What is an Ideal Customer Profile (ICP)?
An ideal customer profile (ICP) is a hypothetical description of an organization that has all the qualities that make them the best fit for the solutions you provide. This fictitious organization would benefit the most from your solutions. Naturally then, they have the highest propensity to buy your product and thus, are your greatest revenue potential.
ICPs are often confused with buyer personas. They are both very important to develop, but are not the same thing. An ICP describes a type of organization and a buyer persona describes a specific person within that organization. Your buyer personas are the individual people that you want to sell to based on their positions and pain points.
Traditional vs. Advanced ICP Definitions
The ICP of many organizations is defined solely on traditional firmographic data such as annual revenue, number of employees, industry, and region. The problem is that this is very often not specific enough to accurately describe an ‘ideal’ customer. More advanced organizations are including additional insights into their ICP definitions that are not only more specific, but also provide much needed context for sales and marketing outreach.
For example, a traditional ICP might look something like:
“Multinational companies in the financial services industry with 1000+ employees and over $100MM in annual revenue”
An advanced ICP will factor in much more detail and look something like:
“Multinational companies in the financial services industry with 1000+ employees and over $100MM in annual revenue that are using SAP, and have upgraded to S/4HANA, have a multi-cloud strategy, and are spending at least $5M per year on Cloud ERP”
As you can imagine, the extra granularity provides a great deal of additional focus to the organization, increases alignment, and provides much needed context to the sales and marketing teams.
Keeping your ICP Up-to-Date
Changes in products, customer behavior, and market dynamics mean that your Ideal Customer Profile needs to be updated from time to time. Major economic changes, such as our own current environment, make having an updated ICP even more critical to ensure business success. Companies should ask themselves:
- How has my ideal customer changed?
- How could my ICP be more specific?
- Does my entire organization share the same ICP definition?
Why is an Updated ICP Crucial for Success?
An updated ICP is critical for any organization that wants to grow its revenue. In fact, high growth companies claim that developing an accurate ICP resulted in a 68% higher average account win rate.
As there are significant changes happening in most markets right now, re-defining your ICP may be more important than ever. Below are 4 more specific reasons why an ICP aids in the success of your organization:
1. Aligns your Organization
Defining your ICP aligns your marketing, sales, customer success, and product teams to focus on the same high-value accounts. With this foundational, organization-wide ICP in mind, your teams have a shared plan of action and can focus their limited resources where they will count the most.
This is important because B2B organizations that are tightly aligned, compared to those that are not, achieve 24% faster three-year revenue growth and 27% faster three-year profit growth. More specifically, sales and marketing alignment can help businesses become 67% better at closing deals.
How an ICP focuses the efforts of each department:
- Marketing: optimizes content used in marketing initiatives to target the ideal customer.
- Sales: prioritizes outreach and personalizes sales pitches.
- Customer Success: develops repeatable strategies for onboarding customers.
- Product: ensures the features and functionality of products attract and accommodate the ideal customer.
2. Streamlines Account Prioritization & Hyper-Targets Marketing Campaigns
With an ICP, your marketing team knows exactly which prospects they should be dedicating their resources to. As leads enter the pipeline, they are able to score and prioritize them based on how closely they match the ICP. From here, they can launch targeted and personalized campaigns. These campaigns can target just one account or groups of accounts with the same pain points.
For example, Alfresco, a B2B SaaS company, used technology intelligence from HG Insights to discover what tech products their prospects used. With this information, they identified which prospects best fit their ICP and created messaging that would best target users of these certain tech products. As a result, Alfresco experienced an incredible 75% increase in engagement rates with their online advertising. Read the rest of their case study here.
3. Accelerates Sales Cycles & Increases Conversion Rates
Shockingly, SDRs spend 50% of their time reaching out to poor or unfit prospects. With an accurate ICP, you can immediately identify which leads entering your pipeline are a good fit for your solution. This way, your SDRs can prioritize their outreach with target account lists. While this decreases the amount of prospects entering your pipeline, it increases your conversion rate as your SDRs can dedicate more of their time to the right accounts.
Once in contact with these high-value accounts, an ICP also increases the effectiveness of your selling. As your sales team has a good understanding of the profiles of these accounts, they can personalize and optimize their outreach. For example, if you know what technologies an account is using, you can identify their pain points and leverage this information to better articulate why your products solve their challenges.
4. Reduces Customer Churn and Increases Customer Lifetime Value (CLV)
It’s always more expensive to acquire new customers than it is to retain customers. What you may not know is that 80% of your company’s future revenue will come from just 20% of your existing customers. And, according to Marketing Metrics, while you only have a 5-20% chance of selling to a new prospective customer, you have a 60-70% chance of selling to an existing customer. Evidently, it’s important to focus on retaining your customers and keeping them happy.
With an ICP, your customer success team has a better sense of your customers’ pain-points and how to integrate your solution with the customer’s technologies. From here, they can develop repeatable and scalable strategies for onboarding customers. These customers will naturally have a more seamless experience with your brand from awareness to onboarding.
Also, because these customers get real value from your solution, they are unlikely to stop using it and are instead likely to recommend you to other potential customers. This is ideal because 84% of B2B businesses initiate the buying process with a referral. And, referred customers are 4x more likely to buy and have 16% higher lifetime values than non-referred customers.
Bottom Line: An Updated and Accurate ICP is Crucial for Success
Essentially, an ICP creates strategic focus within your organization, driving the productivity and alignment of your teams. As described in this article, ICP development is a process that is absolutely crucial for the success of your organization — especially during these turbulent times.
If you’re interested in learning how HG Insights can help you discover your true ideal customer profile, visit our ICP solutions page now.