Potential Customer Meaning
Potential customers are a section of the advertisement audience who need the promoted product and can pay for it. A potential customer is yet to try or consume a particular product.
Potential customers have an observable need for it. For the same item, every competitor is a source of potential consumers. Thus, a business studies its competition. To gauge customer sentiments, businesses conduct consumer research and offer limited editions of a product.
Table of contents
- Potential customers are a section of the population who are the most likely to buy a particular product.
- Typically, there are two types of potential consumers—hot prospects and cold prospects. Hot prospects are the ones who show immediate interest. A hot prospect might likely make an immediate purchase. Cold prospects are the opposite.
- Every business wants to reach and convert the maximum number of potential consumers and achieve a larger customer base than its competitors.
Potential Customer Explained
Potential customers need a particular product and can pay for it. Although endorsements reach a varied audience, a particular section responds to them by buying the product. Therefore, businesses design their products and services by the target market.
A target market consists of different groups of individuals, households, and organizations. Businesses can create and implement effective marketing strategies if they know customers’ needs and preferences.
Businesses segment customers based on geography, demography, and buying behaviors. To gauge customer sentiments, businesses conduct consumer research and offer limited editions of product offerings. There are multiple steps before an actual product launch.
Further, a particular customer might purchase the same item from a competitor. Else, a customer might need a particular item or service but might know about various brands and alternatives. Businesses, especially, target these customers.
Thus, a potential customer is yet to try or consume a particular product. Businesses generate direct and indirect marketing leads to convert a potential customer into a repeat customer.
Now you can Master Financial Modeling with Wallstreetmojo’s premium courses at special prices
Best Financial Modeling Courses by Wallstreetmojo
Financial Modeling Course
* 12+ Hours of Video
Financial Modeling & Valuation
* 25+ Hours of Video
* Certificate of Completion
* 12+ Hours of Video
How To Identify Potential Customers?
Now let us discuss how to identify potential customers.
#1 – Market Research
Businesses know who they are targeting before executing marketing strategies; it is not a shot in the dark. For example, for a men’s hairdresser, every male in the vicinity who sports a beard or hairdo is a potential customer.
Businesses try to determine customer needs first and design the service or product accordingly.
#2 – Study Competitors
For the same item, every competitor is a source of potential customers. Thus, a business studies its competition. They look for opportunities where they can one-up their competition. A business tries to offer better quality, discounts, and attractive offers to persuade potential consumers away from their competition.
#3 – Networking and Referrals
Networking is a smart way of identifying prospects. Networking offers a feedback loop to the business. More feedback means more data. If the information is detailed, businesses can make better decisions.
In 2021, 92% of customers trusted referrals. Businesses have a 37% higher retention rate if they possess an established network. 65% of new customers are a result of networking and recommendations. On the flip side, new entrants struggle.
#4 – Promotion and Advertising
Promotion and advertising are traditional means of lead generation. When a product or service is advertised, it highlights its usage, importance, price, value, and aspects that attract customers directly or indirectly.
It also helps in building brand awareness. To record a sale, customers must first know that the service or product exists. Businesses with a larger marketing budget can orchestrate a combination of strategies known as the promotional mix.
How To Approach Potential Customers?
Now let us discuss how to approach potential customers.
#1 – Understand the Prospect
First, a business focuses on consumers’ needs and demands. If the product cannot satisfy the need or offer satisfaction, there are very low chances of converting a prospect into a customer.
#2 – Personalized Marketing
Everyone likes a personalized approach. It creates a customer perception that the company cares about them. It could be a personalized text, a tailor-made advertisement, or a compelling conversation.
#3 – Networking
Through networking, businesses receive referrals and convert them into customers. The network acts as an intermediary between the manufacturer and the customer. The network is also responsible for conveying product information.
#4 – Insightful Strategies
Social media, digital marketing, and emails are becoming indispensable in the digital age. Fundamentally, content marketing is a cheaper alternative to traditional advertising.
These innovative strategies are better at isolating target markets. This way, marketing expenditure is brought down. Potential customers are the ones who consume content that revolves around a particular product in the first place. For example, enthusiasts who consume automobile content are more likely to purchase enthusiast-centric cars.
Let us sample some potential customer examples to understand the concept better.
Felicia opens a spa and salon in her village’s local market. Technically, all the women residing in the village are potential consumers.
Felicia opens a small stall at the annual village fair; she distributes discount coupons for shampoo products and markets fish manicures.
Felicia’s services and products are target centric. The village fair creates awareness among prospects. The demand for the service already existed. The fish manicure was unheard of. Out of curiosity, many new customers decide to give it a try.
The innovative nature of promotion led to quick conversion (prospect to customer).
Let us assume that a school hosts a website. During the admission season, the website encounters organic visitors. Despite the traffic, only a small percentage admit their child into the school.
Justin is the school principal. He recognizes the potential (website). Justin attempts retargeting; it is also known as online remarketing. Targeted online advertisements were sent to individuals who visited the website in the last 9 days.
Justin retargeted a section of potential customers; some returned to the website and admitted their wards into the school.
Frequently Asked Questions (FAQs)
Businesses can find a customer base by following these steps:
– Categorize customers based on geography, demographics, age, gender, culture, location, and behavior.
– Study the competitors.
– Conduct customer behavior analysis.
– Use networking to create a feedback loop.
There are several ways to find potential customers online:
– Create a strong digital presence.
– Create a website.
– Create and maintain an active social media presence.
– Work on search engine optimization.
– Run ad campaigns.
Fundamentally, content marketing is a cheaper alternative to traditional advertising. It is better at isolating target markets. This way, marketing expenditure is brought down. Potential customers are more likely to consume content that revolves around a particular product in the first place.
This has been a guide to Potential Customer and its meaning. Here, we explain its identification, approach, and different examples. You can learn more about it from the following articles –