The Importance of having a niche and how to define yours
Updated: Dec 23, 2022
Have you heard of the 80/20 rule? You can apply this rule to many situations. In terms of business finances, 80% of your profits come from about 20% of your customers.
There are a lot of pieces that go beyond dollars in sales. And there is a lot that goes into figuring out who your top customers and your most profitable customers are. You could have two customers that pay you the same amount in sales, but one could be twice as profitable as the other. One could be a promoter of your business.
Why You Must Identify Your Ideal Client
Some business owners hesitate to narrow down their focus to a specific group of customers or market niche. They worry that they are going to be limiting their potential by excluding possible customers. It’s normal for most business owners to go through a phase where they question narrowing their niche.
But when you can be more specific and deliberate about who we do business with, our marketing becomes more efficient and effective, and our company runs more efficiently. It feels like our products are selling themselves. Your business will be in higher demand and more profitable.
The more narrow and specific your focus, the easier it will be to attract your most profitable, loyal, and high-value customers.
When you look at your quilt shop, you’re going to find 80% of your results in 20% of a specific customer category.
What makes a customer profitable?
The concept behind the Pumpkin Plan Strategy is that you want to define your top 20% of customers (or group of customers) so you can attract more of them. To do that, create a spreadsheet or write it down on paper and generate a grade for each customer.
Discover your Ideal Client Avatar
Next, you’ll look at your records for the past year. Most point-of-sale systems have a way to export a list of your biggest, most revenue-generating clients. You’ll want to find those top 20 customers over the last year. Write down their names and how much they spent on purchases from you.
Then rate them on a scale from 1-5 on these five questions: (1 being bad/low, 5 being significant/high)
What is their cringe factor? How much do you like or not like about them as a customer? When the phone rings or they walk in the door, do you do a happy dance or want to run away screaming?
Do they buy from you consistently? Are they repeat customers? How often are they visiting your store?
Do they tell their friends about you? Do they refer you often? Are they leaving five-star reviews online?
Do they share your immutable laws? Do they communicate with kindness, courtesy, and respect?
How much of your time do they take? Do they take a lot of time to complete an order, or do they decide quickly?
Now that you have a score on all 5, add them up and get an average score of each of your customers’ top 20% revenue-generating. The results may surprise you!
Next, you’ll want to identify your top customers’ key characteristics and qualities. Look at the top 5 with the highest grades. What are their:
If you realize that you may not know some of those top customers, take the time to get to know them next time they come into your store. You want to see what they have in common with the other customers.
Once you have the commonalities, you’ll be better prepared to create an ideal client avatar. Be descriptive as possible to include:
Their wants and needs
Because you’ve identified those characteristics in your top 20%, creating the ideal client avatar will be much simpler and more aligned with who your top customers are. You’ll have a detailed description of who to market to. Your marketing will become more efficient and effective. Your costs will go down and your ROI will increase. All because you are targeting exactly the right person for your business.
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