Growth and Ideal Customer Profile(ICP)
Why clearly defining your ICP is so crucial to your growth model
Can you do growth without clearly defining an ICP?
Whether you are sales-led, marketing-led, or product-led, clearly defining your ICP is necessary to build your growth flywheel. You cannot expect your business to grow sustainably if you don’t know the customers you are going after.
Also, no, ICP is not the same as a buyer persona.
So, what is an ICP?
An ICP is a customer that is the best fit for your product. It’s a customer who would derive the max value from your product.
ICP for a B2B product is a mix of ‘firmographic’ data such as company size, industry, geography, number of employees, tools they use, etc.
User personas, on the other hand, exist within ICPs. User personas are ‘individuals’ who would buy or use your product for different use cases.
Why is defining ICP crucial?
The answer is simple but not easy: Defining an ICP establishes a common language to unify the efforts of your marketing, product, and sales teams. It helps reduce the customer acquisition cost and increases the LTV of your customers.
However, as basic as this sounds, ICPs get lost due to poor acquisition methods used by startups. It is common for startups (even those with a self-serve product) to have siloed product, marketing, and sales teams. Each team cares about optimizing a different metric, and growth efforts have little coherence. Marketing is spending dollars on acquiring as many (ICP / non-ICP) leads as possible; sales are trying to convert these leads to fill their quotas while the product is solving for some use case assuming marketing and sales can sell it to a customer who might care about it.
How does defining a clear ICP enable growth?
ICP enables better marketing spend. It helps target the right customers in the right industry with the right messaging and positioning in a channel that makes the most sense for acquiring those customers. Marketing is adept at knowing which channels are used by what kind of customers and how to nurture them. ICPs help create an ideal journey for the customer through content, website, channel spending, etc.
ICP enables better product feedback loops that help refine the product and discover adjacent use cases. Your product cannot solve all the use cases for companies of all sizes and cannot service all industries. ICPs help narrow the scope of the product to specific use cases, in turn enabling better customer retention.
ICPs help sales teams in lead qualification. This way, sales reps are not spending too much time on accounts that won’t convert. But without an ICP, sales teams are wasting time and effort going after every lead that marketing sends them or whoever signs ups on the product. They also find themselves ill-equipped to talk with leads of every kind resulting in higher CAC of customers who would convert.
How does this change if you have a self-serve product? It doesn't. In a self-serve product, your marketing should also go after those channels where your ICPs hang out. The product should focus on activating and retaining users and teams of an ICP. At the same time, sales should concentrate only on ICPs who might also be product qualified.
Now that we know why ICPs are inherent to growth, let’s see how to find your ICP.
I imagine three stages at which your company would require defining ICP more formally.
Finding your first ICP:
If you’re in the very early stages and maybe even before Product Market Fit, know that your ICP and Product-Market Fit are deeply interlinked. One cannot exist without the other. To find your ICP, you would typically start with a broad definition of ICP to launch the product. The definition encapsulates a customer profile your product solves problems for.
After releasing the product, you’ll find that a particular group of customers retains better than the rest. This group is likely your ICP. They will have some common characteristics - such as the size of the company, type of users/adopters, geography, technologies they use, use cases, etc.
If you find a substantial number of customers who tried the product and retained, congratulations, you might have a Product Market fit for a segment of customers who are also your first ICP.
If this is not the customer group you were hoping to target and retain - then there is a clear gap in your perception of the product and the market’s perception.
If you did not find a common group of customers who retain, you need to go back to the drawing board to refine your ICP and go to market.
Finding lost ICPs:
It’s common for ICPs to get lost when you’ve grown rapidly and couldn’t successfully operationalize a shared understanding of your ICP across the org. This resulted in poor customer acquisition methods used by your marketing and sales teams. This results in a product that probably retains well for a few groups of customers.
It is essential to narrow down which customer you are building for. Your PLG motion cannot work if all the departments across the org are not optimizing for the same customer segment. If you have a certain number of customers using your product, but you do not know who your ICP is, then this is how you can reverse engineer it:
Pull a list of all your existing customer accounts and enrich all of these accounts with firmographic details such as - company size, no. of employees, geography, type of users (software developers, marketers), technologies used, etc.
Identify your most successful customers, i.e., customers most satisfied with your product. A good indicator of successful customers could be those with a higher contract or lifetime value. Note: Be careful not to over-index on just the highest revenue accounts. That could lead you to a wrong ICP because the number of such accounts might be fewer.
Look into their product usage data and talk to your success and support teams to build a picture of these customers using qualitative and quantitative insights. Since revenue doesn’t tell the whole picture - which use cases your product succeeds in compared to competitors is hugely telling about where your product succeeds in the target market.
After collecting all this data: look for shared firmographic traits that indicate what type of customers derive the most value from your existing product that also aligns with what you are building for.
Finding new ICP when entering a new market:
Once you have saturated your current market, it’s natural for startups to move to a new market segment. This shift generally happens as a natural function of growth or when you win deals in a newer market.
Suppose you are going upmarket from an SMB segment to mid-market customers.
The first step is to split all your customer accounts into small, medium, and large based on the number of people using them.
Since you are going upmarket, analyze the medium and large accounts. You will find some indicators that help you identify which segments your product is winning in. These will typically be based on the problems your product solves well or based on the sales conversion cycle, or show potential for scale where it is easy to add employees and seats.
Use these accounts and enrich them with data on their firmographic attributes such as employee size, annual revenue, industry, locations, technologies used, etc.
Combining these two, you’ll be able to come up with an early ICP to move upmarket.
Use this customer profile to go to market with new segments to target via marketing channels and new sales playbooks to land these accounts.
ICPs are relatively static unless you move to new markets.
Depending on the nature of your product, you can have multiple ICPs.
However, remember that if you sell to everyone, you are selling to no one. It is possible to have more than one ICP, but not too many. Otherwise, you are back to marketing for anyone and everyone, defeating the objective.
As your product evolves and you look for PMF expansion, your ICP will also evolve. This should be a conversation that you revisit every couple of months, especially when heading to previously uncharted waters.
e.g.: of an ICP:
Industry: B2B SaaS
Company size: 101-500 employees
Revenue: >$10M ARR
Technologies used: Salesforce, Outreach, Marketo, etc.
I hope this guide provides some direction in finding your ICPs.
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