The Power of Customer Profiles

Most small businesses focus on revenue. They’ll take any revenue they can get. But not all revenue is the same. Here are some kinds of revenue:

• Revenue that never pays back the cost of acquisition
• Revenue that is mildly profitable and creates cash flow
• Revenue that is massively profitable and fuels reinvestment for growth

Most businesses focus on the first kind of revenue. They lead with discounts, they coddle bad customers, and they have a month-to-month perspective.

So check this out: let’s look at a finacial advisor or insurance agency business and compare two customer profiles that you would expect to see.

Profile 1: Ideal Customer Profile (“ICP”)

• 3-4 cars
• A house
• A rental property, a cabin, an RV with toys, or maybe a small business
• A 401K
• Life insurance
• Somewhat money savvy
• Opportunity to consolidate or improve overall risk and retirement plan
• Customer Lifetime Value = $25,000 in commissions over 20 years.

Profile 2: Minimum Coverage Customer

• Single auto policy with minimum coverage
• Renter policy
• Customer Lifetime Value = $100 in commissions over 1 year.

Ok, then you need 250 Minimum Coverage Customers to equal 1 “ICP”.

(And that’s before we subtract Customer Acquisition Cost!)

So where do you spend your effort? Moreover, where should you spend your effort?

Optimize your business around your profiles.

Step 1 → Figure out your customer profiles.

Break your customer base down into a few profiles–let’s say 5. A great place to start is the size of annual commissions and the number of years of retention.

Step 2 → Define the problems that each customer profile is trying to solve.

Get really detailed. Review notes from conversations. Spend some time talking to them. You need to be fluent in what matters to them and their future well-being.

Step 3 → Design repeatable solutions that address each profile’s main challenges.

Think like a semi-custom home builder. Your solutions (bundles of complementary products, education, and service) can be customizable, but they help you succinctly educate and empower each customer profile in the most relevant ways possible. And you can reuse them, which means you can be relevant every time.

Solutions are better than products because they provide more strategic value. The whole is greater than the sum of its parts, and your care and expertise are what make it all fit. Plus solutions are harder to imitate and harder to shop.

Step 4 → Perfect the conversation with each profile.

Make sure customers easily see how relevant your solutions are, feel your care and credibility, and trust you to help them solve their important problems.

Step 5 → Build your core strategy around helping customers graduate from one profile to the next.

To maximize Customer Lifetime Value, you have to stay relevant. You've got to retain customers long enough to help them take the next steps. This means engaging often enough that you don't miss an opportunity to serve them or help them upgrade their life plans.

Of course you don't want to push or manipulate customers into purchases that they don't need. But your customers will evolve, and their needs for managing risk and retirement will evolve too. Someone has to be there to help them make good choices.

Step 6 → Become the category owner for your top profiles, i.e. make them your niche.

Make sure your ICP always refer their peers to you. Be where they are. Rub shoulders with them. Network. Contribute. Know what they don't know. Become an influencer. Build a reputation.

Make sure your business can handle specialization.

As you're segmenging your customer base, you'll need corresponding segmentation and specialization within your business as well. (Competing on price for Minimum Coverage Customers and having strategy conversations with ICPs are two very different functions.) But as you start to maximize the value of your customer profile segmentation you’ll see amazing things start to happen.

You worked hard and spent your treasure to acquire a customer. Are you really going to let the long-term value of that relationship go to a competitor?

Almost everyone in your industry is doing the same grind: working harder to try to get a little more growth. But you can scale way beyond them if you start thinking about how to maximize profits by segmenting and specializing.

Hey friend, if this article gave you something to think about, consider subscribing to my newsletter:?Matt Wagner's Growth Insights. Every week or so I'll share something that will help you break out of the status quo and reimagine how you grow your business.

About Matt Wagner:?I'm a veteran of the tech industry who found his happy place helping leaders grow their organizations. We focus on culture, talent, strategy, and profit. I'm available for coaching and speaking engagements. Shoot me a DM and let's chat.

? 2022 Matt Wagner

#sales #segmentation #profit