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Defining your Ideal Customer Profile
Your marketing strategy for B2B SaaS needs define companies and people to go after. Learn how to define your Ideal Customer Profile (ICP).
Once you have an understanding of your market segmentation, you now need to define the companies and people you should go after. This means defining the Ideal Customer Profile (ICP) and personas to reach so you can find their contact information. This allows you to understand which channels will help you reach this audience, the content that will be relevant for them, and what it will take to cultivate the digital relationship to convert your prospects into customers.
You can learn a lot about your future opportunities just by examining your current customers. Here, the goal is to extract data from your customer base and identify trends that will point you in the right direction to finding your ICP. Ask yourself:
- Where are you right now?
- Who are your customers?
- Who are your best customers?
- Who are your raving fans?
- Who are the customers that are costing you headache?
Write down your best 5 to 10 customers and what attributes they have in common. I usually find there are two types of characteristics that you will discover. Things that have nothing to do with you (like a customer’s size, their industry or location), and the attributes that make them a specific fit for what you have to offer. It is powerful to find as many of these attributes in both categories as possible:
- Company size (financial, people, customers)
- Revenue generated (split by one-time vs. recurring)
- Cost to service the client (client ROI)
- Job roles who need your solution (Jobs-to-be-Done)
- NPS/customer satisfaction data
- Industry, market segments they service etc.
- Technical tools that they use?
- Service/Solution partners they work with/depend on.
Aiming at your Ideal Customer Profile
Many early-stage companies define their TAM, and then stop. It’s usually a way to describe the size of the opportunity for investors, or to describe the Gartner Magic Quadrant they envision they can dominate one day. The problem is that a TAM is too broad for an effective GTM strategy – especially for younger companies. When you don’t define an ideal customer, it allows your marketing and sales teams to operate with a “spray and pray” mentality, trying to force product-market fit somewhere within your TAM. That’s inefficient, especially when you have limited money and time to get results. When you go after the wrong companies, write the wrong messages, promote the wrong value-props, and create the wrong content for too long, you run out of time to get results.
If the carrot grower above specialized in growing perfect, gourmet carrots, he or she could narrow their total addressable market to one that’s more serviceable such as, select provisioners like Harry & David, an American-based premium food and gift producer. If the grower’s carrots were on the small side but extremely flavorful, selling to carrot juice makers or pie bakers would be the way to go.
Creating an ICP forces you to segment that market to find best-case accounts for your company – so you can focus your time on strategies that are most likely to get you customers. It’s the most concrete way to define the SAM, the part of the market that you can Service.
What’s your ICP?
An ICP is an outline of your ideal customer – the ones you want more of. The ones that buy from you consistently and tell others about their great experiences. The customers that don’t churn. The customers that had a real pain and clearly saw your value proposition. The customers that had the shortest sales cycles and lowest sales friction.
Your ICP provides guidelines to your sales and marketing teams. It tells them which companies are a great fit – and what they should look for to find more that look like them. It should be the “North Star” for your team as they build your customer base.
To be clear, your ICP should not be used strictly to accept or reject all new prospects. There may be companies that fall outside of your ICP that are still a great fit for your product. Your ICP’s main job is to provide guidance for the companies you want to approach pro-actively, by investing in sales and marketing.
Finding your ICP does not need to be complex. If you’re struggling to find the right balance between a small enough target to focus, while big enough to be meaningful, start with lots of detail. When the time comes to size up your TAM (total addressable market), SAM (serviceable addressable market) and SOM (specific obtainable market), you can always remove certain filters to make your pool large enough to be meaningful. Building on your “best customer” list, you can use the following Segmentation methods to create your ICP:
Firmographics are characteristics of the companies where your customer personas work. Think about the companies that are the best fit for your company. A few sample questions you can answer are:
- What industry (or industries) are they in?
- How many people are in the company?
- How big is the department you sell into? Is there a minimum or maximum size that makes it ideal?
- Does your ideal customer fall in a specific revenue band?
- Where are your ideal customers located?
- How old is your ideal customer company?
- Are there any organizational changes that could affect their propensity to buy?
- Do they have partnerships that make them easier for us to sell to?
- What is their business model (i.e. B2B or B2C)?
These are the technologies your ideal customers use to run their organizations. Are there tools they use that make them a good fit? Some sample question to get you thinking:
- Does your product only integrate with a certain technology suite (i.e., does your product have any tech dependencies)?
- Does your product replace a certain older technology really well?
- Are there certain tools that tell you a company is trying to optimize a part of their business that your product helps with?
These are characteristics of the specific people that work at your ideal customer. Demographic segmentation criteria should not be confused with customer buyer personas that we will use for outreach and content development. Here we are talking about demographic attributes that tell you that a certain company or organization fits your ICP.
- What job titles do your ideal customers have employed?
- What age bands do they typically fall into? What kind of education do they have?
- What roles is your ideal customer recruiting for?
- How many people work in certain departments or roles?
This is the actual job your customer is trying to accomplish. It should be something that’s solved by your product or is tangential to the problem your product solves. It should also be findable – there needs to be a virtual footprint that tells us someone at a company is trying to do this job. You may be able to combine these with technographic data. For example, if someone is a Monday.com user, they’re likely trying to solve a project management problem.
- What are they trying to accomplish in their role?
- What “job” are they hiring their existing solution to do for them?
- What friction do they face in their current day-to-day?
- What pains are caused by the current way of doing things?
- What’s the “dream state”? If they had the perfect solution, what would it allow them to do?
- What is the event (or “switch”) that encourages someone to buy?
Filters vs. signals
As you build out your ICP, note which segmentation criteria are filters and which are signals. This is an important distinction. Filters are used to remove portions of the market from your consideration pool. You can use filters to create a shortlist of accounts you want to go after (this is usually your SAM). Within this final list, you can use signals to prioritize which accounts to prioritize. Signals are indicators that certain companies are better fits than others. They tell you which accounts are tier 1 vs. tier 2. This is also sometimes what’s the delta between your SAM and SOM, Serviceable and Obtainable Market.
Document it, and keep it fresh
Create a centralized document that gets sign-off from your leadership, sales, and marketing teams. Once you’ve defined your ICP, you can scope the size of your market and begin list building of the right companies and organizations. This is a crucial step in developing your account-based marketing strategy.
Don’t let your ICP sit too long without a refresh. Refine and update it with learnings on a regular basis. Include customer success, sales, and marketing teams in the conversation. As your company grows (and if you create multiple differentiated product offerings) you might consider creating different subset ICPs. There’s no one-size-fits all approach to this. Do what gets the best results for your company.