page etc.
Long story short, the more customers you can target your advertising toward that will be easily convinced to purchase your product or service repeatedly, the better. To continue with our running shoe sales model, the first step is pretty simple; they need to have feet or at least one foot. But are you selling to everyone with feet? Let’s assume these are high-performance shoes made for long-distance running. This is going to start narrowing down your ideal customer list. You know you are looking for people with feet that enjoy long-distance running. The shoes cost $300 a pair. This is where things get fun; it’s time to throw some statistics in the mix to see precisely which people with feet that enjoy long-distance running are most likely to purchase your shoes.
Hate math? We all do, don’t worry; money math is more fun!
When people hear the word “statistic,” they automatically think of overwhelming amounts of raw data, charts and graphs. While those all have their place in the business world, what we are talking about today is more of the meat and potatoes of statistics in relation to small businesses. There are all kinds of “stats” to draw from when measuring the viability of a business, so what you really need to ask yourself is, “What are the make-or-break variables I need to be aware of?”
In relation to figuring out who your ideal customer is, there are 3 main stats you need to concern yourself with:
- What percentage of each gender buys my product or service?
- How much household income do the people that buy my product or service most often tend to make?
- Are there any other specific factors that drive the sales of your product in a specific demographic (for example, runners or most likely to buy running shoes over people that enjoy swimming)
I could go into more detail on what stats can help determine your ideal customer, but these three will give you a good starting point. You can find market research on your industry all over the internet. Make sure to check multiple sources. The best places to start are universities with publicly accessible research papers and government websites like Statistics Canada or, if you’re in the United States, USA.gov/statistics.
How do I determine how many of my ideal customers are up for grabs?
Simply put, how many potential ideal customers are available in your proposed marketplace? Now if you’re running an online business, selling online products, the answer is practically limitless. For brick-and-mortar businesses, this has to be the first question you ask yourself before signing a lease or purchase agreement. It’s okay to look for pricing and scope out some spaces if you need to for your business plan, but DO NOT commit to anything until you are 100% positive you have the available customer base to support your endeavour.
Now that you know the outline for your ideal customers, you can dig into how many of those types of people live within your service area. For our running shoe example, census data from one of the above sources will quickly tell you how many men and women in your service areas earn a household income within your parameters. From there, if your research gave you insight into the age ranges that are most likely to be competitive long runners, you can narrow your search even more. Now, this is not to say that there will not be outliers, but what we are looking for is the largest identifiable group that uses your product or service so they can be targeted with your marketing.
By taking the population figures and dividing them by the number of businesses providing the same or similar services to yours, you can start to narrow in on how many “potential customers'' you can try to get on board right off the bat. Stats 1 and 3 come into play in designing your marketing campaigns. Facebooking, for example, lets you get very specific in your targeting; you can specifically run ads to men and women between the ages of 25 and 45 interested in long-distance running. Suppose your research showed that 70% of women vs men were likely to purchase new running shoes. In that case, you can run two different ad sets and put a higher percentage of your marketing budget toward targeting women you are more likely to convert into a sale.
This can also be useful in your traditional marketing and community outreach efforts. We know more women are likely to convert to paying customers than men, so we will put effort and money into getting out product in front of that target audience. In this case, maybe we will start a local women’s running group and put a billboard up en route to a popular coffee shop, yoga studio, hair salon etc. We want our product in front of our target audiences' eyes as many places as possible to stay top of mind when they start looking for their next pair of shoes. Find a podcast that talks about long-distance running and see if they are looking for sponsors. If you’re not in front of their eyes, you want to be in their ears, preferably both.
Let's summarize what we've learned:
- You need to identify your target audience first based on market research
- Once you know your target audience, census data can tell you how many potential customers live within your service area
- Add in factors like interests and sales percentage by sex to further tailor your marketing efforts to your Ideal customer.
- Make more money with less of it going toward advertising costs.
I hope this was helpful! If you have any questions or want to find out more about determining your ideal customer, make sure to follow us on our social media accounts.
If you’re considering starting a business or want to grow your business, reach out any time for a free 1-on-1 consultation.
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