How to identify your ideal customer
Hi, I’m Markus, and welcome to a 🔒 subscriber-only edition 🔒 of my newsletter. I help you to deliver, grow and monetize customer value to improve your performance, accelerate your career, and build a profitable SaaS business.
It does not matter how many customers you acquire.
What matters is their lifetime value.
Acquiring new customers is an investment that gets repaid over time.
But if they don’t stay long enough, you will never get your money back.
Too many SaaS companies are still trying to acquire everyone with a pulse.
And they pay a hefty price for it.
Their conversion rates are exasperatingly low.
CAC is at all-time highs.
And it becomes even worse when they “successfully” talk bad-fit customers into buying their product.
The costs of acquiring bad-fit customers
Too many leaders are (still) only looking at their revenue.
They have no idea how much it costs to maintain a customer.
Especially not on an account level.
So they don’t know that bad-fit customers cost up to 10x as much to maintain compared to your top segment.
But they are certainly not bringing in 10x as much revenue for the same level of profitability.
A grave mistake I see SaaS companies do on top is to build features requested by these same customers.
Features that don’t change a thing but dilute your product and make it more complex.
And what’s more, are the costs of opportunity
When your sales reps are busy selling to bad-fit customers they can’t get in front of great-fit ones at the same time. By the time they get back at them, they might have purchased a competitor product already
The same is true for your CSMs. When they spend an extraordinary amount of time trying to “fix” bad-fit customers they have less time for their best customers. Resulting in a loss of creating demand for expansions and upsells plus earning 2nd order sales.
Instead of building useless features your product team could have built ones that actually add value to your product. Features customers are willing to pay a premium price for.
The best way to grow a SaaS company is not to maximize the number of customers.
It’s to maximize the LTV per customer - your ideal customer.
Here’s how to identify them:
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