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Finding Your Ideal Customer Using the Value Quadrant

Do you ever get an email from a prospect who asks question after question only for them to finally decide they’re not interested?

You spent hours answering their questions, got excited about the possibility of a new customer, and suddenly all communication has stopped.

You’ve been ghosted.

In an ideal world, it would be easy to identify straight off the bat the best prospects to go after.

Of course, in reality things aren’t so simple.

A seemingly hot prospect might come to you full of questions, only to never be heard from again.

This is why it’s important to start honing the skill of determining if your hot prospect is actually a potential customer or just a tire kicker.

Identifying Your Core Customers

When I get an email from someone needing help, there are often obvious signs that indicate straight away whether the person is a serious prospect, or merely looking around.

Knowing what to do will help you save time and figure out how to respond to such requests.

Here are the three things you can do to identify your core customers so that you can spend time on the most serious and likely prospects.

Identify Red Flags at the Start

Red Flag #1

Sometimes it’s difficult to know right away whether someone will become a customer (and a good one at that), but there are some tell-tale signs that can serve as strong indicators.

If someone is difficult to deal with during your initial discussions most likely things won’t get better after they’ve signed on — if they decide to go with you.

For example, a prospect might take up a lot of your time asking for advice with no signs of moving forward.

It might feel like providing enough value to the other person will encourage them to become a customer, but this often isn’t the case.

Since they’re already getting all the help they need, where is the incentive to do so? And if the prospect continually asks for more help and advice, expect to spend large chunks of time catering to their demands.

Instead, try limiting the exchange to a few emails before you suggest progressing to something bigger, such as a brief phone call or a small project. Doing so forces the other person to think more seriously about whether they want to work together.

Red Flag #2

Another red flag is when someone contacts you out of the blue to give advice.

Isn’t it interesting how people love to give advice, regardless of whether or not they’re qualified to do so? If you’ve been running a business, you’re probably received advice from strangers on how to run your business, even if they don’t run one themselves!

This brings us to the question of when to take feedback seriously. It turns out that the answer depends on whether the person is already a customer or not.

In Trakio’s Beta program, the free users gave suggestions that were very different from its paid users.

Paid users provided suggestions that were more mundane, but increased the value of the product.

Free users, on the other hand, gave ideas that were “nice to have”, but not essential to product usage.

So while it’s (sometimes) nice to get feedback from people, it’s important to identify where the feedback is coming from, and whether its implementation increases the value of your products and business overall.

Understand the Psychology Behind Buyer and Non-buyer Behavior

If you’ve ever felt like someone wasted a chunk of your time without providing anything in return, don’t despair. We’ve all been there.

The first step to prevent this is to understand that it takes two people to cooperate: you and the other person.

When I interact with someone who reaches out to me, I remind myself to keep aware of how much time I’m spending with the other person.

Giving value upfront can give the prospect an idea of how you can benefit them, but be careful not to spend too much time upfront.

If you spend a lot of energy helping the person over and over, the prospect will be conditioned to expect help from you, making them feel less gratitude over time and increasing your level of resentment towards them.

The increased use of the internet for service and product transactions is likely a major reason people feel more comfortable taking without the need to reciprocate.

In a study done by the University of Nottingham’s School of Economics, volunteers were more likely to cooperate with one another if they were held publicly accountable and could face punishment for acting selfishly.

Since the internet is largely anonymous, for the most part people aren’t publicly accountable for their actions. The threat of punishment is low since users aren’t faced with social rejection or any other form of punishment when they don’t conform to social norms.

When speaking with prospects, the question “how much does this cost?” will invariably come up. Before you get to the price point though, you need to demonstrate how you can provide value first.

This helps the prospect understand how you can help them reach their goals and make their life easier, which will essentially make the price more justifiable.

Despite your best efforts, some people will solely focus on the cost and not on the value you provide. If this is the case, accept that not everyone is going to be a customer and that’s okay.

Determine the Value of Your Customers

According to the Pareto principle, about 80% of sales revenue comes from 20% of customers.

We can use this principle in a few ways to determine the value of our customers.

