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Weekly 3: Making customers successful

Summary: Identify your best (and worst) customers. Uncover what they really care about. Create a win-

Idea Journal Weekly 3

June 24 · Issue #40 · View online
We combine 3 ideas to help you think differently and be more creative.

Summary: Identify your best (and worst) customers. Uncover what they really care about. Create a win-win scenario. (~7 min read)

#1. Create an "Ideal Customer Profile" for your business.
Ideal Customer Chart
Ideal Customer Chart
Stephen Heiman and Robert Miller write in their book The New Strategic Selling that trying to sell to everyone indiscriminately is bound to create bad orders and bad relationships.
They recommend using an Ideal Customer Profile against which to measure your actual customers – so that you can focus on the good ones, get rid of the bad ones, and anticipate problems with those who fall in the middle.
You can create an Ideal Customer Profile for your business by making a chart like the one above, and following the below 5 steps:
1. List your best customers
You should determine the criteria, but a key guideline is to focus on those past and current customers that have given you the maximum number of wins with the minimum amount of trouble.
2. List your worst customers
Again, you should set the criteria. Focus on those customer relationships in which you feel that either you or the customer, or both, have lost – even though the deal closed, and regardless of the amount of money involved.
3. What are the common characteristics of your best customers? 
Some examples might include: a commitment to quality control; their business ethics and integrity; or an innovative and progressive management team. Heiman and Miller suggest that you avoid general characteristics like “needs my product” or “has money to buy” – the characteristics you list here should be unique to your best customers.
4. What are the common characteristics of your worst customers?
Here are some examples that Heiman and Miller list from their own experience: being inflexible on price; being secretive and unwilling to cooperate; an authoritarian management system; or they want you to lose so they can win.
5. Create your Ideal Customer Profile
Follow these steps:
  • First, look at the list of characteristics of your best customers, and ask yourself: Which of these are most significant?
  • Next, look at the characteristics of your worst customers: identify the most significant ones, and then ask yourself: What are the opposite characteristics? 
  • Finally, take this combined list, and select the top 5 characteristics that are most important to you – together, these will define your ideal customer. 
Now that you have a profile of your ideal customer, you can look at each of your current customers and ask: How well does this particular customer match with each of the top 5 characteristics?
#2. Why are your customers "hiring" you?
Author and Harvard Business School professor Clayton Christensen writes in his book Competing Against Luck that most companies don’t know how to innovate because they’re asking the wrong question.
Don’t ask: How can I get people to buy my product?
Instead, Christensen recommends that you ask: What job are my customers hiring this product to do?
His “Jobs to Be Done” theory of innovation says that customers hire products or services to perform particular jobs. Some of those jobs might be small (e.g., pass the time while waiting in line), while others are more significant (e.g., find a more fulfilling career).  
Christensen tells the story of how he used the theory while advising McDonald’s. The company was looking for a way to increase its milkshake sales, and despite having tons of data on its customers and the market, it was struggling to do so.
Christensen and his colleagues spent most of their time asking McDonald’s customers what jobs they were hiring the milkshakes to do, and in the process they had two insights:
  1. Many people bought milkshakes to have for breakfast during their early-morning commute. They hired the milkshake instead of a bagel or a doughnut because it lasted longer, was easier to handle, and was more enjoyable during their otherwise “long and boring” drive.
  2. Another large set of customers hired milkshakes during the afternoon “to feel like a fun parent.” They saw a milkshake as a convenient way to reward their children – one that was both cheaper than an expensive toy, and less time-consuming than going to a movie.
Christensen and his team helped McDonald’s uncover more opportunities to increase sales by focusing on customers’ specific needs and circumstances, and the jobs they were hiring the milkshakes to do:
  • For the commuters, the company could make the milkshakes thicker; possibly add fruit; or even have pre-mixed milkshakes prepared to help the commuters save time in the morning.
  • For the parents, the company could create smaller cup sizes, so that the parents wouldn’t feel as guilty; or they could pair the milkshake with a small toy.
#3. Making your customers better off means having better customers.
Innovation expert Michael Schrage writes in the Harvard Business Review that the ability to calculate what customers might be worth is alluring and powerful for managers and marketers alike.
But as he points out, the calculation customer lifetime value (CLV), which brings quantitative rigor to assessing customer relationships, is limited because it doesn’t take into account what value means from the customer’s perspective.
Delighting customers and meeting their needs are important, but they’re not enough for a lifetime.
For Schrage, innovation must also be seen as an investment in the health and wealth of customers: “By investing in and enabling new customer capabilities, firms create new ways for customers to increase their lifetime value.”
Schrage recommends using a simple prompt to help you think through scenarios that will be mutually beneficial to both you and your customers: Our customers become more valuable when …
Here are some examples: 
Our customers become more valuable when … 
  • they reduce our costs
  • they make more informed choices about which products or services are best for them
  • we know more about their particular interests
  • they give us good ideas
  • they evangelize for us 
  • they try out our new products
  • it takes them less time and effort to find the right product or service
Note: We wrote about a related idea by Michael Schrage, asking who you want your customers to become, in a previous issue called Tools for innovating.
Quote of the Week
“No one is eager for a core dump, but if you can remember my trouser size, or suggest a movie that all my friends loved, or sort out my insurance needs, then you are making me smarter. The rule is simple: Whoever has the smartest customers wins.”
- Author and technology expert Kevin Kelly in his book New Rules for the New Economy
Idea Journal
Idea Journal
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