It’s 2021, and marketing should be entirely data-driven by now. Right? Not quite. While large portions of marketing have given themselves up to analytics and automated processes, a significant chunk of marketing strategy relies on educated guesswork. How often have you created a buyer persona and generated content to serve them only to realize you’ve missed the mark?
Analytics can bring a wealth of insight into the buyer persona creation process. However, many firms and agencies hesitate to introduce data-driven methods when they go about getting to know their customer. B2B buyers rarely Google products and this might convince you that a data-driven process will fall flat on its face. However, this isn’t true.
Here are 4 ways in which quantitative methods will help you create better personas and a pricing strategy that drives growth.
Position Yourself to Appeal to High-Value Customers
Every business loves high-value customers. They’re the ones that pay the most and keep coming back for more. However, most marketing teams lack clearly defined metrics for what constitutes “high-value”. The standard approach is to push as many people as possible into the funnel and hope the high-value people identify themselves.
The key to growing your business is to define clear metrics and qualities that can help you identify a high-value customer. You can then focus on attracting similar customers who conform to these metrics. Tying your high-value customer metrics to personas removes the guesswork from the persona creation process.
For example, if you have data on existing customers, find out who they are in real life. Begin with simple questions such as what is their role? Which industry do they work in? What is the size of their company? Who do they report to within their organization? How well do these people correlate to your existing buyer personas?
Revenue metrics such as monthly recurring revenue (if you’re a SaaS company) or average purchase value will help you identify your best customers. Get to know them better by either interviewing them or using tools such as Clearbit, Zoominfo, or Adapt. These tools will help you answer the questions noted previously.
The key to revenue growth is to use these customers as your buyer personas and target people similar to them. Your sales and marketing teams will have real data on who your prospects are and will align with one another better. By using the tools mentioned previously, you can target people in similar companies and grow sales.
What if you’re just starting out and have no existing data to work with? In this case, the approach favored by Alex Bennett, Chief Content Strategist at content marketing agency Red Mallard, works well. Bennett notes that he uses tools such as SEMRush to gain insight into competitor traffic, Google Analytics to figure out existing traffic, and deep interviews with clients to understand who their customers are.
He concedes this isn’t a perfect method. However, using analytics to build initial personas is a far better approach than using vague adjectives to describe prospects that don’t mean anything to your sales team. For example “Busy Bee Mindy” might be driven, motivated, and partial to using Slack, but this doesn’t give your sales team anything to work with.
It doesn’t accurately tell them what her role is nor what her pain points are. Even if you can guess her pain points, they need to be validated using data. Neglect this, and you’ll create irrelevant content that wastes everyone’s time.
Align Marketing to What Customers Value
One of the keys to achieving consistent growth is to package your product appropriately for each buyer persona. Customers will stick around and accept upsells only when they receive value from you. Therefore, the key to successful sales is to figure out what each of your personas value.
Of course, this is easier said than done. Before diving into the different ways you can research what your customers value, take some time to measure your churn rate. High churn implies an improper value proposition. You might be mixing different value propositions into a single offer to each persona.
Surveys and interviews are some of the best ways of gathering data about your customers. As Bennett notes, you can never speak to enough people because you never know where insight might come from. This doesn’t mean you should interview every single person on the planet. It’s just that you should tailor your surveys and response options appropriately.
For example, many marketing teams send surveys that have respondents rank their preference on a scale of 1-10. For example, their answer to “I need analytics in my software suite” is ranked from “not important” (0) to “extremely important” (10). Marketers use data from these surveys to figure out value propositions.
The problem is that by giving respondents too many choices, you’re only going to confuse what they value. Someone who has no use for analytics might mark their response as a 6, while someone else who values it to a higher degree might mark a 7. Does this mean both sets of users want analytics? Conclusions drawn from data like this is what leads to messy value propositions.
Instead of providing a whole host of options as responses, it’s a good idea to ask for absolute answers. Replace the 1-10 scale with “Most Preferred”, “Neutral”, and “Least Preferred”. This method might not be perfect, but it reduces your margin of error.
