In the competitive landscape of B2B sales, understanding your customers isn't just a nicety—it's a necessity. That's where the concept of the Ideal Customer Profile (ICP) comes in.
An Ideal Customer Profile is a hypothetical description of the company that would gain immense value from your product or service and provides significant value to your company in return.
This isn't just any customer; it's your perfect customer, based on various characteristics such as industry, company size, job roles, business needs, pain points, and buying behavior.
It allows your sales team to focus their efforts on high-value prospects, leading to better use of resources, higher conversion rates, and ultimately, increased revenue.
[If you were just looking for the template, here it is: https://docs.google.com/spreadsheets/d/1qrrq73BXpWhscmghvVqQCjqZaaOItdKRq6tHvhIL8hw/edit]
Let's start by analyzing your existing customer base.
Understanding Your Current Customer Base
Do you serve small local businesses or Fortune 500 corporations? Are your customers primarily in the tech sector, or do they span various industries? Are they located in urban centers or spread across rural areas?
Take a close look at your most successful relationships. Which customers bring the most value, stay the longest, and refer other businesses to you? For instance, if you notice that most of your top customers are mid-sized tech companies in the Midwest, that's an important clue about your potential ICP.
Depending on your role, your product marketers and salespeople will all have great data and insights on this topic, based on their daily customer interactions.
In your CRM, such as Salesforce or HubSpot, can provide valuable insights into customer behavior, purchase history, and overall engagement with your company.
If you can, nothing beats speaking to real customers.
Conduct customer surveys or interviews to gather qualitative data. Ask about their challenges, needs, and what they value most about your product or service. For example, if most of your top customers value your responsive customer service, this should be a key characteristic in your ICP.
By analyzing your current customers, you're laying the groundwork for identifying your ideal ones.
Creating Your Ideal Customer Profile (ICP)
Now that you've delved into your existing customer base, let's create your Ideal Customer Profile (ICP). This profile should embody the characteristics of the companies that would benefit most from your product or service.
Consider several key factors when defining your ICP.
First, identify the industry or industries where your product fits best. If your software helps automate warehouse processes, your ICP might lie within manufacturing or retail sectors.
Next, consider the company size. If your solutions are tailored to complex, large-scale operations, your ICP might be larger corporations. Conversely, if your services are affordable and scalable, small and medium enterprises (SMEs) could be your ideal customers.
Geographic factors also plays a role. If you offer a language learning software, for example, you may target companies in multicultural cities or regions where multilingual skills are highly sought.
Job titles and roles: If your product is a project management tool, your ICP could include companies with large project teams, with roles like Project Managers or Team Leads.
Identify Customer Pain Points: Understand what problems your product or service solves for customers. Are you saving them time? Reducing costs? Improving efficiency? These pain points will become central to your ICP. For example, If your software aids in reducing production downtime, your ICP might be companies struggling with inefficient production processes.
Use quantitative data like customer demographics and qualitative data like customer feedback to inform your ICP.
A health tech company, for example, could use quantitative data to find that most of their customers are hospitals with over 500 employees, and qualitative data to learn these hospitals value their platform for its interoperability features.
Finally, take these insights and create a detailed ICP. This profile should not only guide your sales team's prospecting efforts but also inform your marketing strategies and product development. Remember, the more specific you can be, the better.
Ideal Customer Profile (ICP) template
With this, we have created a template that we now get our customers to fill in. It’s created in Google Docs, so you can simply “Make a copy”, or download it locally and share it with your team. Here it is:
Example ICP Template
Mid-sized companies (100-500 employees)
Primarily North America, particularly in tech hubs (e.g., Silicon Valley, Austin, Seattle)
Decision-makers: CTO, Director of Engineering, Lead Developers
Efficient software development tools; needs to improve collaboration and project management among development teams
Poor communication and coordination among teams; lack of transparency in project progress; difficulty meeting project deadlines
Value long-term solutions over short-term fixes; prefer comprehensive demos and free trials; responsive customer service is a must
Heavy usage of project management and collaboration features; occasional need for custom solutions
High lifetime value; likely to refer other businesses; provide valuable feedback for product improvement
ICP validation: building trust with sales and marketing, and the Account-to-Opportunity conversion rate
After creating your Ideal Customer Profile (ICP), it's crucial to validate and refine it. Testing your ICP involves comparing it against real-world customers, both current and potential.
