Part 1: Building Your Ideal Customer Profile
What is an ICP?
If you’re running an account based sales or marketing program, it’s critical to spend some time defining your ideal customer profile (ICP). An ideal customer profile is a description of the company that’s a perfect fit for your solution — they benefit greatly from your product, and you also get significant value from having them as a customer.
If you’re a new company, or if you recently transitioned to an account based approach, you might be saying “But we’re doing well without it — we’ve gotten a lot of interest and we’ve closed some great deals.” Why limit yourself, right?
It’s totally normal for startups to take any and every customer they can get (we’ve been guilty of it at Groove) — you’re excited by the interest in your product and you’re eager to get some cash in the door. I get it. But there are some potential problems with selling to anyone and everyone who shows interest:
It wastes your sales team most precious resource: time. When a deal isn’t a solid fit from the beginning, it’s likely to take too much effort from your reps and they’re less likely to close anyway.
If you’re selling to companies that aren’t a great fit for your product or service, your customers will eventually notice that you aren’t the best match for their needs. You’ll likely see higher customer churn rates than you would with a solid ICP.
Building your ICP
Let’s look at how to build a profile for your ideal customer. If you already have a good number of customers, that’s great. It’s time to dig into your analytics tools and look for customers who are the most valuable. That means you want to look at companies with the highest lifetime value (how much they pay you now, and how much you stand to profit from the relationship over its lifetime). Among the customers with the highest LTV, dig in and look for similarities. What industries are you seeing most? What size companies are you seeing most? Are there other commonalities?
If you don’t quite have enough customers yet, here are some questions to help you identify your ideal customer.
What are the top companies that you would like to have as customers? What do they have in common?
Think through what problems your product solves. What kinds of companies are likely to care about these problems the most? Which would feel the most impact if these problems were solved?
How does your product stand out from your competitors? For example, if customization is a big differentiator, then maybe you should be more enterprise-focused. If ease of use and administration is a big differentiator, maybe SMB is the best market for you.
What size company cares most about the problem you’re trying to solve? See if you can narrow your ICP to large companies or the SMB market.
Is there a product that a company must use to benefit from your product? For example, Groove customers must use Salesforce.
Is your product better suited for a particular industry (manufacturing, entertainment, tech, etc.)? Highly regulated industries such as finance and healthcare have unique security and compliance requirements that not every company is ready to meet.
Is the cost of your product prohibitively expensive for certain types of companies (such as smaller companies, or companies that have low operating margins)?
For many companies, time is as important as money. How much time does it take to set up and administer your product? What roles are required? Sometimes, large companies have staff that can handle setup and admin, but smaller companies will likely need (and expect) your help. What makes sense for you?
Analyze and adjust
This might seem like a lot to consider, but there’s good news: There’s nothing wrong with having multiple ICPs in the beginning. My advice is to track your results in Salesforce, including:
Closed vs. lost opportunities
Then you can narrow down to the ICP that delivers the best results for you. And your ICP may even evolve over time as your company grows, so it’s a good idea to continue tracking results, and testing new ICPs if you suspect something has changed. That’s exactly what we did at Groove.
Initially, we targeted larger enterprise customers because Groove is so customizable, and our data storage model aligns with many large companies’ security and compliance requirements. We stood out from our competitors in those two areas, and some of our first customers were banks and Fortune 500 companies. But since then, we’ve shifted the product’s focus to usability (at the expense of customizability), and our feature set has evolved accordingly. Now, Groove is best suited to innovative companies that are growing rapidly. We consider a company’s industry and number of employees less than their funding (whether they have it and how much), their growth rate, and their number of employees in sales.
In my next blog, I’ll go over how to use your ICP to build out your account and contact lists in your CRM, and how to train your reps and build messaging for your new ICP. Sign up for our newsletter to make sure you don’t miss it.
Need a hand building your ICP? Grab a copy of our ICP worksheet (it’s free).