Plot the frequency with which each product feature was the “most preferred” across a large number of users, and you’ll have a clear idea of how to market it. Map this to the different personas you have, and you can then begin to match value propositions to personas.
Using data like this is an iterative process. You’ll need to go back and ask individual personas more questions about the product features they thought were relevant. As a clear picture of their values emerges, your sales team can begin tailoring their approach to them.
Ideal Pricing for Each Persona
Figuring out what your personas want is one thing. Figuring out how much they’re willing to pay is another. Perceptions of value and prices are closely tied to one another, and you risk making a negative impression by charging too much for your product. Charge too little, and you’ll leave money on the table.
Many businesses take pricing cues from competitors, but all this does is begin a race to the bottom. Adopting a value-based pricing approach, where you tie pricing decisions directly to each persona’s values, is far more beneficial. The question is, how can you do this?
Interviews and surveys should once again be your preferred methods. However, your questions should be structured to give you actionable data. The best method to follow is the van Westendorp model. Here are the 4 questions that you need to ask your prospects according to the model:
- At what price would you consider the product/service to be priced so low that you feel that the quality can’t be very good?
- At what price would you consider this product/service to be a bargain—a great buy for the money?
- At what price would you say this product/service is starting to get expensive—it’s not out of the question, but you’d have to give some thought to buying it?
- At what price would you consider the product/service to be so expensive that you would not consider buying it?
Plot the responses to each question on a graph to determine the sweet spot where customers find value in your products, as well as think it’s worth the price you’re asking for it. The result is usually a price range that you can then refine depending on the extent to which you want to maximize customer LTV.
Like with value propositions, you can map prices to each persona and figure out exactly what you need to charge each of them. The result is a pricing strategy that is grounded in reality and takes your customers’ needs into account, instead of trying to undercut your competitor’s prices by default.
Persona Costs
You now have clearly defined personas and a pricing strategy for every one of them. It’s time to profit, right? Not so fast. Pricing strategies don’t take customer acquisition costs (CAC) into account. Your customers might be willing to pay you $100 per month for your service. However, if it costs you $101 to acquire them, your effort isn’t of much use.
A key point that many marketing teams ignore during the persona creation process is whether they can afford to attract that persona to them. Answering this question is key to aligning your sales and marketing efforts together, and to creating relevant content for your personas. You might find that the most valuable persona might be the one willing to pay less than top-dollar simply because they’re easier to attract and generate greater bottom lines from.
Many companies have different thresholds for this, but an LTV to CAC ratio of 3 and greater is considered the bare minimum. When you’re starting off without existing customers, calculating CAC is tough. However, you can estimate these costs by surveying your prospects for the products they currently use. Examining the channels that these products advertise through will give you a rough estimate of what their CAC is.
You can follow the method espoused by Ada Chen Rekhi, founder of collaborative note-taking app Notejoy and former SVP Marketing at SurveyMonkey. First, estimate the percentage of users who visited the offer page, who then signed up for a trial.
Next, estimate the percentage of users who then paid after opting for the free trial. Multiply these two percentages. Divide the estimated CPC by this number, and you’ll have the CAC. Note that you can create a range of CACs by estimating different conversion rates.
Quantitative methods like these might be overkill for some companies. However, if you’re offering a free trial and have existing customers, it makes sense to calculate your CAC in this manner. Once you’ve calculated the CAC, you’re now ready to put all of these data points together and create a coherent pricing page.
Your pricing page’s copy should clearly differentiate between your personas through category names. The value proposition for each persona has to be communicated clearly, and price points must reflect both your personas’ willingness to pay as well as their CAC.
An Iterative Process
When starting out, a quantitative process might seem like overkill. However, it’s helpful to install a quantitative framework to your persona creation process. This will help you incorporate data into future customer segments and drive better insight into your marketing goals.
Best of all, aligning your sales and marketing teams is easy when you conduct a quantitative buyer persona creation process. It’s time to ditch guesswork in persona creation and use data to build better marketing strategies.