# Target Customer Analysis

Defining your best-fit target customer is the step that makes positioning actionable. Without a tight target, your positioning is a strategic exercise that lives on a whiteboard. With a clear target, every team — sales, marketing, product, customer success — knows exactly who to focus on. This reference provides frameworks for identifying, defining, and validating your best-fit customer segment.

## Best-Fit Customers vs. Total Addressable Market

This distinction is critical and frequently misunderstood:

| Concept | Definition | Purpose | Example |
|---------|-----------|---------|---------|
| **Best-Fit Customers** | The narrowest segment of customers who care the most about your unique value | Focus for positioning, initial go-to-market, sales targeting | Mid-market SaaS companies (50-500 employees) with a dedicated RevOps person who currently use Salesforce |
| **Serviceable Addressable Market (SAM)** | All customers who could reasonably use and benefit from your product | Medium-term growth planning, investment decisions | All B2B companies with a sales team of 10+ using any CRM |
| **Total Addressable Market (TAM)** | Every potential customer if you had unlimited resources | Investor presentations, long-term vision | Every company that sells to other businesses |

**The positioning paradox:** The tighter your best-fit customer definition, the more effective your positioning — and counterintuitively, the faster you grow. By dominating a narrow segment, you build proof points, word-of-mouth, and credibility that naturally expand outward.

### The Bowling Alley Strategy

Think of market adoption like bowling pins. Your best-fit customer segment is the head pin. When you knock it over convincingly, adjacent segments (the next row of pins) fall more easily because:
- You have relevant case studies and social proof
- Your product has been refined for related use cases
- Word of mouth travels within connected communities

The mistake is trying to hit all the pins simultaneously. That's a gutter ball.

## Actionable Segmentation Criteria

Best-fit customer characteristics must be **actionable** — meaning your sales and marketing teams can identify these customers before talking to them. This is the fundamental constraint that separates useful segmentation from academic segmentation.

### The Actionability Test

A segmentation criterion is actionable if you can answer "yes" to all three questions:

1. **Can I identify this before first contact?** (Using public data, purchased data, or observable signals)
2. **Can I build a list of companies/people with this characteristic?** (Is the data available in CRM, LinkedIn, databases?)
3. **Can I target this characteristic in marketing?** (In ads, content strategy, outbound lists?)

### Segmentation Criteria Categories

#### Company-Level Criteria (Firmographic)

| Criterion | Actionable? | Data Source | Example |
|-----------|------------|-------------|---------|
| Company size (employees) | Yes | LinkedIn, Crunchbase, ZoomInfo | 50-500 employees |
| Revenue range | Somewhat | Some databases, SEC filings for public companies | $10M-$100M ARR |
| Industry/vertical | Yes | LinkedIn, company websites, SIC/NAICS codes | B2B SaaS, Healthcare, Financial Services |
| Geography | Yes | Company address, domain TLD | North America, DACH region |
| Funding stage | Yes | Crunchbase, PitchBook | Series B through Series D |
| Tech stack | Yes | BuiltWith, Datanyze, Wappalyzer | Uses Salesforce, runs on AWS |
| Growth rate | Somewhat | Job postings, headcount growth data | Grew headcount 50%+ in past year |
| Organizational structure | Somewhat | Job postings, LinkedIn | Has a dedicated [role/team] |

#### Contact-Level Criteria (Demographic)

| Criterion | Actionable? | Data Source | Example |
|-----------|------------|-------------|---------|
| Job title/role | Yes | LinkedIn, email signatures | VP of Marketing, Head of RevOps |
| Department | Yes | LinkedIn, company org structure | Reports to CRO, part of Revenue Operations |
| Seniority | Yes | LinkedIn title conventions | Director-level and above |
| Reports to | Somewhat | LinkedIn, org charts | Reports to CMO, not CTO |

#### Behavioral Criteria (Observable)

| Criterion | Actionable? | Data Source | Example |
|-----------|------------|-------------|---------|
| Currently uses specific tool | Yes | BuiltWith, job postings, integration requirements | Currently uses Salesforce + Outreach |
| Recently hired specific role | Yes | LinkedIn job postings, hiring announcements | Hired first Head of Revenue Operations |
| Recently raised funding | Yes | Crunchbase, press releases | Raised Series B in last 6 months |
| Published content about specific topic | Somewhat | Blog, social media monitoring | Published about "revenue operations" challenges |
| Event attendance | Somewhat | Attendee lists, social posts | Attended SaaStr Annual |

