Using the Ideal Customer Profile (ICP) helps identify, source, and prioritize your best prospects – but how do you create an accurate ICP in the first place?
First, let’s level-set on why you should go through this exercise in the first place.
Two words: finite resources.
It takes time, money, and people to attract, convert, and delight new customers!
And as a savvy business professional, you want to ensure the allocation of resources to those prospects who will deliver the best return. You can’t market to everyone.
Besides ensuring that your existing customers are a long-term fit, the ICP also tells your teams about needed resources to keep them feeling valued, supported, and part of your community once all new customer activities subside.
If you know your ICP well, then you’ll be aware of how you can solve their pain points now and in the future.
What is an Ideal Customer Profile?
An ICP is a combination of firmographic and behavioral characteristics that define an organization’s most valuable customers. By creating a general profile of an organization’s best accounts, sales and marketing teams can develop measurable strategies that convert these top buyers.
Company firmographics (the set of qualitative and quantitative characteristics of your best-fit accounts) define your Ideal Customer Profile. The company-level ICP is often confused with the buyer persona, which focuses on the qualities of the individual buyer.
Alignment with Sales and Marketing
Developing an ICP is a strategic exercise that must involve the alignment of sales, marketing, and leadership, as well as the development and agreement on the definition and parameters of the characteristics feeding into that definition.
Sales and marketing alignment is critical to business growth. For skeptics who think otherwise, consider the following: Companies whose sales and marketing teams work together see 36% higher customer retention and 38% higher sales win rates (source).
An ICP can inform your entire sales and marketing strategy, from content creation to advertising to sales outreach, by answering critical questions.
How do you rally? Help sales and marketers understand what a good ICP can do for them:
- What type of messaging resonates with your best customers? Increase effectiveness from focusing the efforts of your teams on repeatable and scalable strategies that reach and nurture the right prospects with the right message.
- Better yet, what factors disqualify them from buying? Shorten sales cycles by reducing time in the awareness stage of the buyer’s journey. Qualified prospects may already be using your competitor or looking for services like yours.
- How do you communicate your value proposition? Better fit prospects and opportunities won turn into better-fit customers who have a lower churn rate
- Increased closed-won deals – those entering the pipeline are more likely to have the budget, interest, and talent needed for your product to have value.
Sold yet? (How could you NOT be?) Now, let’s get into the “how you do it”. Keep reading to see how we define ICP and our best practices for creating Ideal Customer Profiles!
Steps to Creating an ICP
1. Find the Data.
Start simply: Take stock of your current customer base and uncover their common characteristics. This includes using a mix of quantitative and qualitative analysis.
The ICP can be as detailed or general as your team needs it to be. A few basic characteristics to consider are company revenue, employee headcount (either the entire company or within a relevant department), industry, location(s), or job titles.
Export opportunity data from your CRM and append account information as needed. Then build it out with more data points relevant to your activities and industry.
Then, look for patterns. It’s different for every business. You might notice that they are concentrated in a particular region of the country, a certain industry, a similar size, or involve a specific buyer.
2. Identify Your Best Customers.
Don’t just look at your entire customer universe, but hone in on your very best customer universe.
Start by building out a list of your best customers. The term “best” is subjective; stakeholders throughout the entire organization must agree on the criteria.
Criteria vary by the organization and you’ll need to determine what “best” means to you. Here are some common points:
- Highest NPS (Net Promoter Score)
- Highest ACV or TCV (Annual Contract Value or Total Contract Value)
- Highest potential for growth
- Highest retention rate or longest time with your company
- Highest Customer Health Score
You should also consider the customer accounts that have been the most profitable. Once you have come up with your criteria, repeat the exercise above. Aggregate the data and look for patterns or similarities amongst this cohort.
Additional Customer Profile Considerations
Those attributes alone may be enough to create your ICP. However, we recommend going deeper.
Customer Lifetime Value (CLV): Calculate total CLV–the total net profit a company earns from any given customer over the course of the relationship. From a forecast and planning perspective, CLV helps companies determine how much to spend on customer acquisition.
Referrals: Your “best” customers may not necessarily have the highest CLV. Highly satisfied customers add additional value in the form of referrals. Statistics show that 84% of B2B decision-makers start the buying process with a referral. Additionally, the majority of sales and marketing professionals agree referrals close faster (source).
Product/Service Usage: The frequency at which customers use your product or service can go a long way. If applicable, drill down feature-by-feature to determine how marketable specific functionality within your offering is.
Customer Advocacy: Your “best” customers may also be the companies most willing to publicly advocate for your product or service. This can include participation in case studies, online reviews, and more. Don’t discount this in your analysis; 90% of consumers say they trust online reviews as much as personal recommendations (source).
Prominent Brands: Customers with established brands provide your organization with credibility and brand equity.
3. Find the Similarities.
Some patterns may jump out at you. Others may be harder to see at first glance.
Here are some questions to ask to get you started:
- Do they have a geographic location in common?
- Are they all organizations in the same stage of life?
- Are they in a similar industry?
- What’s the employee count at these customers?
The granularity of your data and segmentation tools is the only limitation here.
This set of characteristics of your best customers becomes the foundation of your ICP. You know it represents your best future customers because it’s based on your very best existing customers.
4. Prioritize and Implement.
Based on the results of your evaluation, develop a best-fit rating rubric to see how well an account aligns with your Ideal Customer Profile. You can then use this rating system to prioritize and align your resources and strategies, as well as identify future target companies and leads.
Here’s an example:
- Best Fit: US-based companies, with over 500 employees, who manufacture and sell software security
- Good Fit: North American companies, with over 200 employees, who distribute software security
- Bad Fit: Non-North American based companies, with less than 100 employees, who do not manufacture or distribute software security
This works in prioritizing and qualifying inbound leads – prospects that have come to your organization – to determine how you follow up or if they get passed to sales.
It also provides strategic direction for your outbound or account-based target lists.
The Ideal Customer Profile is the North Star for your sales and marketing teams; if a company does not fit the ICP, there’s a good chance they’re not a good fit for your product – so don’t waste your time drifting around aimlessly in the vast ocean of prospecting possibilities.
Last piece of advice? Revisit your ICP data to evaluate fit ratings over time – say, once a year – and also to reassess resource allocation and strategies. Bon voyage!
This post was updated April 8, 2020