Who is Your Customer?
Founders are often tempted to capture as much value (or revenue) as possible from different types of customers. To do this, they often wastefully spend their energies and company resources on capturing multiple types/avatars of customers and therefore lose sight of the company’s core value proposition and focus.
At Kae Capital, I’ve seen maximum value and growth generated when founders have a laser sharp focus on one customer avatar. These founders then go ahead to build every aspect of the company around that one customer avatar (be it marketing, branding, value proposition, any hooks of engagement etc.)
This is my take on what you could do:
Defining core customer avatar: Go deep in defining the customer avatar – age, gender, ethnicity, behavioural traits and habits etc. The idea is to build all aspects of the company around the avatar and what appeals best to that customer
Firing your customer: Anyone who does not fit the above profile is not an area of focus. Fire the customer!
To help you build further on this, at Kae we came up with a framework. I think it’s a great exercise to work as a team and come up with answers to these 8 key questions.
Defining core customer avatar:
Q1. Hypothesis – Who is your core target customer?
Be as detailed as possible in defining your core target customer. In certain B2C cases this would be a “user” which is different from the “customer” e.g. social networks / audio platforms where the users are part of the network / consumers of content
Q2. What is your company’s core value proposition for your customers?
It’s also important to define the core value proposition of your company. What makes your offering so compelling for the customers? Why would you win against competition? Is the core value proposition really valuable for the core target customer?
A good way to summarise core value proposition for the core target customer is coming up with a one line ‘positioning statement’
Q3. Validating the hypothesis – Is your core target customer deriving maximum value out of the offering?
Once you have defined the core target customer and the core value proposition, its critical to validate that thesis. Go deep in the customer mix and the value derivation by the customers, look for evidence of who and in what way is deriving the maximum value out of your offering. There are a few tools that you can use to measure the value derivation and to find/ identify core customers
- Usage/Engagement trends – Look through the usage/engagement data and notice the trends. Looking at the power user curve is a good tool for this.
- Customer Retention/Renewal/Churn data and trends
- NPS – Segmental NPS data can give a lot of idea about core customer
- Sales process and conversion data
If you do find a mismatch in the answers to Q1 and Q3, it is time to go back to the drawing board and iterate till you reach a broad match in Q1 and Q3.
Q4. Aligning efforts – What percentage (number and revenue) does the above core customer occupy of your entire customer base?
This will help you understand how focused your energies truly are as on today.
Q5. Once you’ve identified your customer, what has your company done to build around this core customer?
List down 3-4 initiatives your company has taken up (in the last 6-9 months) to build a value proposition that resonates with the customer
Q6. Going forward, how do you plan to further strengthen your value proposition for the identified customer?
As a team come up with 3-4 levers you plan to implement in the next 6-9 months which would strengthen your value proposition
Focus, focus, focus!
Fire customers who do not fit the core avatar!
Firing your customer:
Q7. Who have you fired in the last 6 months?
One of our health-tech portfolio company fired customers who were above the age of 65 as it was a herculean task to onboard them and their ability to pay for services was low. Which avatars have you fired in the last 6 months and any key learnings through this exercise?
Q8. What efforts are being taken to fire the remaining customers?
What steps are you undertaking to fire the remaining customer avatars (avatars that are not core to the business) in the next 6 months
We ask our portfolio founders to document these answers and share it company-wide – this helps every team member to align and work towards the goal.
If you are working on a consumer internet idea – I would love to discuss and brainstorm over a cup of coffee. Hope this helps!