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Why Defining Your Dream Customer Will Make Your Life Easier & Your Business More Money

We’ve all heard the saying “the customer is always right”. In a crowded world where customer service is a genuine differentiator for a business, this is a difficult adage to ignore. 

But is it true? Doesn’t customer feedback help us refine our product or service? Our answer is well, yes, but provided that the customer feedback is from the right customer for your business.

“But if they’re paying for my service or product, they are the right customer for my business!”


We hear you, and yes, if they’re paying $15.00/month for your service/product like everyone else, then we can see why it would appear they’re all of equal value.

However what we see so many businesses failing to consider is what the cost of that particular customer is to the business. A customer that costs more to the business is of course less profitable, and therefore lower value.

The Different Ways A Customer Is Costing You Money

  • There’s a cost to acquire a customer. This might be in advertising dollars spent, time spent on the phone with your sales people, or time it takes to onboard them.
  • There’s a cost to retain the customer. How many resources or how much time from your team do they require to keep them happy? How many times a day do they email you with useless questions, or are unnecessarily rude and demanding of you or your colleagues?
  • What’s their customer lifetime value? Customer lifetime value means, based on the data that you have about them, how much can we expect this client to be worth to our business over their lifetime (i.e. before they no longer pay for our services/product). Is it worth the time and effort of getting a customer who is only likely to be with us for 3 months?

Let’s Use An Example

Let’s use a fictional example below to visualise how different customers can be worth different amounts to your business. 

Our fictional business is an online Yoga subscription service, where for $15.00/month you get access to live online classes. We’ll look at three different types of customers who have subscribed to this service.

Customer 1 – ‘James’

Persona: James is a 28 year old, time-poor investment banker who is looking for a way he can exercise in his own time.

Cost To Acquire: As a young, relatively high income earner looking for a release, James is the target of many other exercise companies’ advertising. He’ll take some convincing, as Yoga isn’t really mainstream for men his age.

Cost to acquire is $25 in Facebook Ads

Cost To Retain: Grumpy James regularly complains about the service, and keeps emailing about wanting higher energy workouts that make him ‘feel’ it more. This costs $20/month in time for someone to take the time to reply to his emails and make him feel heard. 

Cost to retain is $20/month.

Customer Lifetime Value: James tried a little bit to get into Yoga, but his heart was never really in it. He quits his membership after 3 months, instead looking for something that’s higher energy.

Customer Lifetime Value: $15 x 3months = $45

Total Value of Customer: We made $45 off James for the 3 months he subscribed to our Yoga service.

It cost us $25 initially to get him as a customer, and $20 a month to keep him happy. This is $60 over 3 months. 

Total Value: $45 – ($25+$60) = -$40.

James has actually cost our business $40. 

PersonaCost To AcquireCost To RetainCustomer Lifetime ValueTotal Value of Customer
James$25$20/month$15 x 3months = $45$45 – ($25 + $60) = -$40
James ended up costing our business $40

Customer 2 – ‘Mary’

Persona: Mary is 65, semi-retired lady who has dabbled in both yoga and pilates before. She wasn’t sure which one she would like more, but wants to do it online to get the basics right before going to in-person classes.

Cost To Acquire: As someone who is likely to have a bit of money and free time, companies are competing heavily for Mary’s attention.

It costs $15 in Facebook Ads to convince her Yoga online is her best option

Cost to acquire is $15 in Facebook Ads

Cost To Retain: Mary isn’t very tech savvy – she regularly has to call the customer support line because she “can’t get her zoom working”. Customer support tries to help her fix the issue every time. This costs $30/month in time for someone to help Mary.

Cost to retain is $30/month.

Customer Lifetime Value: When Mary can get the Yoga service to work, she loves the classes. However the ‘technical difficulties’ become too much, and she gives up after just one month.

Customer Lifetime Value: $15 x 1month = $15

Total Value of Customer: We made $15 off Mary for the 1 month she subscribed to our Yoga service.

It cost us $15 initially to get her as a customer, and $30 a month to keep her happy. This is $45 over 1 month.

Total Value: $15 – ($15+$30) = -$15.

Mary has actually cost our business $15. 

PersonaCost To AcquireCost To RetainCustomer Lifetime ValueTotal Value of Customer
Mary$15$30/month$15 x 1months = $15$15 – ($15 + $30) = -$15
Mary ended up costing our business $15

Customer 3 – ‘Sarah’

Persona: Sarah is a 33 year old young mum who works part time, and used to love practicing Yoga in the studio but now needs something she can do at home.

Cost To Acquire: Sarah clearly loves Yoga, so it was easy to target her online. It costs $5 in Facebook Ads to convince her to join

Cost to acquire is $5 in Facebook Ads.

Cost To Retain: The classes are the perfect pace for her, and she’s technically savvy enough to not have any issues. Sarah costs $0 to retain.

Cost to retain is $0/month.

Customer Lifetime Value: Sarah keeps her subscription for 5 years, until her bub is old enough to go to school, at which point she decides to go back into a physical studio.

Customer Lifetime Value: $15 x 60months = $900

Total Value of Customer: We made $900 off Mary for the 60 months she subscribed to our Yoga service.

It cost us $5 initially to get her as a customer, and $0 a month to keep her happy.

Total Value: $900 – ($5+$0) = $895.

We have made $895 off Sarah.

PersonaCost To AcquireCost To RetainCustomer Lifetime ValueTotal Value of Customer
Mary$5$0/month$15 x 60months = $900$900 – ($5 + $0) = $895
We made $895 off Sarah

Your Dream Customer & The Pareto Principle

As it turns out, the Sarahs of the world are our Dream Customer. If our Yoga business focuses their service on Sarahs, we’ll have lower acquisition costs, retention costs, and an increased customer lifetime value. The ‘Sarahs’ currently only make up about 20% of our total customer pool, but are driving 80% of the profit for the business. 

The idea that 20% of your customers are driving 80% of the value is so well established that it actually has a name – The Pareto Principle. It originated from Pareto, an economist who noticed that 20% of the pea pods in his garden provided 80% of the peas when harvested. He investigated further, and noticed the same pattern in wealth and income distribution. This principle is applicable to many aspects of life and is well founded (one of my favourite advocates of The Pareto Principle is Tim Ferris in his book The Four Hour Work Week). 

Try and apply it to other areas of your life? Your wardrobe for example – do you wear 20% of your clothes, 80% of the time? What about your time management – does 20% of your time create 80% of your productivity (think of all the useless meetings you get pulled into)? 

Once you identify your 20% of customers that are the greatest value to your business and focus on them, the growth that results can be astounding. 

If you’re not sure how to identify your 20% (i.e. your ‘Sarahs’), or if you’re trying to find a niche within your own market, check out this article on how to define your dream customer.

I'm George, an embarrassingly passionate B2B marketer. There's nothing I love more than helping small/medium sized businesses grow. That's why while running my B2B marketing agency Wayves, I'm working on The B2B Playbook - a resource that any business owner or marketer can follow to help their business grow online.

When I should be sleeping I'm usually either deep in a YouTube rabbit hole analysing my subpar (in the bad way) golf swing, tickling the ivories (playing the piano), or indulging in my guilty pleasure - a reality TV series called 'Below Deck'.

As a former lawyer, I've always believed that with the right plan, and the right people to help along the way, anything is achievable.

That's my goal for The B2B Playbook. To make the Playbook the 'right' plan, and make it readily available for smaller businesses to help them grow.

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