#### NOT Actionable (Avoid for Segmentation)

| Criterion | Why Not Actionable | Alternative |
|-----------|-------------------|-------------|
| "Innovative mindset" | Subjective, can't identify before contact | Use proxy: attends specific conferences, uses specific tools |
| "Values quality over price" | Can't observe before contact | Use proxy: company size, brand positioning, pricing tier of current tools |
| "Frustrated with current solution" | Can't know until you ask | Use proxy: length of time on current solution, public reviews |
| "Ready to buy" | Intent is invisible | Use proxy: recently searched for [category], recently hired for [role] |
| "Tech-savvy" | Subjective | Use proxy: tech stack, engineering team size, developer blog |

## The Best-Fit Customer Discovery Process

### Step 1: Analyze Your Best Customers

Start with your existing customer base. Identify the top 20% of customers based on:

| Metric | Why It Matters |
|--------|---------------|
| Net Revenue Retention | Best customers expand, showing they get increasing value |
| Time to value | Best-fit customers onboard quickly because the product fits their needs naturally |
| Usage/engagement | High usage indicates the product is embedded in their workflow |
| Referrals | Customers who refer are the strongest signal of product-market fit |
| Support ticket volume | Low support needs indicate good fit |
| NPS or satisfaction score | Direct measure of perceived value |
| Sales cycle length | Best-fit customers buy faster because the value proposition resonates immediately |

### Step 2: Find Common Characteristics

Look across your best customers for patterns. Use a table like this:

| Customer | Industry | Size | Role of Champion | Tech Stack | Trigger Event | Previous Solution |
|----------|----------|------|-----------------|------------|---------------|-------------------|
| Acme Corp | B2B SaaS | 150 employees | VP RevOps | Salesforce, Outreach | Series B raise | Spreadsheets |
| Beta Inc | B2B SaaS | 300 employees | Head of RevOps | Salesforce, HubSpot | New CRO hire | Manual reporting |
| Gamma Ltd | B2B SaaS | 200 employees | RevOps Manager | Salesforce, Gong | Rapid headcount growth | Cobbled-together dashboards |

**Pattern identified:** B2B SaaS companies, 100-500 employees, with a dedicated RevOps function, using Salesforce, who recently experienced a growth trigger (funding, new leader, or headcount spike).

### Step 3: Validate with Negative Cases

Look at your worst customers (high churn, low engagement, long sales cycles) and identify characteristics that are absent from your best-fit list or that distinguish them.

| Characteristic | Best Customers | Worst Customers |
|----------------|---------------|-----------------|
| Industry | B2B SaaS (90%) | Mixed — manufacturing, retail |
| Dedicated RevOps | Yes (100%) | No (80%) |
| CRM | Salesforce (95%) | Various — HubSpot, Pipedrive, none |
| Company size | 100-500 employees | Either <50 or >5000 |
| Trigger event | Recent growth event (85%) | No clear trigger |

### Step 4: Write the Best-Fit Customer Definition

Combine your findings into a clear, actionable statement that anyone on the team can use:

**Template:** "Our best-fit customers are [role/title] at [company type] that [key characteristics] and are experiencing [trigger/situation]."

**Example:** "Our best-fit customers are RevOps leaders at B2B SaaS companies with 100-500 employees that use Salesforce and are experiencing rapid growth (recent funding, 50%+ headcount increase, or new CRO hire)."

### Step 5: Quantify the Segment

| Metric | Value |
|--------|-------|
| Number of companies matching best-fit criteria | ~2,400 (from Crunchbase + LinkedIn data) |
| Number of target contacts within those companies | ~4,800 (assuming 2 contacts per company) |
| Current penetration of this segment | 5% (120 customers / 2,400 companies) |
| Revenue potential at current ACV | $36M (2,400 x $15K ACV) |

## Persona Creation for Positioning

A positioning persona is different from a marketing persona. It focuses on the characteristics that make someone care about your positioning, not general demographics or psychographics.