I find using the value quadrant useful exercise to get a big picture idea of how I’m spending my time and what areas I can focus on to maximize efficiency.

In a nutshell, you look at your current customers and evaluate the amount of support (i.e. time) they need and the revenue they produce.

Using a value quadrant then helps determine the placement of various customers:
ValueQuadrantPlace your most valuable customers in the top left quadrant. These are the customer with high revenue and low support. Then place from there place the customers of varying levels and support in the appropriate quadrants.

Interestingly, you might notice in your own experiences that as you charge higher prices or rates, customers tend to take up less of your time and make fewer demands.

Once you’ve determined which of your current customers fit into the top left quadrant, learn more about them.

This includes finding common demographic factors such as their age, occupation and geographical location. Look at where these groups congregate or go to for information — this can be as direct as providing them with survey questions.

Once you’ve learned more about how to reach your ideal customer, you can go after them in a focused and deliberate manner. You can go where they go to find similar customers and join the conversations they are already having.

Finding and targeting your ideal customer is a win-win for both you and the customer.

You get to work with people who appreciate your time and help, while giving them the opportunity to work with someone who can over-deliver and dedicate energy to helping them.

It’s a process that you can begin today by figuring out what your customer needs and the revenue they provide.

You don’t need to overhaul your customer base overnight, but doing an initial evaluation will go a long way in finding out how to improve your products and services.

How about you? Have you found your ideal customer, yet? Do you have any questions using the value quadrant? Let us know in the comments!

About Melissa Chu

Melissa Chu helps bloggers get the most out of the content they create. For more ideas on achieving success and making an impact, join the newsletter (with a productivity guide included).

17 comments

  1. Pat ( User Karma: 0 ) says:

    Melissa,

    Interesting. How do explain the success of Jeff Walker and others who round up a lot of people by offering free training? Your graph would say no to that…right?

    Pat

    1. Melissa Chu ( User Karma: 0 ) says:

      Hi Pat,

      Good question. I think free training falls along the line of the freemium model that is popular these days. So the free initial product(s) you offer are a “sample” for prospects to get to know you and your program better, and if they choose, they can pursue higher-end courses that you release.

      Here’s what one online business owner said: “I would never sell a guide for $5.95: for that price, I would rather just give it away for free.” IMO, the way you price your products sends a signal to the market about the quality of your product and the way you perceive your product. So there is a difference between free and selling low-priced training courses.

      The Trak.io link above has a really interesting discussion about why they decided to pull the plug on their free plan – so the free plan does work for some company models (such as Mailchimp), but not for others.

      I’d like to hear your thoughts on this too. I think pricing is one of the hardest and most nerve wracking decisions to make when it comes to products.

      Melissa

      1. Pat ( User Karma: 0 ) says:

        Thanks Melissa. I have tons of ideas from this.

        Pricing isn’t very hard at all. You charge minimally, ten times what it costs you to produce it. That’s the up charge. Otherwise, your business will never, ever grow. Bank loans are 9 times. Books are 6 times. These are all minimally, some are much higher, like high end sunglasses $.69 to make, $299 in the store.

        I used to sell greeting cards and people asked me how I can charge so little and I told them I spend half my time looking for cheaper deals on materials and mark them up ten times or more. I should have paid someone minimum wage to do that and focused on finding more customers.

  2. A very useful guide Melissa,
    I can very well relate to this because I’ve experienced it a lot. I’ve had people contact me from nowhere and demanded for a certain advice and i thought I’ve gotten a clients only to find out that they’re the tyre kickers as you called them :), and this was after spending much of my precious time responding to their emails back and fort.

    However, I’ve learnt to always take a closer look at such emails before responding, i usually examine what they said on the email and sometimes, i use to spot those fake ones by their writing tone.

    I’ve never heard of the Value Quadrant before but it sounds so interesting and worth trying.

    Thanks for sharing.

    1. Melissa ( User Karma: 0 ) says:

      Hi Theodore,

      Yep I’m pretty sure this situation has happened to all (or nearly all) freelancers – but we live and we learn. I used to think that offering more help and advice free or charge would encourage the person to eventually sign on but it doesn’t. After all, there’s no incentive!

