The Complete ICP Guide

Cutting costs is an integral part of maintaining a healthy business. Cost leaders and high-end brands both need to make sure that their profit margins are the best that they can be. The struggle in this endeavor is finding that ideal spot to save some funds.

Sales and marketing are undeniably crucial to the growth and sustainability of businesses and business-to-business markets. However, they are also geared towards spending company money. This means that for cutting costs, it’s a question of efficiency.

A good sales team will bring in a high amount of revenue relative to the amount of money spent on making those sales. This usually means achieving frequent large sales with minimal resources.

An inefficient marketing and sales team will sell to anyone and everyone. This can result in a high churn rate as customers leave your business after one purchase.

These customers lack the same long-term benefits that a well-fitting customer would provide. They are harder to convince and more likely to leave.

Acquiring new customers is more expensive than keeping your current customers satisfied. So, the most efficient sales teams must be selective in the customers they sell to. But, you may be wondering, how do they do it?

The easiest way to increase your sales efficiency is to create an ideal customer profile (ICP). This one strategic tool separates bad leads from good ones. It can also better align your sales and marketing efforts with each other.

The ideal customer profile is a description of the hypothetical company that would best suit your target customers.

Why Make an ICP?

An ideal customer profile helps bring sales and marketing together, to reduce costs in both departments and increase their overall effectiveness.

An ICP significantly improves the efficiency of your sales dollars. It keeps your sales team focused on the right people so that they can get a better conversion rate with less time and effort. This reduces sales costs in both negotiating hours and marketing materials.

Not only this, but it also improves the efficiency of your marketing dollars. This is because it builds a more specific customer for marketing to draw in. Not only this, but these will be customers who are already looking for a product or service like your own, so your advertising doesn’t have to fight for their attention.

Without an ICP, a business can suffer a variety of financial and strategic issues. They could find themselves struggling to meet account relationship goals, since they won’t be able to make the sales numbers they could otherwise. Alternatively, they might find themselves making sales that don’t foster long-term relationships, resulting in larger marketing and sales costs from constantly acquiring new customers.

A major strategic issue could arise if the business starts getting requests for features. These customers could have wildly varying needs, and thus different and potentially contradicting requests for features. Without an ICP, it would be difficult to say who’s ideas would best move the product forward.

Furthermore, once you start getting customers who fit your ICP, you’ll begin seeing significant cost savings in both departments. This is because  the ideal customer would fit into your company well enough to want to vocally support you.

The ideal customer would be a strong advocate for your brand and would be a successful business in their own right. They would keep buying your products and spread the word to the other businesses that they work with.

A customer like this will, once you’ve begun doing business with them, need minimal sales dollars to maintain the relationship and get return sales. They would already know that your product works for them and wouldn’t need much additional convincing to purchase again.

Furthermore, this customer, by being a strong advocate, would make other sales easier by helping introduce other potential customers to the product or service, thus improving the reputation of the brand. This kind of free advertising goes a long way in cutting costs.

Client Fit

A good client is a good fit for the business. Simply put, the ideal customer profile helps a business pinpoint the type of client that would best fit their business model.

For example, suppose that you own a small business that creates and sells office furniture. You can produce, at most, 500 chairs in one month. In this scenario, it would make no sense to take on a client with over 100,000 employees who needs 10,000 new office chairs in three months. Your business simply wouldn’t be able to meet the demand, and would only dissatisfy the customer, ruining a potential future business relationship.

The ICP would help your sales team to focus on customers that match your current capabilities. However, this isn’t to limit your sales forever. What is a good fit today might be a limitation tomorrow. A good ICP will change over time to fit the changing needs of your business.

ICP vs. Buyer Persona

Whenever there is a conversation about ICPs, someone is bound to bring up the buyer persona. While similar, the buyer persona is a distinct idea that the business should take on only after completing their ideal customer profile.

The buyer persona is the hypothetical representation of a company’s decision-maker to whom the sales team would pitch. These hypothetical people are defined by their role, job title, function, seniority, and income. 

The ICP is for finding the company that needs the product. The buyer persona, on the other hand, is for visualizing the decision-maker in that company, and therefore can only really be constructed after the ICP.

