14 July 2020

Potential Customer vs Ideal Customer

The criteria to find potential customers within a market and the reasons why you need to dig deeper to define your ideal customer.

I've spent the past week writing the beginning of my upcoming course called "drive growth with positioning & strategic messaging" (working title!), and the first section is all about the Ideal Customer Profile.

It starts with finding potential customers

The first step to create the Ideal Customer Profile is to find a target audience with a problem. Then you have to narrow it down to find the ideal customers.

But if you start with a very niche target audience, it means your potential customers are already a very small number.

When choosing a market, there has to be some minimum bar for:

1/ The total number of potential customers.

2/ How easy it is to reach them.

3/ The amount of demand they have for what you are going to or have created.

4/ Their willingness (and ability) to pay.

Source: Justin Jackson's article titled The Myth of the Niche Market

Find a market with a competitive analysis

Looking at competitors can give a quick answer to these points, even though it will need to be complemented with customer research.

  • Total potential customers: find the numbers of customers your competitors have. Press releases often brag about that.

  • Reach: see what social media, ad channels, communities, and other channels your competitors placed on.

  • Demand: review sites can tell you how frustrating competitors can be.

  • Ability to pay: if there are competitors priced similarly to you, they probably can pay.

Potential customers ≠ Ideal customers

After finding a market, you are left with potential customers. Some of them you must avoid because they are too needy, too expensive, and they will quickly churn.

Selling to the right person is more important than all the sales methods, copywriting techniques, and negotiation tactics in the world. Because the wrong person doesn't have the money. Or the wrong person doesn't care. The wrong person won't be persuaded by anything.

Source: "80/20 Sales & Marketing" by Perry Marshall

Before completing the ICP, more questions need to be answered.

  • Is it efficient to acquire them? If your competitor is spending more than they earn (like some VC-backed startups), you have no chance to be profitable.

  • Can you upsell them? If your potential customers are able to pay but only a small amount of money, it might cause some issues, especially in small niches.

  • Do they usually recommend solutions they use? You can hang around communities and groups to see if the ideal customer shares things or not.

  • Are they the right fit? There are 6 types of fits: technical, functional, resource, competence, experience, and cultural fits.

You won't be able to answer all those questions without talking to potential customers. The last question is particularly tough because if you are wrong in your analysis of just one of those fits, you will have a tremendous problem down the line.

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I write weekly marketing & growth playbooks. Get the processes I use with my clients to identify bottlenecks, deflate churn rates, and optimize conversion.