Selling to the wrong customers will kill your startup

by Steli Efti

Failing to find the right audience for your business will guarantee a startup's failure. As founders tend to be fanatical about closing their first customers and hustling their way to initial traction, they need to keep in mind that not all customers are created equal. 

If you close deals with customers that ultimately shouldn't be buying your product because their use cases are not a good fit, you will suffer the consequences.

The wrong data and the wrong product

During the product development process, you need to collect feedback on what you're creating. You'll decide which features to focus on and what to build depending on that feedback.
But if you have the wrong audience, you'll have negative feedback and you'll get the wrong feedback on how to improve your product. The only way you can get valuable feedback is by asking the right people.

High customer service costs

If you're putting your product in front of people who it isn't meant for, they may not be able to use it easily. Selling to the wrong customer means that you will face extra questions from users: your product won't work efficiently for the wrong audience, so they'll constantly complain.

Wrong customers don't see value

When you're dealing with the wrong audience, those users will routinely ask you 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 in using your product or struggle with the process.

High churn rates

If you put your product in front of the wrong users, you'll bleed customers. When those users get tired of trying to deal with a product that isn't helping them, they will stop trying to figure out your product. They'll cancel their subscription.

And nothing is worse than making changes to please an audience that then disappears. It turns your time and investment into a waste.

Poor team morale

That situation isn't just rough for you as the head of the company. It's demotivating for the whole team that worked on developing your application. No one likes finding out their work was useless.

Damage to your reputation

It's 2014—if you disappoint your customers, word will go around. People will vent their frustration on Twitter, write negative reviews, 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 trying to bring as many customers as possible on board, start with just a few perfect customers: the kind who you can build your product for and who will adore your product once they put it to work.

Until you have that handful of fanatical customers, you shouldn't focus on scaling your customer base. You're still in exploration mode.

With those perfect 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?

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 recruit more perfect customers. You can make sure that everyone in your sales funnel is likely to use and profit from your product.