      It’s good that you’re getting to see the signs of a serious prospect vs. a non-serious one. About the tone, I find that if the email is written really poorly – all caps, full of slang language or just rude, those are clear red flags.

      Thanks for your comments!

      Melissa

  3. Hello Melissa,

    There is a way to make things a lot easier for everyone.

    Two years ago, I got fed up with people who just contacted me for free help (and I’m not talking about recommending my favorite WordPress plugins or tools). So I edited my services page to include my rates and a series of questions everyone should answer to determine how I can help them.

    The result? I cut bad apples by 80%. Now, most of the people who contact me respect my time and work and / or are willing to pay for my services.

    1. Melissa ( User Karma: 0 ) says:

      Hi Cendrine,

      That is a great suggestion! If the prospect is serious, they’ll be willing to take the time to fill out a questionnaire. And of course, publishing your rates lets prospects know that your products and services aren’t free of charge.

      About free help, it’s surprising how sometimes people can ask for large favors (such as personal mentorship for a year!) without introducing themselves or offering anything.

      Melissa

      1. Absolutely, Melissa!

        Earlier this year, I got interviewed for a big magazine here. When the article was published, I received more inquiries for large favors from strangers than ever before. So, instead of wasting my time trying to explain everything, I redirected everyone to my service page.

        Guess what happened after that? You guessed it: The sound of crickets. lol

        1. Melissa Chu ( User Karma: 0 ) says:

          Oh yikes! Yeah I guess that shouldn’t come as too much of a surprise sadly enough.

          Congrats on being interviewed for a big magazine though – I’m sure it’s a strong marker of credibility you can use for future interviews and actual prospects!

          Melissa

  4. Rohi says:

    Thanks for this useful post, Melissa.
    I liked the concept of the value quadrant as well as the three red flags. I’m still trying to figure out my ideal customer so your post has been a big help. And I’ve subscribed to your blog. 🙂

    1. Melissa ( User Karma: 0 ) says:

      Hi Rohi,

      Yep it can be a process to find your ideal customer – sometimes it’s not just about the demographics (age, income, etc.) but can be other factors that aren’t as obvious. They might hold similar beliefs, lifestyles, or attitudes for instance.

      Thanks for subscribing and looking forward to seeing you again!

      Melissa

  5. Jessica ( User Karma: 0 ) says:

    Hi Melissa, I like the way you’ve broken down the quadrants and identified common red flags that can signal you’re talking to a non-ideal client. But wonder, is a client who needs high support necessarily non-ideal, if they’re paying you adequately to help them?

    Some of my favorite business plan clients are the ones who have a lot to learn about the basics of business, and through the planning process, I coach them into becoming confident entrepreneurs. They need lots of support, and I don’t mind, because I’m providing great value to them, and they appreciate it and apply it.

    I guess it depends on how you define ‘support’ – if it means customers who are really demanding and constantly try to push a project beyond its defined scope, we don’t want that; but if it means customers who actually need your help the most, and they absorb your feedback and grow with it, then bring it on – I want those people!

    1. Melissa ( User Karma: 0 ) says:

      Hi Jessica,

      That’s a good question actually! I think that if clients are paying you adequately, while respecting and knowing how much care you put into helping them, then they can be ideal clients. I also enjoy working with people whom I can see progress and growth, and that’s rewarding in and of itself.

      Unfortunately, some people can be pushy and asks for lots of help on a project they’re working on, but either unwilling to pay or trying to get the lowest price possible. Definitely not ideal!

      I find ‘ideal’ customers do tend to refer other good clients as well. Is this your experience too?

      Thanks for your comments, Jessica!

  6. Melissa Chu ( User Karma: 0 ) says:

    Thanks for letting me contribute, Firepole Marketing. I’m happy to answer any questions or comments anyone has!

    Also, after leaving a comment, feel free to grab my guide (in my bio)!

    Looking forward to hearing from all of you,
    Melissa

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