Defining an Ideal Customer Profile

Kirby Wadsworth is the CMO of Ionir, and has served as CMO at enterprise software and networking companies including Illusive Networks, Bayshore Networks, and Limelight Networks. In this guide, he explains how to identify prospect characteristics that predict strong fit, to help sales and marketing automate prioritization.

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Questions covered in this guide

What is an ideal customer profile?

A set of characteristics that help you identify a better target group within your potential customers – an ICP allows you to define some characteristics of a subset of your targets that align well with your previous success, or what you anticipate your success will be in the future. For example, you might say, “we sell to companies between $200-500M in revenue in the entertainment space”. There are probably hundreds of companies around that world that fit into that profile, and you could target them all. Defining an ICP helps shorten your target list.

What’s the purpose/business value of defining an ICP?

Get sales and marketing (and others) aligned on who the target is – this sounds obvious, but it’s not. Sales comes into these conversations and says “I’m going to target 25 accounts in my territory,” based on their experience, rolodex, or gut feel. Marketing might have a completely different idea on what accounts they think the company should target based on competition or segmentation exercises. Product management might have a whole different set of ideas because they study the users. No one approach is right or wrong here, but past experience doesn’t define future opportunities, and end users often don’t make buying decisions. 

When you set off to do an ICP exercise, the first thing that you’re going to try and do is get everybody on one page, saying “let’s come up with a group of targets that we all agree make the most sense to engage, start sales conversations with, and understand better through research”.

Qualify leads more quickly and avoid “happy ear syndrome” – before you give the lead to whoever follows-up on your leads (an SDR, AE, Channel Partner, etc), you need to define what characteristics fit with what you’re looking for. This gets everyone honed in early in the sales process and filters out non-qualified targets early, eliminating what is often called “the happy ear syndrome” – where every deal sounds like a great opportunity worth pursuing in the beginning. 

If you’re doing ABM – it’s impossible to do account based marketing (ABM) without an ICP anchor. 

What types of variables could be used to define an ICP?

Characteristics need to be easily (and externally) observable – let’s say you need to narrow your list down from 1,000 accounts to 200 or 100 accounts. If you pick a characteristic that isn’t easily observable, then you’ll need to hire a research company to find out if that target has the characteristics you want. The problem is that it’s expensive and time consuming and changes quickly. So for the first phase you want to pick things that are easy to observe and cheap to externally observe at scale. And it might not be perfect the first time you do it; it might only take you from 100 accounts to 500, but it’s a start. 

Basic firmographics – size, location and industry.

Size of the team – the size of the team could impact deal size, but also sales cycle. You might think the bigger the team would be better, but when you really dig into it, it could be that smaller is better if you’re trying to move quickly. 

Technographics – you can use any number of services (HG Technographics, DataFox, and TechTarget and others provide this service) to purchase data on companies. However, it’s a bit of a slippery slope. Just because somebody bought Oracle doesn’t necessarily mean they’re a great target for Workday. Now, if you can get more specific and they bought one of your competitors, then you can go in and potentially try to displace your competitor. If they bought a technology that’s complimentary, that’s also telling. Do you sell disruptive, emerging technology? Great – look for companies that routinely deploy new technologies. It doesn’t have to have anything to do with your offering. What you’re looking for are companies that view technology as a competitive differentiator – it’s in their DNA.   

How do you find good characteristics? How do you decide which ones to use?

Take ideas from everyone, and create a huge spreadsheet – have all the different internal teams and individuals give you everything they can come up with where they see a pattern in the existing set of customers or the customers they think we should be targeting. I’ve run contests before where people can win a $10 Starbucks gift card for offering the best idea, to get people into it and create some fun. 

Figure out which information you can find – you’ll likely end up with a massive spreadsheet (the last time we did it, I think we had 180 different characteristics). From there you narrow it down based on the characteristics, you can easily find possible accounts along with which characteristics you determine to matter the most. It may be interesting (and telling) that your best buyers all had long careers in military logistics, but digging out that level of detailed information across the thousands of potential target companies is like unreasonably expensive and time consuming. Stick to data you can get at scale for now.

When should a company invest in defining its ICP?

The earlier the better – as you’re hiring salespeople and you’re training them on the qualification processes, that’s the right time to be thinking about “how do we put better opportunities into the demand generation process we’re creating for developing the sales pipeline.” However, it’s also helpful to have a base set of customers and look at their characteristics. You can look at the general population of customers you think you’d like to go after, take a look at the patterns from the existing set, and then apply that to the general population. 

An ICP is valuable for any size deal – targeting matters for everyone. Once the ICP is in place and it’s running, it scales without effort. If you’re selling a $1,000 dollar product versus a $100,000 product, you’ll have to process more opportunities, so it may be even more worthwhile for products with smaller price tags.

When should you update your ICP?

Revisit the ICP annually or around big sales structure changes – you don’t want to keep changing this, but it does get more stable as the base gets bigger. Revisit every year sometime in November or December as you’re getting ready for your sales kickoff. You’re going to use this information to explain to the salespeople who their targets are for next year and how to better qualify the existing target so they know what’s coming into the pipeline from marketing and who you’re going after. 

