How to create a powerful ideal customer profile (ICP)
Your ICP is a core element of your go-to-market strategy and crucial for your sales and marketing success.
In a lot of my previous articles (e.g. How to grow from 10 to 100 paying customers or Launch your B2B SaaS startup with a powerful Go-to-market strategy), I wrote about your ideal customer profile (ICP).
Your ICP is a core element of your go-to-market strategy and crucial for your sales and marketing success.
You will see that having a clear ICP results in high-quality leads that will show better conversion rates (because they resonate with your messaging, your value proposition, and your product), a shorter sales cycle, and more happy paying customers (with a higher NPS score). This also means that fewer customers will churn (lower churn rate) because they see the value in your product, and you will see more referrals coming in. So you will increase your average customer lifetime value.
What is an ideal customer profile?
For B2B businesses (vs. B2C businesses) your ICP describes a (fictitious) company that is most likely to benefit from and buy your product. Lots of people also talk about buyer persona, which rather refers to the person who is involved in a purchasing decision at the company (your ICP). So when you sell a B2B SaaS product, your ICP is the company, where a specific buyer persona (e.g. Head of HR) is in charge of the buying process.
But to better understand your ICP (ideal customer profile) we need to have a closer look at the difference between a target audience vs. potential customers vs. your ICP.
In the following, I'm referring to a great model by Myk Pono (Ideal Customer Profile (ICP): How To Create A Comprehensive Customer Profile).
Your larger target audience is this part of the market (= segment) that all share the same pain points, meaning they all face similar challenges/problems you are trying to solve with your product.
But just because they feel and suffer the same pains, this does not necessarily mean they all want the same solution for their problem. You normally can solve pains with multiple solutions.
Here are some examples of pains and different ways to solve them:
Hiring new developers is hard —> Increase recruiting budget; Hire dedicated recruiter; Write better job ads; Better employer branding...
Having not enough customer insights in CRM —> Train sales reps on CRM; Automate CRM Steps; Hire a Sales operation manager...
So this being said, your target audience simply shares the same pain points. Some examples of different target audiences for different business ideas:
sales enablement software (reducing onboarding time for new sales reps)—> VP of sales; head of sales
social media scheduling software (reducing the time per posting by 50%) —> VP of marketing, head of marketing
hr software for recruiting (to hire 2x faster with a build-in integration to all job platforms) —> VP of people; head of recruiting
👉 Target audience = Pain Points
But sharing the same pain points does NOT necessarily mean that the way you address the problem is a fit for them.
Your potential customers are a subset of your target audience. They do not only share the pain points, your product is also a fit for them (Pain Points + Fit). A fit means that your product or service fits the specific needs and situation of the target audience (see example above with recruiting). The value proposition of your product is relevant to them.
Here are some examples of it:
sales enablement software (reducing onboarding time for new sales reps)—> VP of sales; head of sales with min. 10 new sales reps/year
social media scheduling software (reducing the time per posting by 50%) —> VP of marketing, head of marketing with min. 3x posts a week on 2 different social media platforms
hr software for recruiting (to hire 2x faster with a build-in integration to all job platforms) —> VP of people; head of recruiting with 10+ open jobs and company annual revenue below 50M€
So let's take the example of hiring. For almost every hr department it is important to hire new employees fast, but while larger organizations could hire headhunters or recruiting agencies to help them (as they have a bigger budget), startups and small companies with a smaller budget need to do recruiting in-house (and therefore would be a better fit for your recruiting software).
👉 Potential customers = Pain Points + Fit
Ideal Customer Profile (ICP)
And finally, your ICP (ideal customer profile) combines Pain + Fit + Readiness.
This means, that your ICP feels the pain (that you are solving with your product), your product, and the way you approach the problem is relevant to them (FIT) and they are ready for a solution. Myk Pono says that “ideally, the person who fits your ICP is aware of the problem and already looking for a solution”.
To continue with the example above with recruiting, this could mean your ICP is:
VP of people or head of recruiting + of companies with 10+ open jobs + a company annual revenue below 50M€ + aware of the problems of slow recruiting (losing 20k€ revenue each month due to missing new sales and marketing hires).
👉 ICP = Pain + Fit + Readiness
5 Steps to create your powerful ICP
So let's have a deep dive into the 5 practical steps on how to actually create your ideal customer profile.