### Positioning Persona Template

| Element | Description | Example |
|---------|-------------|---------|
| **Title/Role** | The specific job title of your champion | VP of Revenue Operations |
| **Reports to** | Who they answer to (determines what they care about) | Chief Revenue Officer |
| **Responsible for** | Their key responsibilities related to your product | Pipeline forecasting, sales efficiency metrics, CRM administration |
| **Measured on** | KPIs they're accountable for | Pipeline accuracy, sales cycle length, revenue per rep |
| **Current solution** | What they use today (competitive alternative) | Spreadsheets pulling from Salesforce + Outreach + Gong |
| **Pain with current solution** | Specific frustrations with the status quo | Manual data consolidation takes 2 days/week; data is stale by the time reports are ready |
| **Trigger event** | What makes them look for a solution now | Board asked for real-time pipeline visibility; CRO demands weekly forecasting instead of monthly |
| **Decision process** | How they evaluate and buy | Runs a pilot with 1 team, proves ROI, then rolls out company-wide |
| **Success criteria** | How they'll judge if the purchase was successful | 50% less time on reporting, real-time pipeline visibility, forecast accuracy within 10% |

## Differentiating Best-Fit from Adjacent Segments

As you grow, you'll naturally expand beyond your best-fit segment. Understanding the concentric circles of your market helps you plan this expansion:

| Ring | Segment | Positioning Approach | Expected Metrics |
|------|---------|---------------------|------------------|
| **Core (best-fit)** | RevOps at B2B SaaS, 100-500 employees, Salesforce | Primary positioning — purpose-built for them | Fastest sales cycle, highest retention, most referrals |
| **Adjacent 1** | RevOps at B2B SaaS, 500-2000 employees | Same positioning + enterprise features messaging | Slightly longer sales cycle, may need enterprise security/compliance |
| **Adjacent 2** | Sales Operations at non-SaaS B2B companies | Adapted positioning — emphasize general RevOps value, not SaaS-specific | Longer sales cycle, need more education, may require different integrations |
| **Stretch** | Marketing Operations teams | Different positioning — repurpose as marketing analytics | Requires significant product adaptation, essentially a new market |

## Validating Your Target Customer Definition

### Quick Validation Tests

| Test | Pass Criteria | If Fail |
|------|--------------|---------|
| **The List Test** | You can build a list of 100+ target accounts from public data | Criteria aren't actionable enough — use more observable characteristics |
| **The Ad Test** | You could target these people with LinkedIn or Google ads | Criteria are too subjective — translate to targetable attributes |
| **The Sales Test** | Sales team can identify if a lead is best-fit in under 2 minutes | Definition is too complex — simplify to 3-5 key criteria |
| **The Pattern Test** | 80%+ of your best customers match the definition | Definition is too narrow or wrong — re-analyze best customer data |
| **The Negative Test** | Less than 20% of churned customers match the definition | Definition isn't discriminating enough — add more criteria |

### Ongoing Validation

Revisit your best-fit customer definition every 6 months or when:
- Win rates change significantly
- Churn patterns shift
- You launch a major new feature
- You enter a new market
- Competitive landscape changes

## Exercise: Best-Fit Customer Definition

### Step 1: List Your Top 10 Customers
Rank by a composite of retention, expansion, usage, and satisfaction.

### Step 2: Fill in the Characteristics Table
For each customer, capture: industry, size, role of champion, tech stack, trigger event, previous solution, time to value, current usage level.

### Step 3: Identify Patterns
Which characteristics appear in 70%+ of your top 10? Those are your best-fit criteria.

### Step 4: Write the Definition
"Our best-fit customers are __________ at __________ that __________ and __________."

### Step 5: Validate
- [ ] Can I build a target list from this definition? (The List Test)
- [ ] Does 80%+ of my best customer base match this? (The Pattern Test)
- [ ] Does less than 20% of churned customers match this? (The Negative Test)
- [ ] Can my sales team use this to qualify leads? (The Sales Test)
- [ ] Can my marketing team target these customers? (The Ad Test)
- [ ] Is the segment large enough to sustain growth goals? (The Market Size Test)
