In the early stages of growth, it can be tempting to think any new customer is a good customer. And many companies adopt the “churn and burn” philosophy of bringing in as many customers as possible, churning through the bad ones, and finding your fit through the process.
But even in early stages, converting bad fit leads can actually cost you more in the long-run.
Even if bad-fit customers come in seamlessly, they will drain your support resources and drag you away from serving your more valuable customers. Bad-fit customers will eventually churn. And more often than not, they will do so with gusto, creating long term issues for your brand, making it harder to sustain growth.
But spotting non-ideal leads isn’t always an easy task. Here are 7 steps to stopping bad-fit leads before they become costly customers.
1. Create buyer personas for good-fit customers
This seems like a no-brainer, right? But you’d be surprised by how many companies never establish buyer personas before embarking on user acquisition.
Before you can recognize a bad-fit lead in your pipeline, your need to understand what a good-fit really looks like. First, you need to make sure you thoroughly understand your current user base.
Send out surveys, hop on a call, whatever it takes, you need to get user feedback and understand your customers on a deeper level.
More importantly, you need to understand your most successful customers. These are the ones who have been with you for years, who have integrated your product into their daily workflow, and who wouldn’t think about leaving you unless something drastic changes in their position.
These “VIP” customers will give you insight into your true best-fit personas.
- What characteristics define a these types of customers?
- What are their daily tasks and responsibilities?
- What are their interests?
- What problems do they need solved?
- What role do they play in their company?
- How do they make decisions?
- How did they find your product in the first place?
- What sold them on choosing you over the competition?
- Most importantly, what made them so loyal?
Collect qualitative data from as many customers as possible as you create your buyer personas. Then, make sure those personas are extremely detailed. It should feel like you know these imaginary people inside and out. You understand their motivations, inspirations, issues, and dreams.
Once you are fully aligned around these best-fit personas, you can move onto step 2.
2. Create buyer personas for bad-fit customers
No matter how good your product is, there will always be people who simply won’t find the value. Often times, it has nothing to do with your offering, and more to do with their needs and expectations coming in.
And you should be able to spot these people before they get too far into your funnel.
Now that you have asked all the right questions and drilled into your best-fit customer personas, it’s time to define what a non-ideal, or bad-fit customer looks like for your business.
You can likely find these answers in your customer support channels. Which customers are muddying up the waters with constant complaints and issues? Find those conversations, and then reach out to those customers.
Additionally, you should look at your churned customers (yes, even people who have left are valuable to you). Reach out to ex-customers who churned quickly after signing up.
Set your parameters to 1 month or less. People who churn within the first month were clearly unimpressed with your product, and you need to know why.
Create a list of these contacts and send out a survey about their experience. Hop on a call with churned customers. Whatever it takes, you need to fully understand why these people left in such a hurry.
Just like your best-fit personas, you want to understand these people on a deep level.
- What characteristics make someone a bad-fit for your product?
- Where did your product fall short for them?
- What expectations weren’t met when they came in?
- How did they find out about you? Why did they chose you in the first place?
- Where did they go next? And why?
- Create a “cheat sheet” of persona characteristics your sales team can reference quickly.
- Prepare your sales team with walk away messaging.
- Create a solidified system for turning down a lead.
- Partner with a company who better serves your bad-fit personas, and create a system to point those leads their way (and vice versa).
Build up a buyer persona (or multiple personas) based around the same standards you chose for your good-fit customers.
Knowing which kinds of leads aren’t likely to stay will improve your ROI and help to shape your marketing and advertising decisions moving forward. And, prevent you from bringing these people into your product in the first place.
3. Educate your entire team
“Customer success is a function of every department. Customer success is everyone’s job…” You’ve probably heard it a million times, but what does this really look like?
In a nutshell, if your goal is to stop bad-fit leads at the door, everyone has to be aligned around the high-level mission of customer success.
By now, you’ve got your good-fit and bad-fit personas locked down, now it’s time to educate your team. Ahem, your entire team. Yes, your sales team should know these personas like the back of their hand, but it doesn’t stop there.
If your development team is working on features that your ideal customers don’t necessarily need, it’ll be harder to catch the bad apples before they get into your product. If your marketing team is speaking towards bad-fit characteristics, you’ll bring in more bad-fit leads than your sales team can weed out.
See how customer success really trickles through your entire company?
The responsibility of stopping bad-fit leads at the door falls heavily on your sales team, but every department contributes to the issue. Good-fit and bad-fit buyer personas should be intertwined in every single business decision your team makes, from product development to content marketing to customer success and sales.
Make sure every department understands these bad and good-fit personas so anyone can spot a mismatched customer before they become too costly for your startup. Aligning your team around these personas will ensure more protection against those havoc-wreaking users.