Step 1: Create a dream list of 100 customers
Start to manually create a dream list of 100 companies that represent your ICP. Those dream customers should be real companies or persons who have the pain you are trying to solve (no fictional companies). Just start with a simple spreadsheet and collect relevant information about them (industry, revenue, #employees, company stage, country...) that are relevant to your product. See if you can even build segments within your ICP.
Step 2: Information about the Buyer Persona and Users
The buyer persona is the specific person within your ICP company who is in charge of the decision-making. Users are the ones who are later on using your product. This being said, the buyer persona can be also a user but does not necessarily have to. Example: Social Media Scheduling Software:
Buyer Persona: Head of Online Marketing
Users: Social media managers
Start to take notes (really write them down) about the buyer persona and the users. Include things like job title, department, age, gender and enrich them with the information from a day in the life of your customer and the customer behavior.
Step 3: A day in the life of your customer
The more you know about your customers, the higher chance you will be seen as an expert (customers trust experts), and the more likely you will nail your sales and marketing communication. Especially if you’re following a sales-led growth your sales team needs to be industry experts (so whenever potential customers talks to your sales team, they are seen as experts and they can better sell the values of your product and not just features).
So digging deeper into the daily life of your customers, helps you to enrich your rough picture of your ICP.
The best way to do so is by doing customer interviews, surveys, and job shadowing. With job shadowing, I mean sitting by their side while they’re at work.
I’ve seen sales and product managers spending days together with their customers (e.g. with sports venues, coffee & restaurant owners, and also with HR Managers responsible for payrolls)
Write down what their daily job looks like and try to get information about...
... their daily activities (take notes on what they do and how long it takes them to do)
... their responsibilities
... their goals & success metrics (how is their performance measured)
... their challenges and pain points (what do they care about; also include pain points they do not (directly) relate to your product)
Step 4: Understand customer behavior
When you spend (enough) time with your potential ICP you will understand their behavior. Knowing how they think, what they care about, and what they are doing is key information for you. Those are unique insights that you can use to tailor your sales messaging for your ICP.
Get answers on:
What software tools are they using?
What partnerships do they have?
Who else is also selling a complimentary service/product to them?
What content/website/newsletter do they read?
Who are they following? What events are they taking part in?
Who do they want to become? Who are their role models?
and many more...
Step 5: Trigger Events
To know if your ICP is ready to buy your product, knowing relevant trigger events and using them in your sales and marketing activities are really powerful. With the right triggers identified, you know your ICP needs your solution now.
For every product or company, those trigger events can be different. For the example of our recruiting software, good triggers could be:
new Team Lead Recruiting —> new leaders mostly want to implement new tools
new legal requirements on GDPR —> need to migrate to another solution?
bad reviews about recruiting on job platforms (e.g. Kununu) —> need to invest in a better recruiting process
new investment round —> this means most probably hiring new people —> good timing to approach them with your recruiting software
number of open job listings above 10 —> means recruiting is a priority right now
new VP of people
Some other triggers for other products could be negative reviews, new product launches, running tv advertisements, development of stock price, revenue development, company relocation, press coverage, social media engagement....and many more.
For a more comprehensive guide, check out the 9 elements of an ideal customer profile by Myk Pono.
Bonus tip: Always review and adjust your ICP along the way
Working on your ICP is (unfortunately) not a one-time event. You should frequently analyze your customers and identify your most successful customers and based on that iterate on your ICP.
Successful customers are the ones you should focus on and try to find more of them. They value your product and help you to run a healthy business (LTV/CAC >3) long-term.
Indicators for successful customers typically are:
high NPS score
upgrading to a more expensive pricing tier
increase in usage (more sessions, more seats, more features...)
more (inbound) interaction with you (to discuss new features, optimize workflows...)
actively referring new customers
With a powerful ICP, it's getting much easier for you to acquire the right customers and grow your business.
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References: This article is inspired by Myk Pono (Ideal Customer Profile (ICP): How To Create A Comprehensive Customer Profile), TK Kader (How to Create an Ideal Customer Profile for Your SaaS Business (And Use it to Accelerate Growth), Mike Northfield (How to create your B2B ideal customer profile (ICP) [template]) & Mia Rossman (How to Create an Ideal Customer Profile And Find Clients).
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