Hi! In this week’s post I walk through the steps to build an Ideal Customer Profile (ICP) for your business. Whether you are building an ICP for the first time, or refining your existing ICP, you will find this post valuable.
What is an ideal customer profile and why is it important?
Your ICP is the definition of who your target customer is and why they need to buy your product — and is a critical component of your company’s strategy for two reasons:
In a go-to-market context, your ICP provides the inputs for building your target account list, building your prospecting process and qualifying prospects in the discovery stage of your sales process.
In a product development context, your ICP provides the inputs for deciding what to build (and what not to build).
A common catalyst for building an ICP is when your Prospect to MQL metric is low — for more context on that check out last week’s post on identifying opportunities in your sales funnel to maximize growth.
The guiding principle for building an ICP is, be as specific as possible. The more specific you are with your ICP, the smaller it makes your target market. While this may initially seem counter-intuitive, in practice it works because the smaller your target market is, the faster you can prospect, the higher your conversion will be and the faster you will learn what works. You can always expand later.
The three key components of an ICP are:
Company profile — the attributes describing companies that are likely to need your product.
Buyer personas — the types of people within the company who will make the buying decision for your product.
Discovery questions — the questions that your salespeople can ask your prospects to understand their challenges and desire for change.
For illustrative purposes I am going to use a hypothetical company called “BillNoMore” that sells a software solution for managing payments to vendors and suppliers.
Part 1: Building your company profile
The goal of the company profile is to describe the common threads between your existing customers in a way that makes it easy to identify potential customers without having to talk to them one-by-one.
The five attributes of company profile are:
Use case: the primary customer use case that your product solves.
Intent signal: something a prospective customer does during the course of running their business that indicates a need for your product.
Industry: the detailed industry and sub-industries your customers operate in.
Size: the metrics that determine the size of company.
Location: the geographic areas where your product works, and your pre-sales and post-sales teams can service during normal business hours.
The best way to calculate these attributes is to start with a list of your current customers and a prospect universe database. A key nuance here is that the more relevant the prospect universe database is to your use case, the more accurately it will help predict qualified prospects.
There are 3 types of prospect universe databases, with varying degrees of relevance:
Product usage data that identifies company names. This is the most relevant data because it’s directly related to your use-case. In the case of BillNoMore, it could be the numbers and types of vendors that its customers do business with, and the volumes of transactions and amounts.
An industry-specific database. These are less relevant because they are available to competitors, but still valuable because they provide more depth of context on the industry. Common sources of industry-specific databases are trade organizations, industry-specific solution providers and government data (there are a lot of free data sets on the DOL, BLS and IRS websites). In the case of BillNoMore, there may be relevant data sets available from the IRS.
A general business database, like ZoomInfo or Discoverorg. These are the least relevant because tend to reduce business information to the lowest common denominators like revenue, number of employees and industry classification codes. In the case of BillNoMore, these would be useful for removing outliers and adding any missing criteria.
To build your company profile, you need to do some analysis. While the exact methodology will vary depending on the data sets you are using, the basic approach is the same: Use your prospect universe database to append relevant data points to your current customer list, identify which values appear most frequently, see how many prospect companies match those criteria.
When you are done, your company profile should look something like this:
Part 2: Creating your buyer personas
The goal of the buyer persona is to describe who makes the buying decisions for your product and what drives them to do so.
The 5 attributes of a buyer persona are:
Role: the name you use to describe the persona. The best practice is to keep this consistent internally.
Titles: the set of job titles that the persona could have in any given company. These can vary widely, even in traditional functions like finance.
Challenges: the common challenges buyers face in addressing the use cases without your product.
Motivations: Motivations are either Rational (i.e. tangible ROI like reducing costs, saving time or increasing sales) or Emotional (i.e. things that stress out a buyer or make their life better).
Triggers: events that compel a buyer to seek out solutions and take action. Triggers can sometimes be the same as the intent signal in the company profile.
The best way to identify these attributes is through doing structured deal reviews with your sales reps; ask each rep the same set of questions about 3-4 of their recent deals and then look for patterns in the responses. Here’s an example of a deal review with a BillNoMore sales rep for 3 recent deals.
When you are done with your deal reviews, you should be able to summarize the buyer personas like this:
Part 3: Creating discovery questions
The goal of discovery questions is to validate that the company and persona are a match for your company profile and buyer persona, that the buyer has challenges you can solve and has a desire to make a change.
There are 3 types of discovery questions:
Situational: these are close-ended questions that are easy to answer, often with a fact or a yes/no.
Probing: these are open-ended questions that build help the buyer open-up and often begin with “how”.
Impact: these are open-ended questions that get the buyer to consider what happens if they solve the challenge (i.e. utopia) and what happens if they don’t (i.e. dystopia)
The best ways to create these questions are to listen to recordings of sales calls and to crowdsource ideas from your salespeople. The key is to align questions with each challenge that a persona has, giving your sales rep the outline of a script to use on a sales call, like this:
With your company profile, buyer personas and discovery questions all built out, your ICP is complete!
The next step is to turn it into a list of target companies and contacts. Remember to keep the list as small as possible. A good rule of thumb is 5-10x the size of your current customer base and 50-100 companies per sales rep, staying on the low end if there are multiple personas per account. Resist the urge to expand beyond these boundaries and start creating multiple tiers of accounts — if an account isn’t in the top tier it isn’t worth pursuing.
Thanks Arnie for crisp notes here. I like your suggested step-by-step approach.