4. Analyze your pricing tiers
Pricing tiers have a surprisingly large impact on the quality of customers that come into your pipeline. If your pricing is set too low, or fails to provide quality value, you may attract the wrong kinds of customers.
You need to make sure your pricing tiers align with your best-fit customers in mind. This is, yet again, another way your business can be truly customer-centric.
If your pricing tiers are simply designed to bring in as many people as possible, or upsell as often as you can, the quality of your users will reflect that.
If you’re truly a customer-first company (as you should be), your pricing will aim to provide the most value for your best-fit customers, at every stage. And if it’s not, you’ll feel it in your churn.
If you being to notice an uptick in bad-fit customers on your lower-tiered plans, bogging down your support team and creating lots of noise, double back and analyze your pricing.
Pricing tiers should be designed with long-term retention in mind. And if they’re designed correctly, they will naturally eliminate non-ideal customers.
Sounds does a great job of this with their pricing. Each tier clearly provides the value and features their user need at every stage. They don’t skimp on features on the lowest tier, and clearly express the features available on each level.
Do your tiers offer real value to the customers you want to keep? The best place to look is at your lowest tier. Is the entry point too low?
It’s tempting to design a free, or highly inexpensive plan with minimal features just to get people in the door. But if there’s not real value tied to it, you could attract users who don’t necessarily need your product.
When this happens, you’ll see an increase in complaints, angry customers, and yup you guessed it– churn. Your pricing tiers say a lot about the value of your product.
Make sure your pricing strategy speaks to the expectations of your best-fit customers.
5. Dial in your marketing
As I’ve mentioned, halting bad-fit leads at the door isn’t just a sales issue. The second big player in customer quality is your marketing team. Now that you’ve got your buyer personas set, it’s important to circle back and check in on your marketing efforts.
With strong buyer personas set, you can really hunker down into your external communications in a more targeted way. Your goal is to flag any marketing pieces that may attract those bad-fit leads to you in the first place.
Review every piece of your marketing strategy. From ad copy to email subject lines, ensure that you’re speaking to the issues of your best-fit persona every single time. Simply sharpening up your messaging and brand presence should lower the amount of bad-fit leads that enter your funnel.
If you’re not sure where to start here, using a cohort analysis is a great way to gather insight into any marketing that may be bringing in bad-fit leads.
Analyzing your churn with time-based cohorts can help you identify any moments where large groups of users churned out. Compare this churn analysis against all of your marketing campaigns.
Did you run a set of Facebook ads for a month, then see a large amount of churn 30 days later? It’s trends like this that will give you clear insight into certain marketing tactics that may be bringing in poor-fitting customers.
6. Bridge your marketing and sales teams
Marketing and sales go hand in hand, right? This may sound like another no-brainer, but more often than not, sales teams and marketing teams are not nearly as intertwined as they should be.
Creating a bridge between the two teams will allow each department to better understand how they’re doing in terms of bringing in the best-fitting customers.
Create processes for your sales team to report on the nature of the leads coming in. Maybe this looks like a monthly report sent to the marketing team, or a weekly high-level meeting to discuss findings from their prospects.
Qualitative data from your sales team should impact high-level decisions made on the marketing side.
If the sales team feels bogged down with prospects who seem to fall in the bad-fit persona, marketing needs to know there’s something wrong. Conversely, if the sales team feels like a large portion of the leads coming in are eager to buy and fall in the best-fit persona, this will continually help drive your marketing team towards better strategies.
And this goes both ways.
Quantitative data from your marketing team on things like activation rates and long-term retention of customers should impact high-level decisions made on the sales side. If the sales team converted 10 leads that turned into highly valuable, loyal customers, they should have that information (and be rewarded for it).
This data will help them further their understanding of who really is the absolute best-fit lead so they can prioritize their outreach accordingly. The only way this is possible is through open and positive communication.
When sales and marketing teams work together, your funnel will become cleaner, more controlled, and will naturally bring in better fitting customers.
7. Learn to walk away from a bad sale
If you incentivize your sales team to convert as many leads as possible, bad-fit customers are going to start pouring in.
Instead, include rewards for your sales team on post-sale wins such as retention, upgrades, and engagement. Even if these metrics are not directly tied to sales, you are empowering your team to take ownership over high-level goals.
Knowing when and how to walk away from a bad sale is invaluable for long-term retention. Here are a few ways to sharpen this process:
Avoiding the tempting trap of booking bad-fit customers
While customer acquisition is necessary for growth, retention should get more of your focus. It doesn’t matter how many leads you convert if none of them fit enough to stick around.
If you’re bringing in too many bad-fit customers, your churn will get out of control. And in the long-run, you’ll spend more money and resources just trying to keep up with the noise.
Responsible executives understand that customers come first, which means not every sale is a good sale. From employee and customer satisfaction to churn reduction, halting bad-fit leads at the door will set your business up for dependable growth.
So are you willing to stop signing bad-fit leads?