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30 April 2020

How to Create an Ideal Customer Profile to Increase Retention

by Ross Fulton Reading time: 5 mins

Recurring revenue models have undeniably changed the shape and strategy of sales pipelines within software companies. The prospects you allow your business to acquire significantly influence the recurring revenue unit economics you end up with, whether you subscribe to the double-funnel or the helix pipeline. This is why you need to create an ideal customer profile.

Defining and using an ideal customer profile to drive the qualification criteria for your sales opportunity will enable your SaaS sales pipeline stages to have a greater impact on your recurring revenue strategy.

This profile will also help you achieve increased win rates and larger initial average order/contract values. It will result in faster sales cycles, less monthly/annual recurring revenue pipeline burn and higher productivity from your Sales and Customer Success team members who are involved in the sales cycle.

When you create an ideal customer profile, it ultimately helps you acquire customers who will drive higher revenue retention and expansion rates for your business.

Create an ideal customer profile and an ideal buyer profile

Does your company have qualification criteria for sales opportunities that you proactively and consistently apply as part of your overall sales strategy? (That spreadsheet or collection of fields in your CRM that gets completed by your Sales teams sporadically at best does not qualify as a ‘yes’!) 

If you can honestly answer yes to the question above, now ask this question of your current sales qualification criteria:

Do you qualify prospects on their likelihood to buy or their likelihood to become a successful customer? Your answer should and can be ‘yes’ to both.

Benefits of creating an ideal buyer profile

An ideal buyer profile helps focus your sales pipelines. This profile should include your prospect’s company profile plus the buyer personas within said company. It should answer these three questions about your ideal buyer:

  1. What tangible or quantifiable data about a prospect indicates that the prospect is likely to prioritize the strategic goals that your solution helps achieve? This data could include vertical, age, business model, number of employees, etc.
  2. What tangible or quantifiable data about a prospect indicates that their potential budget and other commercial criteria are likely to align with the investment profile (cost, terms, etc.) of your solution? This data could include revenue, market cap, geography, public vs. private, other SaaS investments, etc.
  3. Who are the buyer personas that, if confirmed as supporters of your solution, would increase the likelihood of a sale? These personas could include commercial decision makers, technical decision makers and their respective influencer peers, reports and managers.

You’re more likely to achieve your booking targets for this quarter if you have a pipeline full of prospects who you’ve qualified as meeting the majority of your ideal buyer profile.

Hitting your booking targets is just half of the equation you need to complete in order to have a sustainable, growing and highly valued software company in today’s subscription economy. 

The other half of the equation requires you to retain and expand revenue from your existing customers, year after year. An ideal buyer profile is just one section of an overall ideal customer profile that your business must define and use to drive the qualification of your prospects. You can only complete the equation with both profiles in place.

Benefits of creating an ideal customer profile

When you create an ideal customer profile, you define a prospect who is a strong candidate to purchase your product and become a customer who you can retain and expand, year after year.

Your ideal customer profile should answer the following two questions in addition to the three listed earlier for an ideal buyer profile:

  1. What tangible or quantifiable data about a prospect indicates that they’ll be able to realize measurable value that helps them achieve their strategic goals by adopting your product? This data could include current processes, organizational structure, job definitions, incumbent solution, etc.
  2. Who are the user personas within a prospect’s company that, when confirmed as supporters of your solution, increase the likelihood of successful change happening in the prospect’s business as required to adopt your product? These personas could include executive sponsors, power users, external stakeholders (if your solution interacts with your customer’s customers, partners or other vendors) and technology/infosec stakeholders.

When you create an ideal customer profile, you must ask the questions that help you understand whether a prospect is likely to want to, and be able to, make the changes necessary to achieve the outcomes you’ll prescribe and help them with.

Qualifying prospects in this way ensures that your Sales and Customer Success teams have enough knowledge of each prospect to prescribe compelling value-based outcomes and present a clear adoption plan to the prospect that will close the sale.

How many prospects are in your Sales pipeline right now that don’t fit within your ideal customer profile? If you’re ready to narrow this number down, Valuize is here to help.

Ross Fulton

Prior to founding Valuize, Ross spent over 16 years growing software companies and their partners in go-to-market strategy, sales engineering and customer success leadership roles on both sides of the Atlantic. An Englishman by birth but not by nature…he’ll take an espresso over tea every time!