Failing to find the right audience for your business will guarantee a startup's failure. While founders tend to be fanatical about closing their first customers and hustling their way to initial traction, they need to remember that not all customers are created equal.
If you close deals with customers who ultimately shouldn't be buying your product because their use cases are not a good fit, you will suffer the consequences.
Successful SaaS prospecting hinges upon the precision of targeting your efforts. Discerning which customers genuinely align with your solution's value proposition becomes paramount in securing those critical early wins.
It might seem tempting—you want to acquire customers. You want your startup to grow. Your sales reps want to close deals. And, after all, a paying customer is generating revenue. So where's the problem?
The Wrong Data and the Wrong Product
During the product development process, you'll heavily rely on user feedback. Based on that feedback, you'll decide which features to focus on and what to build.
But if you have bad-fit customers, the feedback will lead you astray. The only way to get valuable feedback is by asking the right people.
High Customer Service Costs
If you're putting your product in front of people for whom it isn't built, they'll need your support team's help to find ways to make things work.
Your Customer Support and Success team might be able to devise workarounds to make your product work well enough to get the job done, but it'll never be the great experience your customers should expect.
Not only will your customers eventually become frustrated that things aren't built in a matter that "just makes sense" for them—but your customer support team will also grow increasingly unhappy if a large part of their job is to help customers who shouldn't be customers in the first place to come up with cumbersome workarounds.
Bad-Fit Customers Don't See Value
When you're dealing with the wrong audience, users will routinely ask for discounts or try to haggle. They won't want to pay full price for your product because they don't see the value in it—especially if they fail to use it or struggle with the process.
High Churn Rates
If you put your product in front of the wrong users, you'll lose customers. When those users get tired of dealing with a product that isn't helping them, they will stop trying to figure out your product and cancel their subscription.
Nothing is worse than making changes to please an audience that'll eventually disappear. A high churn rate turns your time and investment into a waste. Instead, invest your resources into serving your Ideal Customers better.
Poor Team Morale
That situation isn't just rough for you as the company head. It's demotivating for the whole team that worked on developing your application. No one likes finding out their work is useless.
Damage to Your Reputation
It's 2024—word will go around if you disappoint your customers. People will vent their frustration on social media, write negative reviews on software review sites, and badmouth your company to their peers. It creates a lot of bad business karma and negative energy around your company.
But You Can Fix the Situation
Rather than acquiring more customers, focus on acquiring better customers: the kind you can build your product for and who will adore it once they put it to work. The kind of customer who will actually become more successful as a result of using your product.
You shouldn't focus on scaling your customer base until you have that handful of passionate customers. You're still in exploration mode.
With those ideal customers, you'll be able to analyze them and their needs so that you can create a document that shows what they have in common:
- What industry are they in?
- What size of business are they?
- Are they switching from another solution or first-time buyers?
- What's their budget for this kind of application?
- Who is the decision maker?
- Who are the users?
Check out our step-by-step guide on creating your Ideal Customer Profile (ICP).
Important note: Sometimes, unhappy customers can actually be good-fit customers. If they are the kind of customer you want to focus on and they aren't happy with the way your product helps them accomplish their objectives, that is incredibly valuable feedback to take in and should be weighed much heavier than complaints from companies you don't want to focus on.
You can capture this information in your favorite sales CRM and manage your sales pipeline more effectively.
Qualify Based on the Best
Once you know what your customers have in common, you can use that information to acquire more ideal customers and ensure that everyone in your sales funnel is likely to use and benefit from your solution.
That's why qualifying your prospects properly early on in your sales process is so crucial.
Let me illustrate this with an example: Until 2023, our sales CRM did not offer a mobile app. This decision was driven by our unwavering focus on catering to inside sales teams—sales professionals who predominantly conduct their selling activities via email, SMS, phone, and video calls.
However, we recognized that different businesses had unique needs. For instance, if a prospective client informed us that they constantly boasted a substantial field sales force on the move, and it became evident that they would be better served with a mobile app, we were forthright with them. In such cases, we candidly advised against purchasing Close and instead provided recommendations for alternative sales tools that aligned better with their requirements.
On the other hand, if we learn that the prospect is a good fit, for example, because they have a large sales team that's making a lot of sales calls, but for some reason, they're hell-bent on wanting an AI-powered CRM for social media, we'll challenge them on that and make a case for why our sales CRM will help them become more successful, and demonstrate how for example a feature like our built-in Predictive Dialer could double the productivity of their sales team.
When it comes to selling, always first selflessly determine whether a prospect would benefit from using your solution and then selfishly determine whether your company would benefit from having them as a customer.
It's easy to get distracted by a short-term win: another deal closed, another revenue milestone hit. However, to win in SaaS in 2024 and beyond, you need to work urgently in the present while adapting a long-term mindset to understand what will generate the most value in the future.
Want more advice on growing your company? Get a free copy of our book from Zero to 1,000 Customers & Beyond, which I co-authored with my friend Hiten Shah. We've founded a series of multi-million dollar startups and share a framework for sustainably growing successful companies from scratch in this book.