The Difference in Goals

One core difference between these two concepts is the end goal. The ICP aims to find the right client for negotiation. This is all about picking the company that you are selling to.

The buyer persona focuses the marketing team on the right people. This profile is all about creating a hypothetical representation of the person that your sales representatives will have to meet with to close the sale.

Construction

The ICP is about sales. It defines what issues you can help your customer with, match your product with your customer’s needs, and help determine where improvements in your product can be made to better meet the needs of your customers.

Creating the ICP involves looking at the competitive environment of the customer and where they fit. It involves an external glance around the customer to get an idea of how their business compares to other businesses in their industry who could also be a customer of yours.

The buyer persona is more geared towards marketing since it’s about appealing to one person, as opposed to a business as a whole. It considers the general demographics, goals, motivators, and challenges faced by the decision-maker for the company identified by the ICP.

Creating a buyer persona involves more empathy and consideration of how the decision-maker fits into the corporation. It involves a more internal look at the customer company and the environment in which the buyer works.

Because of these core differences, it’s important to create the ICP before the buyer persona. The ICP can help create the buyer persona, as it will help give an idea of the company a buyer is taking into consideration. This informs a great deal about their challenges and motivators.

How to Build Your ICP

Building an ICP involves considering a wide range of information, both about the target company and about your own business.

A good ICP should include company size, revenue, industry, and location. It can also consider budget, legal issues, and the limitations of the product in question. Legal issues, for our purposes, refers to any sort of regulations or regulatory problems the customer might face while trying to use your product. For example, universities  must be careful about how they use copy machines in order to avoid potential copyright issues.

One method of constructing your ICP (if you’ve already been in business for a while) is to assess all the accounts you are currently doing business with and decide which clients are the best to work with.

Determining your best customers can be a difficult task due to both the objective and subjective nature of the question. Some factors to consider in creating your list include how much business they do with you annually, how much their company could grow in the future, and how long they have been a customer of yours.

The length of the relationship with the customer should be one of your more heavily weighted factors. It shows that the customer has found continued value in your product over time. Certainly, for the next step, you’ll want to involve the customer who has had the longest relationship with your company.

Once you have created a list of your best customers, you should interview each of them about their experience with your product. You need an idea of how they use it, why they prefer it, what problems they still have when they use it, and what problems they have because they are using it. You should also be using this opportunity to gather demographics information, such as company size and industry.

With all of this interview data, you can start comparing information to see what your customer companies have in common. These shared traits will then become the basis of your ideal customer profile.

However, what if you haven’t been in business in this particular industry yet, or your pool of customers just isn’t that big yet? Can you still build an ICP?

In this case, your ICP will have to be constructed on a more internal view. You need to interview yourself, in a sense, to get the information you need.

You will need to look at your capacity to determine how big your customers should be. The customer industry can be developed from a serious look at your product and how you expect customers to use it, as well as how it is designed.

The ICP financials will need to depend on your own financials. How long your company can wait on payment will be the level of credit the ideal customer needs, for example.

From all of this, you should be able to construct a basic ICP that will help you start targeting your first customers. Then, once you’ve had time to grow as a business, you can recreate your ICP using the external interview method stated above.

Once you create an ICP, it’s important to check in on it every so often and update it to reflect any new information. This can help keep you on track and avoid chasing after poorly-fitting customers who might have been a good fit in the past.

Conclusion

The ideal customer profile is one of the most important sales tools a business-to-business enterprise has at its disposal. The ICP helps to ensure that your business finds and maintains strong, mutually beneficial relationships with customers. It can save your business money along the way, too.

While the buyer persona is a related concept, it differs in who it targets. The buyer persona works best as a complement to the ICP rather than a replacement for it.

Any business at any stage can and should develop an ICP to direct their marketing and sales strategies. At the start, a business will have to develop their ICP through internal data, but with increased sales and more customers, external data can be used to determine what customers are actually doing and what they still need. 

The ICP is far from a static tool. Like most strategic tools, the ideal customer profile should be updated over time and in tandem with any major changes a company undergoes.