Strategic courage means also saying no to customers
In growth-oriented companies, there is a lot of talk about focusing sales, but in practice the discussion often centers on new customer acquisition rather than the existing customer base.
However, if a company truly wants to sharpen its strategy, the same scrutiny must also be applied to current customers.
Typically, a company’s customer base is anything but homogeneous. Some customers have been promised an exceptional service model. Others were originally attracted with pricing that is no longer profitable. Some have been over-served through tailored offerings that are no longer aligned with the company’s strategy. At the very least, the customer base usually includes accounts whose servicing relies on individual employees’ tacit knowledge, process exceptions and constant adaptation.
Often these customers do not appear problematic because they are long-standing, familiar and significant in terms of revenue. However, true customer profitability is easily misunderstood if the company does not have a systematic way to track the actual customer-specific costs incurred.
An Ideal Customer Profile, or ICP, is, when well designed, a strategic tool that helps identify the types of customers for whom the company can create the most value, build repeatable ways of working and, at the same time, conduct profitable business.
In practice, an ICP helps identify three things:
- A good customer is not the same as a large customer.
- A good customer is not the same as a long-standing customer.
- A good customer is not even the same as a customer who is satisfied with the company’s current way of working.
A strategically good customer is one whose needs, buying behavior, operating model and growth potential fit the direction in which the company itself wants to develop.
Building an Ideal Customer Profile and embedding the related ways of working into everyday sales practice is not necessarily easy or comfortable. Between a long-standing customer and the sales team, there is often a trusted relationship with a long history, often also linked to a personal sense of achievement. If the customer was originally won through hard work, the idea of reassessing that relationship can feel disloyal, or even like a loss.
For this reason, implementing a new customer strategy and the related customer boundaries should be understood as a change management project. In addition to finance and sales leadership, those responsible for sales should be widely involved, so that an understanding of the underlying reasons can develop and implementation can proceed smoothly from the perspective of both sales and customers.
The best way to start is with a shared analysis in which existing customers are assessed not only based on revenue, but also in terms of profitability, delivery requirements, growth potential, strategic fit and quality of collaboration. At the same time, it is worth evaluating in which customer relationships the company is learning things it wants to repeat in the future, and in which relationships it is learning things it should move away from.
The purpose of the analysis is not to divide customers into good and bad, but to create an understanding of what should be done with each customer group. Should the company build a stronger partnership and grow sales, update the service model or clarify the pricing structure, or consider a controlled transition to another service, partner or solution that better serves the customer’s needs?
It is also extremely important to ensure that customer segmentation does not become a personal risk for the salesperson. If the sales director says they want more focus, but salespeople are still measured purely by revenue growth, the system will steer them to continue as before. Customer segmentation only succeeds when strategy, metrics, incentives and daily work are aligned.
Not all customers need to be let go immediately, and building focus does not mean dividing customers into good and bad.
The goal is for the company to understand where it can be genuinely useful, where its model works best, and with which customers it should build the next phase of growth.
