Support Documents

Ideal Client Profiles and Why They're Important

 21st Sep 2022

Ideal Client Profiles - Why are they important for your business?

The truth is that repeat customers spend 33% more than new ones, due in the main to their increased buying confidence.

"As much as 80% of your future profits could come from 20% of your current customer base" - The Gartner Group

We also find that the probability of closing a deal with an existing customer is typically 60-80% as opposed to 10-30% for new ones, meaning our return for the same pre-sales work is somewhere between two and eight times higher.

Once we accept that all customers are important but not equal, and that our resources are finite, then we have to decide how to identify the most important.

Allocating your precious (and finite) resources proportionately to the lifetime value of the customer is just common sense.

There are three pillars to understanding the value of your client base:

  • Ideal Client Profiles

  • Spend Potential

  • Relationships.

You may service several types of customers. Some businesses sell to OEM's, distributors, or end-users, for example; Each customer segment may need its own definitions of these pillars.

Allow us to introduce you to the ICP cube...

Each of your customers within your data-base exists in one of these points within the cube. 

The ability to visualise your client base is key to effective management.
Do you know where your growth will come from? And where the top 20% is?

Customer Cube

 

Ideal Client Profiles

This starts with having a very clear picture of the businesses you want to recruit as customers. Getting this right is critical to long-term profitability (a client base of right-fit clients is a joy for customers and suppliers, after all). Right-fit clients typically:

  • Are happier
  • Stay longer
  • Spend more
  • Help spread the word to other potential right-fit clients.

The opposite is true of customers we recruit hurriedly – perhaps in the short-term interests of hitting our sales targets, knowing they are a poor fit from the outset.

They can:

  • Be difficult to keep happy 
  • Require disproportionate effort to maintain
  • Be less loyal
  • Damage our reputation if unhappy

Retaining your best-fit clients will make your business a happier and more profitable place to be.

Your ICP should include factors such as industry, size, influence, situation, ambition, culture, values, and attitudes. You should have a scoring system for ICP which is published and understood by all customer-facing team members. 

Spend Potential

A customer with low spend potential may take every bit as much effort to recruit and maintain as a customer with high spend potential. Understanding how to evaluate this potential is key to recruiting the right customers and to allocating the right resources to manage those customers.

By deciding what a low, medium, and high spend for a customer looks like, a customer’s potential to spend can be categorised and regularly reviewed, based on insights from those closest to the customer.

Spend potential may change radically from year-to-year. Rapid growth, new initiatives, and acquisitions can positively impact the outlook, for example, whereas poor financial results, a change of leadership, or simply an exhausted spend (you’ve sold them everything they could possibly buy), may mean that, while the relationship remains excellent, the spend potential has reduced.

Relationship Factor & Net Promoter Scores

In managing and maintaining customer relationships, there has to be some scoring system applied to the relationship in order to understand how potential spend might translate into actual spend.

People change, relationships change, mistakes happen and competitors come and go. This is why understanding and evaluating our relationship from our customers’ perspective is critical.

The Net Promoter Score (NPS) survey is one such vehicle for identifying customer satisfaction.In his book The Ultimate Question, Fred Reichheld argues that the business with the happiest customers grows fastest in each sector – outperforming its nearest competitor by a factor of 2.3 times.

By asking our customers how likely they would be to recommend us as a supplier to a friend or colleague (on a score of 0-10), we identify a score which provides important quantitative insights about how our customers are feeling.

NPS Scoring works as follows:

0-6 = Detractors (Unhappy customers trapped in a bad relationship)
7-8 = Passive (Satisfied but unenthusiastic customers who can easily be wooed by the competition)
9-10 = Promoters (Loyal enthusiasts who keep buying from the company and urge their friends to do the same)

Your Net Promoter score is the percentage of promoters minus the percentage of detractors.

By adding a simple second question, “Why did you give us that score?” we gain additional, qualitative, actionable insight into the reasons why our customers are feeling happy or unhappy – telling us who needs extra attention (and why), as well as providing us with some excellent sales messages we can use to recruit new customers.

In managing and maintaining a customer base, these insights are invaluable. The scores are fluid and subject to change over time. Customer surveys – whether they are NPS or otherwise – are an important measurement tool. Some system must exist to measure customer satisfaction regularly if a business is serious about growth.

 

Have we piqued your interest in CRM strategy and using ICP profiles to improve your process?

All this information and more is within our FREE downloadable CRM Whitepaper!

Download the "7 Deadly Sins of CRM" Whitepaper