How to Define Your Ideal Customer in 5 Steps, According to August & Wonder CEO Steve August

For early-stage startups, attracting customers is a top priority. But sometimes these early adopters aren’t actually the right fit for your business, which can lead to problems in the future. Labs mentor Steve August, CEO of August & Wonder, an e-commerce company that sells real-time stock market trackers, held a session to discuss the five-step process for creating a customer profile that’s a perfect fit for your startup.

Step #1: Define your essential value

The first step of creating an ideal customer profile starts with self-analysis. Understanding your essential value is all about recognizing what motivated you to create your product. For example, did you create your product not as an entrepreneur, but as a concerned parent who saw a need for a specific solution to a specific problem? “The theory of essential value asks you to define what is important to you. What is the central mission of your product? First, define that and stick to it. Then figure out why it’s essential to the world,” August says. “Once entrepreneurs lock in on what's essential to them and find out where their product fits in the world, then they’re able to start creating their ideal customer.”

Step #2: Set your ideal customer conditions

Once you’ve established your essential value, you can create what August calls “ideal customer conditions.” These criteria are split into four sections: must-have, can’t-have, nice-to-have, and will-accept. These set your expectations of the type of customer your product will attract. It’s important to define your essential value before you set your conditions since your specific values will determine your ideal target user.

Your must-haves are customers that have hobbies, skills, or desires that are in line with your product. Can’t-haves are buyers whose beliefs, attitudes or opinions go against the type of product you have. Nice-to-haves are clients that are potentially hard to get, such as celebrities or influencers. Finally, will-accept are customers that would normally be outside of your target user base. For example, if you have a new fitness tracker, you must have a customer who regularly exercises, but you probably don’t want someone who only exercises once a month. It would be nice to have an influencer who will adopt your product but you will accept someone with a limited social media following.

“You get to decide as a business owner what your conditions are,” August says. “Whether you want customers who are going to be one hundred percent committed to your brand or you prefer to have customers who share similar morals as you, don’t be afraid to define specific criteria just because you don't think you'll get customers who’ll meet them.”

Step #3: Filter through current customers and create personas

Next, take the customer conditions you created and compare them to your current customer base. “You’ll see which people fall into your criteria and which people are further out on the spectrum. Take the people who are dead center and create personas for those customers,” August says. “You’ll build up that picture of them. Define their goals and objectives, their pain points, their value systems, where they're reading, and other relevant information.”

(Learn more about how to create customer personas.)

Step #4: Define the ideal customer before-and-after state

Part of defining your ideal customer is understanding where they were before they purchased your product and what happens to them afterward. “What were their pain points before they encountered your product? What did their average day-to-day look like? And then in their after state, after they've encountered us, their lives should have dramatically improved. They should have a better status, a better average day-to-day experience,” August says.

Defining customer before-and-after states allows you to look at your product as a tool that helps people improve their quality of life as opposed to just a great product. “Think of your product as a bridge to the after state. It's the adage, nobody buys a drill because they want a drill. They need a hole,” August says. “It's an important way to look at it because it makes it clear what you're there for and what you're giving to your clients and your customers.”

Step #5: Map the ideal customer journey

Similar to defining your ideal customer’s before-and-after state, defining your customer journey can help you gain valuable insight into your ideal customer. “For each step of the journey, we want to define what they’re doing. What are they thinking? What are they feeling? What are their pain points?” August says. “We want to create a map to make sure we’re serving customers at each step of the way.”

The customer journey doesn’t end once a transaction happens. The relationship you have with your ideal customers is one that has to constantly evolve. “At first, you have to get customers to the point where they're going to swipe their credit card. So even if it happens quickly, you're still building a relationship with them,” August says. “Each point in the customer journey is an opportunity for you to serve them and communicate your essential value. So you have to constantly be your best self, be authentic, and allow people to raise their hand and say ‘that is what I want.’”

Creating an ideal customer not only benefits your market outreach, but it can also help you create a more fine-tuned product. “The tighter your audience is, especially in the early days, the more focused you can be on your product. The broader you are, the harder it is to make an effective marketing message,” August says. “A lot of resources get diffused because startups don’t define their ideal customer, so it's critical to create these profiles early on.”

Learn more about product development.

This post is based on content from a WeWork Labs programming session.

Interested in connecting directly with this mentor? Ask your Labs Manager for help.

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