#63- Ideal Customer Profiles
What is an ICP and why every B2B company needs one
This post is for you if you are the founder, CXO, or BD person in a B2B startup that leverages outbound sales as a part of its sales process.
This is a rather long one, so keep a cup of ☕, or bowl of 🍿by your side and prepare for your ride.
Building an outbound sales strategy can be difficult for businesses of any size, especially for early stage startups. One of the most difficult questions to answer is who you should be trying to sell to in the first place. If you get that wrong, everything else becomes even more difficult. Creating an ideal customer profile (ICP) is essential for outbound sales-led companies.
What do you mean by an ICP?
Put simply, an ICP is the representation of the type of business which will most likely want to buy your products or services, remain loyal to you, and become your customer advocate.
An ICP includes:
Company size (by revenues, or employees)
Industry
Need for your product/service
Information on individuals within the company
An ICP looks like a tool for your BD team to target. However, it is more than just a tool for your BD team. Product teams may also use an ICP to test whether they are incorporating the correct features and producing the proper add-ons. It is critical that all teams working on a certain product or service have a shared understanding of who the ideal customer is.
Why is an ICP required?
An ICP is an excellent tool to determine a prospect's strength. If a new lead is an exact fit for your ICP, you should probably put in a lot of effort to sell to them because it may lead to a higher conversion. Companies that do not fit this picture perfectly may still be worth selling to. But remember that the sales cycle may be longer, and the conversion rates will be lower. It will behoove your BD teams to not put in extra effort to chase these leads.
Consider a TravelTechCo, a startup selling price comparison software to enable best pricing for hotel rooms. For TravelTechCo, its ICP will most likely be a business hotel chain having more than 50 sites across a country, maybe even a global business hotel chain. A mom & pop Bed & Breakfast in a quaint town known for sightseeing will not be the ICP. TravelTechCo BD team will benefit and be able to close a higher value deal if they focus on the hotel chain than the B&B.
If you don't have a good ICP, you may end up putting too much effort into too many different areas of the market. Your BD team can squander time chasing down leads who will never buy. That wastes time, money, and effort. And as an early stage company, you do not have the liberty to do so.
The more you know about who will buy from you, the better.
How to identify an ICP?
There are some methods for identifying your ideal consumer. In a top down strategy, you ask CXOs to guide you to the correct SBU or team who can use the product. In a bottom up strategy, you gather advocacy in the lower level teams enough for them to reach out to upper management as advocates. At times, you may directly reach the ‘best possible’ decision maker as well.
What data points will you need to keep in mind?
Type of company (single person, family business, organization, multi-national)
Which companies are ideal for you? (Product, service, hybrid businesses)
What solutions do they currently use? How much do they pay? Why do they use that particular solution?
Decision makers at the company? Organization structure
Continuing the above example, for TravelTechCo, the ICP will include business hotel chains with more than 25 properties which currently use OTAs as a price signal tool, and the decision maker will most likely be the upper management.
Top down strategy
As the name suggests, you start your reachout at the top. Via LinkedIn, or the company website, you find the contact details of a VP, CXO or Head of Department, and email them to refer you to a relevant person within the organization. Our portfolio company Clodura.ai enables this seamlessly. Ideally you may need to share a teaser to get higher ups excited about your product, but trying to sell to them is not recommended. When this person refers you to their juniors, its the boss literally telling them to give you some time → this tactic works well.
Bottom up strategy
This is a bit difficult to do in enterprise sales, but a very good sell. You want to reach out to people lower in the company and get their attention. If many people in the lower levels pitch for your product, it makes the upper level give a proper look. Most sales products like CRM, Lead Gen etc. get a buy in from the team using it before the upper management approves the purchase.
Decision maker strategy
For large deals, at times it is essential to reach out to the decision maker. This saves time and avoids dilution of your pitch when it passes through multiple stakeholders. You need to know who the decision maker is, and reach out to them directly. Warm intros make your life easier.
Whom to reach out to?
Depending on the size and complexity of an organization, the decision makers will be distinctly different.
For small orgs, early stage startups with 0-10 employees
The decision maker is usually the founder or a CXO level employee. CEO for a business related product, CFO for a finance/payroll product, CTO for tech, and CMO for marketing.
For orgs that are scaling with 10-50 employees
These orgs have VP or vertical heads in the above mentioned areas like business, marketing, finance, tech etc.
For growth stage orgs with 50-500 employees
Department specialists in business, marketing, finance, tech etc.
For scaled up orgs with 500+ employees
Regional SBUs or heads
The best companies usually have a three-pronged approach to run all strategies simultaneously or periodically.
How to write an ICP?
This is a key question which can be answered by answering the below questions:
a) Who are your ideal customers?
b) Why are they your ideal customers?
Let’s dive deeper.
Who are your ideal customers?
Your ideal customers will have all or a combination of the follow characteristics:
a) Intent- They are ready to buy your product
b) Ability- They are able to pay and buy your product
c) Willingness- They are willing to pay to buy your product
d) Competence- They have the competence to use and be successful with your product
e) Scale- They are scaling their business which opens opportunities for repeat selling, cross selling and up selling
f) Connects- They can connect you with other relevant buyers by becoming advocates
If you are an early stage company
You may not have lot of data, your best bet is to use guesstimates
If you are a growing company
You can look at past data, understand trends, and identify characteristics of what makes your ideal customer.
Metrics to identify ICP
Customers with the lowest acquisition cost
Customers with the shortest sale cycle
Customers with most repeat sales
Customers with highest satisfaction or rating
Customers with highest referrals
Customers with lowest service or delivery cost
Customers with longest engagement
There is no right answer to these questions or metrics. But with enough data points, you will be able to identify trends and characteristics of your company’s ICP.
Why are they your ideal customers?
Once you’ve identified who are you ideal customers, its time to understand why are they your ideal customers. The easiest way is to ask them. You can read more about how to conduct productive user interviews.
Good customers are always willing and happy to talk to you. Best thing is to set up a few short virtual meetings with a pre set agenda shared in advance and start the process. The agenda should be to understand user feedback, and improve service quality.
A sales rep or customer success person are the best people to conduct these interviews. These can be phone or video calls, and in case they are pressed for time, beautiful questionnaires created on Tally.so or Typeform may just do the trick.
Once you combine answers from both of the above, you will find your ideal customer profile.
What next?
Use it as a prospecting tool or checklist, and keep measuring outcomes against your ICP since there may be changes to the profile along the way.
Use it to sell. After the ICP is fully developed, you will have a clear idea of who your ideal customer is, why are they your ideal customer, what are their pain points, what value can you add, and what are their goals.
Additional reads
What is an Ideal Customer Profile: definition and template questions
Ideal Customer Profiles and Buyer Personas—How Are They Different?
How to create your ideal customer profile for B2B lead generation
Worksheet: How to Define an Ideal Customer Profile (ICP) for Account-Based Marketing
Read my other posts on enterprise sales
#8- How to conduct productive user interviews
#48- A primer on enterprise software sales
#51- How to determine the right sales model for your SAAS startup?