Building trust with sales and marketing using qualitative feedback
Start by aligning your ICP with your existing customer base. For instance, if your ICP is a mid-sized tech company based in North America, does this match your most successful customers? If not, it's time to revisit your ICP.
Next, compare your ICP with prospective customers. Use it to guide your lead generation and see if the leads you attract match your ICP. If they don't, you might need to adjust your sales and marketing efforts, or refine your ICP.
Feedback is key in this process. Listen to your sales team, customer service representatives, and, most importantly, your customers. Their insights can help you understand if your ICP aligns with their reality.
Measure quantitative feedback: Account-to-Opportunity conversion %
The Account-to-Opportunity Conversion Rate measures the percentage of targeted accounts (those that match your ICP) that become genuine sales opportunities. This is typically measured in a timeframe, like 3 weeks or 3 months.
You should hear people saying:
Wow, we just got these accounts, and we already have 14 new opportunities from them!
That's the plain English version of this metric.
A high conversion rate suggests that your sales team is successfully targeting and engaging with the right prospects—those that match your ICP.
Conversely, a low conversion rate might suggest a disconnect between your ICP and your sales efforts, signaling a need to revisit your ICP, sales strategy, or both.
If Tier 1 accounts have a higher conversion rate, it suggests that your ICP is accurate and your sales team is effectively targeting these accounts. If Tier 3 accounts have a surprisingly high conversion rate, it may indicate that your ICP needs refinement.
Incorporating ICP into Your Sales Process
With a validated and refined Ideal Customer Profile (ICP) at hand, it's time to incorporate it into your sales process. This is where the theoretical meets the practical, turning insights into actions.
Ranking your Total Addressable Market (TAM) using your new ICP
Your ICP represents the subset of your TAM that's the best fit for your product or service.
While your TAM helps you understand the overall potential for your business, your ICP enables you to focus on the most promising prospects within that market.
Account Scoring, Tiering, and Prioritization
GoCardless used Tactic identify ICP characteristics for every account in their CRM, and then built a score in order to identify those accounts most likely to buy their product. Their sales team were then able to prioritize accordingly when out bounding to prospective customers.
Once you've identified your ICP, you can use it to score, tier, and prioritize accounts.
Account Scoring is a method of assigning a value to each prospect based on how closely they align with your ICP. The higher the score, the better the fit. This can help you identify high-potential leads quickly.
Account Tiering involves grouping accounts into different levels (such as Tier 1, Tier 2, Tier 3) based on their score. Tier 1 accounts, for example, might be those that align most closely with your ICP, while Tier 3 accounts might be those that deviate the most.
Account Prioritization uses these scores and tiers to determine where to focus your sales efforts. Prioritize high-tier accounts that match your ICP closely, as these are likely to yield the best results.
Ably Case Study
Ably were able to use Tactic to build out an ICP for each of their key products and then build specific territories based on these criteria. This allowed sales teams to focus on a specific product type and increase their chances of conversion.
With scores and tiers in hand, you can start building books for your sales team.
Divide the territories based on the presence of ICP-aligned accounts. Ensure that each team member or subgroup has a balanced mix of account tiers.
This way, everyone has a fair opportunity to target high-value prospects, while also nurturing lower-tier accounts.
Regularly review and adjust these territories as market conditions, your ICP, or your team changes. This flexible approach ensures your sales team stays focused and efficient, maximizing their efforts and your business growth.
Training Your Sales Team to Use ICP
A successful ICP implementation relies heavily on your sales team's understanding and buy-in. Begin with comprehensive training on what the ICP is, why it's important, and how it should guide their sales activities. (You should use this guide!)
Provide resources, such as a written ICP document, case studies, or role-play scenarios. Ensure your team understands not just who the ideal customer is, but also why they are ideal.
Monitor and coach your sales team to ensure they're using the ICP effectively. Regularly check in to see if they have questions or concerns. Their feedback can also help refine the ICP over time.
Remember, incorporating the ICP into your sales process isn't a one-time effort. It requires ongoing reinforcement and adjustment to keep your sales team focused and your business growing.