Defining the Gray Area Between Stretch-Fit and Bad-Fit Customers
Your product or service is not going to be right for everyone. And just because you can sell a customer your solution, doesn’t mean you should. But where do you draw the line on customer fit? When is it OK to push your selling boundaries? And how do you know when you’ve gone too far?
When assessing a customer’s fit, defining what’s a reasonable stretch versus a fundamental mismatch is murky territory. Conflating or wrongly defining these groups has long-lasting consequences including increased customer churn, reputational damage, and cross-functional animosity. While the whole organization plays a role in defining customer fit, Customer Success is the one who’s forced to bear the brunt of a bad-fit customer’s unhappiness and frustration. But by putting in the upfront work to clearly define your range of customer fit, you can avoid both customer heartaches and headaches – building greater trust across your market, customer base, and organization.
In this article, we’ll cover:
- What’s an Ideal Customer Profile?
- What’s the Difference Between a Stretch-Fit and Bad-Fit Customer?
- What’s the Cost of Selling to a Bad-Fit Customer?
- How Can Customer Success Better Influence Customer Fit?
What’s an Ideal Customer Profile?
Before you can understand the differences between a stretch-fit and bad-fit customer, we first need to set the context with Ideal Customer Profiles (ICPs). Establishing a clear definition of your ideal customer and identifying their attributes is one of the main determinants of your company’s success. Your ICP dictates everything from the product features and functionality you build to the words you use and the emotions you evoke in your marketing. ICP factors may include a customer’s readiness, willingness, capabilities, success potential, acquisition efficiency, expansion potential, and advocacy capacity.
Who Should Define Your ICP?
Every department that touches the customer during their lifecycle should be involved in defining your ICP – particularly Product, Sales, Customer Success, and Marketing. Because your market, product, and customers constantly evolve, actively revisiting your ICP is just as important as its initial creation. Treat your ICP as a living document that changes as your context does.
Should You Ever Sell Outside of Your ICP?
Yes, you WILL sell outside of your ICP; that’s to be expected and is not Sales being irresponsible. Very few organizations, if any, only sell to customers who fit their ideal profile. Part of the reason your ICP changes is from purposely pursuing customers who might be slightly outside of your ICP and testing whether you can successfully service them. As the functional group that’s closest to the customer and chiefly responsible for their success, this is where Customer Success can help refine the differentiation between your stretch-fit customers and your bad-fit customers.
What’s the Difference Between a Stretch-Fit and a Bad-Fit Customer?
Let’s start by defining the traits of each customer type.
For a customer to be considered a stretch fit, they must meet the following criteria:
- You can deliver initial value.
- You can deliver required future value in a reasonable timeframe. There’s no hard and fast rule on what constitutes a reasonable timeframe as it will depend on your products, contracts, and buyers. But you must be able to solve some problems for the customer during this interim period.
- You can service customers by solving for broader use cases shared among your customer base.
For a customer to be considered a bad fit, they must meet the following criteria:
- You cannot deliver immediate value, nor can you deliver required future value in a reasonable timeframe.
- Marked by an inherent misfit between the organization and customer’s structural or ideological makeup.
- You can only service customers by solving for individual problems, not broader use cases.
Distinguishing between a stretch-fit and bad-fit customer can be difficult. Sales tends to believe that a bad-fit customer is a stretch-fit customer. Conversely, Customer Success tends to believe that a stretch-fit customer is a bad-fit customer. The truth is in the eye of the beholder.
But the reality is that there’s no hard line to draw a distinction between these two fits. You need to consider the larger, practical application of your solution. If a customer requires one-off work or functionality that you’re not designed to support, or if you don’t see their request solving a prevalent problem for many customers, then they’re too far out of your ICP’s scope.
Also, when dealing with stretch-fit customers, it’s important to know your boundaries. Sales should conduct more upfront vetting to thoroughly understand a stretch-fit customer’s limitations and set reasonable expectations to prevent burning a bridge with not only the potential customer but internal teams as well. But that’s not the only harm that comes with selling a bad-fit customer.
What’s the Cost of Selling to a Bad-Fit Customer?
For subscription businesses, selling to a bad-fit customer damages your revenue and your reputation. Bad-fit customers are more likely to leave early and never upgrade or renew. They become your “squeaky wheel” customers who are never happy, eating up all your support and training resources. A heavy focus on them can deliver a below average customer experience to your best and happiest customers who you inadvertently neglect by only giving an ear to the loudest voices in the room.
And the voice of an unhappy customer carries – reverberating off review sites to social media to one-on-one conversations. Knowing this, over time, your negative customer reviews can easily start to outnumber and drown out the positive ones you’ve worked to surface and build.
Of course, disqualifying a bad-fit customer before they enter your sales funnel is the ideal scenario. But if a bad-fit lead does slip through, the faster you weed them out, the better. Because it’s not just the customers who churn that you have to worry about dirtying your name. The later a lead is disqualified, the more likely they are to walk away with a bad impression of their experience.
On average, your Sales team should disqualify about 20% of the leads they receive. If they disqualify less than that, you might have bad-fit customers who are sneaking in. And if they routinely disqualify more than that or spend a disproportionate amount of time on lead qualification, that may be a sign there’s something off with your lead generation activities.
How Can Customer Success Better Influence Customer Fit?
Because Customer Success hasn’t traditionally been rooted in data, there tends to be more emotional reactions to customer fit when it’s not perfect. If Customer Success wants to influence or participate in conversations about ICP, the best thing they can do is ditch the anecdotes and approach these discussions with a clear data mindset. If you want to legitimize concerns about bad-fit customers, you need to substantiate your claims. What proof points and metrics are you citing? What’s your baseline to identify where and how the fit is off? How are you questioning your own stance on what an ideal customer is based on your actual results? Take a step back and listen to what your customer data is telling you.
Make Customer Success the Conductor
At first blush, it makes sense to assume that retention is a Customer Success problem. But the reality is, at a certain point, there’s only so much a Customer Success Manager can do to prevent churn when a customer is a bad fit for your solution from the start. Customer Success will never be able to achieve your company’s retention numbers alone. There are simply too many variables for one team to control. After all, customers choose to renew, or not to renew, based on a number of reasons and experiences.
So, instead of expecting your Customer Success team to improve retention on their own, make them a conductor. Expand their role to organize, monitor, and improve the work of any team whose function supports retention and affects churn. Your Customer Success Managers should maintain an open line of communication with Sales, Product, Customer Support, and Marketing. Like the conductor of an orchestra, Customer Success Managers can’t play in every chair, but they can help put the players in the right positions and unify their vision and voice.
For more resources on the role of customer fit in retention, check out:
- [Webinar] Should New Sales be Held Accountable for Churn?
- [Blog] Churn Monster: Bad-Fit – our blog series that looks at life-like scenarios involving our “Churn Monsters” with a plan of action to defeat them
Customer Success Around the Web
- 3 Strategies for Best-In-Class CSM Onboarding– Learn three areas to consider in order to ensure your team onboarding is effective.
- How Customer Success Leaders Can Weather (Or Avoid) A Labor Crisis– Discover steps to take to ensure your CSMs are in it for the long haul and feel fulfilled and rewarded in their position.
- How to Create an Effective Customer Journey Map– Find out how to map out your customer’s journey using these examples and templates.
Fighting Churn is a newsletter of inspiration, ideas and news on customer success, churn, renewal and other stuff and is curated by ChurnZero