The other time would be when you have a major change in your sales organization or your sales structure. If you have a new sales leader, if you define new regions/territories, if you have a mass exodus or big hiring – all of those are good times to recheck and refresh your ICP. 

Don’t change the ICP too often – or people will start to lose confidence in it. It needs to be ingrained in the foundation of the processes and systems of the company. This is why it’s important to focus on it and give it time in the beginning so that you get it right. You need to make rapid changes in the beginning so you get it to a point where you feel competent. 

Who leads the work and who’s involved?

Marketing should lead – marketing has a tendency to bring in more data, and look back (and forward) into multiple sales cycles. 

Sales should have a heavy influence and approve – sales needs to understand the ICP and internalize it. They need to appreciate that it’s based on data and facts. They need to have a voice in it and give a lot of input. It becomes the company’s ICP, not just marketing’s ICP. 

How do you test your ICP?

There are tools to help you test (alongside a little human judgement) – choose tools that will give you a hint of a pattern, e.g DataFox. Once the tools give you the characteristics that matter, you can pick and choose those. If you think the program picked characteristics that aren’t quite right, don’t be afraid to ignore artificial intelligence or blend it with human intelligence. 

Rank your accounts – once you have a formula you can apply to your large number of accounts, rank them based on an ICP score. From there, you can segment your “top tier” accounts to get the most sales attention. For the middle tier, marketing takes most of the responsibility for outreach. For now, ignore the bottom of the pyramid, unless they reach out to you. 

Run a campaign against an ICP group vs. the general population – testing is important here because you’ve made a bunch of assumptions so far. When you’re past the first tier of accounts that seem obvious, you can run a specific marketing campaign to see what their response rate is versus a control group. You’re looking for a higher response rate from the segmented group. 

There’s some art, it’s not all science – there are some accounts that you look at and just accept the fact that those are target accounts because they’re only one step away from your existing customers, even though the ICP score doesn’t pop. 

How long does the process take?

4-6 weeks if you’re efficient – you have to put boundaries on this process; you can’t have a month of people giving you ideas; you’ll drive yourself out of your mind. Instead it’s a week-long process of saying, “give me your ideas right now, as fast as you can and at the end of the week we’re going to hand out Starbucks gift cards for the best ideas.” You’ve got to do things quick, and more isn’t necessarily better. Better characteristics are better. 

How many characteristics do you need?

10-12 to start – the most bang for your buck is in the first ones. Refine your list to the easily observable characteristics that align well with the customer base you already have. 

If you’re expanding, how does that impact your ICP?

If you’re solving the same problem for a new segment or geography, much of your ICP might hold – if you expand your target audience (but target the same problem), you can assume that the problem you’re solving for one target group is also applicable to a larger/different target group. Maybe it’s slightly different for certain locations (such as if you’re targeting both the US and the UK), but for the most part the ICP should hold at the 80% level. 

If it’s effectively a different product, you need to start over – if you’re solving a different problem, then you have a different value proposition. This makes it a different kind of product and it’s a different process for who the salespeople should go after. 

How do you operationalize the use of an ICP?

Add an ICP field on the opportunity record – it becomes like any other piece of information you’d have about an account in Salesforce. Now you can look at it and report against it. 

Track % of leads coming from within the ICP – from the marketing side, you want to be able to look at the data and see that 80% of the leads are coming from the top ICP group. You can then funnel them the way you would with higher score opportunities. 

Give high-scoring leads special treatment – you might have different sales scripting for high-scoring deals spelling out how you want to handle those deals vs. medium or low scoring leads. 

What are the most important pieces to get right?

Define characteristics that matter, and keep it small more isn’t better. Better is better. That’s the most important part of all this. Find the small number of characteristics that really matter. 

Have the argument once upfront – get everybody to buy in and understand. Battle it out once, fight about every single characteristic, and come to a conclusion that everybody agrees on. What you don’t want to do is have people argue that one account is different for a specific reason later on. Most accounts are generic enough to support a systemic approach. Don’t let the outliers undermine the process. 

Report on it – it’s important that you have dashboards where you can show that marketing is successfully targeting these accounts. Whether or not they’re not responding, at least we’re aiming for the right targets. You also want to look at the pipeline and be able to break the pipeline down to show how many opportunities you’ve created together between sales and marketing. Reporting becomes important so you can see if you’ve done something wrong in the ICP process, but the transparency also allows people to maintain confidence in it.  

Make sure the CEO is actively on-board – if they aren’t fully committed, then it’s just an exercise in futility and will frustrate everybody involved in it. The CEO and senior executive team have to be actively onboard. That means they’re reviewing the characteristics and have to be part of the buy up process with sales and marketing. It has to be part of the religion and culture at the company. 

What are common pitfalls?

Don’t get lost in the minutiae – you don’t need 100 characteristics. You’re looking for improvement, not perfection. At this point, the 91st characteristic won’t impact the ICP in a meaningful way. 

Don’t get sucked into looking for the buried jewel characteristic – the crazier ones that are harder to find may be diamonds in the rough, but the effort required to dig them up overcomes their specific value. Likely, there isn’t that one little thing that’s nearly impossible to find that will make one account a higher priority. 

Don’t create the ICP in isolation – you don’t want your marketing team playing with the data for the ICP while the sales team is just continuing to close deals and not be involved.

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