Spend 5 minutes browsing any vaguely go-to-market related LinkedIn group or hashtag and you are bound to stumble across people talking about the importance of your ICP and how to identify the right one. But what does it actually mean, and is it really that important?
Starting at the start, ICP stands for Ideal Customer Profile and generally speaking your business will want to identify it's ICP and use that to focus it's development and go-to-market activities. There is no one accepted way to define your ICP but they are usually defined by a set of characteristics that are likely to make the ICP a good fit for your product. The characteristics that make sense are entirely dependent on your business, in B2B for example it could be defined by things like company size, industry and location, in combination with a key challenge.
How to define your Ideal Customer Profile
Defining your ICP can be difficult and time consuming. It's also really easy to get wrong. The approach with the least risk involves combining both qualitative and quantitative data. It will also be influenced by the stage your business is at. Most ICP methodologies assume you have some form of customer base already, and not that you are starting from completely scratch. This guide is going to assume the same thing.
Below are the 5 basic steps required to building an Ideal Customer Profile:
Analyse existing customers
Analyse all win loss data
Build a draft ICP
Test it with customers
Refine and implement
Step 1: Who are your existing customers
With these projects I usually like to start with the data. The less bias you have going into this stage the better which is why I like to do this first. Some people like to start more qualitatively, with interviews and the like but I think this is inefficient and to likely to skew your thinking based on not enough information.
I always start by looking at our existing customer base. What you are looking for here is patterns, shared traits that are common between your customers. I like to include quite a lot of data here, everything from number of employees, to the size of the specific teams in your customers organization that use your product. Combine data on the customers companies with relevant data you can get from your product such as users, or workflows, or whatever it may be. Doing so you can see things like how widely adopted your product is in your customers, do small teams or large teams like your product more, is one specific feature or workflow particularly popular in certain companies etc.
In short, more data is better at this stage. As you work through it you will naturally start to identify what's useful and what's not.
Once you have the data - start analysing. As I said, you are looking for patterns, but keep your mind open to what these patterns might be. Often people trend towards what's easiest, for example - "most of my customer base is made up of small companies", and so company size should be a key characteristic in my ICP. This of course might well be accurate but it could also be coincidence or bias. It might be that actually, it's more about the size of the team that buys your product, and actually the characteristic to call out in your ICP is "small teams", whether it's in small or large companies.
Word of warning - beware historic bias when conducting this research. Dependent on how new your company is, there is a high chance that your existing customer base is either slightly, or heavily biased due to your previous go-to-market biases. What do I mean by this? Well, let's say your business has always believed that their best fit customers were in the UK and in the public transport sector. Chances are this means they might have been focusing most of their efforts approaching this market, and if there is any kind of product-market-fit then they have probably won some customers here. Probably more customers than some other markets or regions that they didn't believe were as good a fit. What's to say that initial bias was right?
If it was wrong your data is going to be skewed, so be wary!
Step 2: Why are they your existing customers?
The previous step get's you to a place where you understand what your customer base looks like. You understand the most common characteristics share in your customer base. You understand what customer spend looks like and what influences high spends and low spends. Ultimately, you have a picture of what a good customer currently looks like.
Now you need to understand why your customer base looks the way it does. Looking at all of your win/loss data should help you add in the other piece of the puzzle. Why you win.
Here you are looking across a lot of similar factors as in the previous stage, but you are looking at it from a perspective of a win rate. What characteristics influence the rate at which you win deals. Do you win more deals in a certain region (or have you only ever tried to win business in 1 region). Or maybe it's use case or vertical that drives good win rates.
As well as a look at just win/loss rate you should also take this opportunity to look at how different types of deals move through your funnel. Do some types of deals or customers move through faster, if so why? Or perhaps different types of deals drop out at different points in your funnel - this can tell you a lot.
Combining this win/loss data will help you answer some of the questions raised in the previous exercise around potential biases in GTM. It will also help you narrow in on the characteristics that make a good customer, and also help pick out characteristics that make a bad one too. The exclusion list here can help as much as the inclusion list. For example, we never win really large companies. Or we never win in a specific industry.
Step 3: Build your ICP draft
By now you should have enough data to build the first draft of your Ideal Customer Profile. And the time has come to get a little bit uncomfortable.
Building an ideal customer profile can be quite scary. It's possible to get very, very narrow if you want to and that can definitely feel limiting. There is definitely a balance to be found. There is absolutely no point in your ICP being super broad because then it's basically pointless. It should be focused. Exactly how focused is dependent on your scenario but I would say that if it doesn't feel at least a little uncomfortable you probably need to push it a bit further.
You should be able to summarize your ICP on a single slide but that slide should be backed by a good bit more detail. Not only should you have an outline of what your ICP looks like but you should also be thinking about what that means for your go-to-market strategy. Do all of the things you are currently doing really make sense if your best fit customer is as defined in your ICP?
Test your ICP on some internal stakeholders and get a gut reactions. Don't be put off if it makes people a little uncomfortable but also don't ignore feedback. Use this as an opportunity to identify areas for the next stage of your research. if someone has a completely different view, ask them to give an example company (ideally already a customer) that they think closely resemble what the ICP should be and why. You can use this feedback as you build out the next stage of your research.
Once you have a draft, you feel comfortably uncomfortable with it, you can run back through the data and still come to the same conclusions and you have tested it with your key stakeholders for some feedback it's time to bring it to the real world.
Step 4: Talk to your (ideal) customers
It's time to take your version of an ICP and see if it actually exists in the real world. And if it does exist, is there any other defining factors that would help in your definition.
This step is relatively straight forward. Find a business (ideally already a customer) that matches your ICP and interview them. Ask them questions like why they started looking for a solution, why they picked your solution, what they like most about it, what it helps them achieve.
Then get to understanding their business a little bit more. Ask them to explain what they (the business) do in their own words. Get to know their product or service and get a bit of detail about their end customer. All of this additional context will help.
Keep interviewing more customers until you start to feel confident that you are seeing the same trends. Then interview some customers (or non-customers) that you think don't really fit your ICP. Ask them the same questions and see if it changes your mind. If it does, investigate, if not, then you really can start to feel confident.
Step 5: Get ready to put your ICP to work
The time has come. You have an ICP defined and you have proven it exists. You now have work to do to get your business on board. This might be easy, or it might be really, really hard. That depends on how dramatic a change it is from the current status quo. Be patient and if things look difficult, design some experiments.
Implementing your ICP doesn't have to transform your business overnight, even if it is dramatically different from your current customer base. Tests can take the form of some new messaging, contained to a targeted ad campaign all the way to a full 6 month campaign targeting your ICP. You decide what makes sense. But if you are going to test it, the test needs to be really focused otherwise you might not prove anything at all. And you need to agree ahead of time what constitutes success or failure.
You also need to think about product-market fit based on this new ICP. Does anything change? Does your new ICP prioritize a different set of requirements from what's currently in the product roadmap.
Hopefully, in time you will get the business to a place where everyone is comfortable with the new ICP and you will have a clear picture of how things need to change (or at least where to start).
Then it gets really exciting...
But using your ICP to inform GTM and Product Strategy is probably a topic for another blog.
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