I was approached by two founders at an event the other day. They have difficulty developing their business. I started with my usual first question: “Who is your client?” This may seem basic, but success in the basics equals success everywhere else.

The founders had theories and ideas but didn’t really know who their customers were. This isn’t surprising, as most of the teams I talk to have misidentified their customers. They make common mistakes while developing their ideal customer profile (ICP).

Make educated guesses

First and terribly common, they suppose. They throw spaghetti against the wall to see what sticks. Most businesses make educated guesses about their customers. They’ll use a variety of tactics to find them: website analytics, buyer persona workshops, lookalike modeling, A/B testing, and even “gut feeling.”

When they develop an ideal customer persona, they do so without the most essential element to driving large-scale growth in organizations: profitability. None of these methods take customer profitability into account. Even using A/B testing to create an ICP doesn’t guarantee that the people who resonate with your message are the 20% of your customers who generate 80% of your profits.

The danger here is that without considering profitability, companies risk wasting limited resources by targeting customers who don’t drive growth or building a model that is impossible to scale. This is unsustainable. But profitability is not the only major problem. Businesses also assume that not all of their customers change as the business grows.

Dig Deeper: How to develop a winning ideal B2B customer profile

Understanding customer types

Many marketing teams assume that early adopters, widespread adopters, and laggards are all the same. But that’s never the case. The first users are not just the heavy users who were the first to board the boat. Early adopters are loud and patient. They fought hard to try to find a solution that would alleviate the pain and are willing to put up with a lot of crap because what you are doing contributes to helping them progress.

Widespread followers are more hesitant. They waited to pull the trigger because they didn’t want to be guinea pigs. They want a reliable solution that works consistently. And if they don’t, they’ll lose interest and never tell you why.

Laggards are the skeptics who resist change. These are the ones who still have the DVD/VCR combo. They’ve seen other people get burned, so they’re in no rush to change unless it’s absolutely necessary. They will only consider your solution when it meets industry standards, otherwise they will have no other choice.

What do the numbers say? The importance of profitability in customer segmentation

These two mistakes – guessing and assuming that customers stay the same over time – lead to poor customer targeting, missed opportunities and wasted resources. To build scalable business models, companies must evolve with their customers. Otherwise, marketers will struggle to attract the right people who will say “yes.”

This raises a crucial question: how can marketers ensure they are targeting the right customers? The key lies in understanding customer profitability.

The first step to correctly identifying your post-revenue ICP is to evaluate existing customer base against profitability. The goal is to understand the 20% of your customers who generate 80% of your profits. To get a holistic view of customer value, you can use:

• Activity-based costing, a management accounting tool to more accurately determine customer profitability.
• KPIs such as LTV, CAC and repeat purchase rate.

It’s easy for businesses to feel like they’ve developed a strong, cost-effective, and data-backed PCI. To further improve KPI, marketing teams must move away from the traditional definition of the customer and toward a more precise framework: the customer ecosystem. – to create more precise and effective targeting.

The customer ecosystem: rethinking the roles of customers in the modern business

Traditionally, the customer is the one who selects, pays for and uses your solution. However, as business models become more complex, the traditional definition of customer becomes less and less applicable. The likelihood that the person who says “yes” to your offer will be the same person who pays for it and then uses it is increasingly rare.

By ignoring this fact, we have created a confusing mess for our marketing teams. The person who says “yes” to hiring you may not be the one paying you and may never touch the solution. It is much more interesting to divide the traditional definition of the customer into three distinct roles: decision-makers, payers and users.

• Decision makers choose to hire you.
• Payers write the check.
• Users use your solution to create a specific result.

While hybrid roles are possible (decision maker/user, decision maker/payer, etc.), customers rarely wear all three hats simultaneously. Once marketing teams are clear about who the decision makers are and focus on integrating them into the sales funnel, confusion disappears and it’s easier to get results.

Dig Deeper: Why Buyer Groups Matter in B2B Demand Generation and How to Target Them

Identify decision makers: look for pivot points in the business model

How do marketers identify a decision maker? They’re looking for the hinge or pivot point of the relationship or the person who actually chooses whether your company is hired or your product is purchased.

The “customer ecosystem” becomes clearer when looking at real-world examples.

Medical practice

I worked in a highly specialized medical practice a few years ago. Their income stabilized at seven figures and they realized that if things didn’t change, they would have to close shop. They thought their client was “the patient,” but they were wrong.

The patient was just the user. They couldn’t afford to work with us and they certainly weren’t paying for the expensive services we were providing them. The referring physician was the decision maker. They chose whether we saw a patient over our competitor. Insurers were payers.

Once we clarified the customer ecosystem, we focused our sales and marketing efforts on referring physicians, leading to 40% year-over-year growth for three years.

Why getting back to basics is important

John Wooden, considered the greatest college basketball coach of all time, was known for his “back to basics” approach. He meticulously explained everything, even how to put on shoes and socks. For what? Improperly worn shoes cause blisters which affect performance. For Wooden, mastering the fundamentals was the key to success anywhere else.

In marketing, knowing your true customer is as fundamental as getting your shoes right. It may seem trivial until you’re tied in the final two minutes of the national championship and your star player is sidelined with blisters. That’s what poor targeting does: it hurts a marketing team’s ability to perform when it really matters and slows growth.

Identifying your true target customer and focusing on the decision maker makes it easier to close sales. It’s like putting the ball in the hands of your star player at the most critical moment of the game. It’s child’s play.

Dig Deeper: How to Make Your “Ideal Customer Profile” More Ideal