I’m not sure when the idea of Ideal Customer Profiles (ICPs) first started circulating around the B2B world but it’s relatively recently (cue someone mailing me with evidence of them first in use in 1973…). Personally, I’ve been using the idea consciously for the last four years or so.
When I say ‘consciously’, that’s what I mean – we’ve always had an understanding of being able to define your ideal customers, profile them and find more like them. But to do that in a structured way makes it more powerful.
Lots of businesses have set-up ICPs but not all go on to be profitable and powerful drivers of the business.
Here’s how you can make them work for you:
1. Commit to your ICP process
Often, the main reason a strategy fails in business is a lack of commitment. Think, for example, of mission statements – that dusty, vague sentence which gets brought out once a year like an old Christmas decoration, then put back in the attic until next year… I spoke recently with an entrepreneur who, in the course of natural conversation about his business, used his mission statement three times in 20 minutes. He’s totally committed to it, and so is his team – and in 6 years, he’s grown his company to have 60+ staff across three countries. He's also committed to his ICPs. Before you can really commit, however, you need to know what you’re getting into.
What is an Ideal Customer Profile?
Quite simply, the ICP is a pen portrait of your best clients. In more complicated terms, it’s a firmographic, behavioural and environmental definition of your best clients.
The ICP describes who your best customers are and how they’re different to your non-customers (or less-than-ideal customers).
It’s a way of focusing on the types of business that will go on to have the best lifetime value and, ultimately, the highest sustainable profit.
Why use an Ideal Customer Profile process
The ICP can carry a lot of weight in a business – it’s primary use is (or at least should be) to align functions. When agreed properly, the ICP should inform Product, Sales, Marketing and anyone else who has a touch point with the customer. When you are all agreed on who you are targeting and you put the ICP at the centre of your product, sales and marketing strategies, you’ll find the whole business starts pulling in the same direction.
Remember, this is your ideal customer profile. Not every customer you bring on will match that ideal (and you certainly shouldn’t reject those who don’t!) but these are the people you are building for.
2. Understand your best customers
Too many B2B businesses focus all their attention on their “best” (aka “biggest”) customers. Of course they do, that’s who pays the bills, that’s who we don’t want to lose. But that doesn’t build sustainable growth. We need to also focus on tomorrow’s best customers (really next year’s, the next 5 years…)The ICP delivers a structure by which the business can focus on both.
In order to find your best customers, you need to define what best means. And it doesn’t necessarily mean those who pay you the most (though that’s important). Factors you need to weigh-up include:
· Repeat business – depending on your model this could be renewal or repurchase
· Upsell/Cross-sell – has this customer grown with you? Have you increased wallet share?
· Referral-rate – how likely is this customer to refer others, to act as a case study, a referee or a review?
· Ease of service – do they demand too many add-ons or ‘special treatment’ or are they easy to deal with?
· Growth potential – are they likely to grow? Or the flipside, are they likely to scaled-back or fail?
· Payment history – do they pay on time? Better still do they pay early?
· Vision and goals – do you want the same things? (If you want to be an environmentally conscious business, you may not want to work with a large polluter, even if your product has nothing to do with their output).
· Revenue – sure
· Life Time Value (LTV) – better
· Long term profitability – better still
Bring all this stuff together, work out which are more important for you. Maybe create a ranking algorithm or a scorecard. Then go through your customer-base and score them. Isolate the top 20-25% of your customers.
3. Define you Ideal Customer Profile
Now we’ve isolated those customers, we need to understand more about them. What unites them? What brings them together? Things to look out for:
· Size (employees and/or turnover)
· Sector
· Geography (country / locale)
· Their customer type (B2B? B2C? B2B2C?)
· Time in business
· Management structure
· Their sales cycle
· Their product and pricing
· Where do they hang out? What podcasts do they listen to? What conferences do they attend? What magazines to they read?
· And most importantly: Their pain point that you can address
Speak to them. Call them and find out more about them. You should already have a good relationship with them, so call them and find out how they view or use your product, how it compares with others, how it addresses their pain – and what other pains do they have?
From here, you should be able to define your Ideal Customer Profile.
Example ICP
· North European SaaS business, £10-15m turnover, approx. 30 staff.
· Product is software sold into finance sector, focus on enterprise clients or well-funded scale-ups.
· Job titles: CEO, Founder, CRO
· They struggle to retain clients without eroding value
Pragmatic checkpoint:
I've written previously about marketing bringing the benefit of pragmatic commercialism to the business. And it needs to be deployed at this point. You will need to do a little research to check that your ICP is viable – are there enough fish in the sea for you to address? If your ICP only matches 12 customers (and you have 6 of them already) you may want to relax it a little to produce a larger meaningful target pool.
4. Share your ICP & use it
Your ICP needs to be communicated and shared around the business. For it to have real meaning, everyone in the organisation needs to understand who the ICP really is. Once everyone is bought in, you can start to change company behaviour in a positive way. For example, when the product team run customer interview sessions, they will target the ICP – our most profitable customers. When the marketing team defines the value proposition, they will be focused on addressing the pain point of the real target customers. The Operations team can devise processes to ensure prioritised distribution or onboarding for the ICPs. And on it goes…
The key here is focus. When shared and committed to, the ICP will ensure you deliver the right product to the right customer in the right way to maximise long term sustainable profit.
5. Refine your ICP
Finally, the ICP is not written in stone for all time. It’s adaptable and changeable. And if you’re relatively new to market, it will need to change quite rapidly. Think about a review cycle (annual for an established business, more frequently for less established). But above all, commit and communicate.