How an ideal customer profile helps you reach product-market-fit
Partner @ Demandbay
What’s an Ideal Customer Profile (ICP)?
An ideal customer profile (ICP) is a fictitious company (one you imagine) that represents the best possible fit for your offer. This means that they would absolutely and surely benefit from your offer, are likely to pay for it, and continue to use it. ICP is only fictitious while you’re creating it, but you aim to find the qualities of your ICP in real customers.
ICP (aka ideal buyer’s profile) is often used interchangeably with ‘buyer persona’ and ‘target market’. However, although these concepts are connected, all three refer to different things and serve different purposes.
Buyer personas are also fictitious, but in B2B context they represent a person within your ICP that your marketing/sales efforts are directed to. You can define multiple personas, and their descriptions usually contain demographics, pains, challenges, goals, etc. Target market is more commonly used in B2C contexts and refers to an ideal group of people that would benefit from an offer (vs company for ICP).
Why do You Need an Ideal Customer Profile?
At this point, you may be asking yourself - why lose potential customers based on some kind of an ideal? Good question. Companies with a focus on their ICP have 68% higher win rates. What this means is that they are more successful in actually selling their offer.
This is because they dedicate all their marketing and sales resources (time and money) to identify and target companies that will likely purchase and happily use the offer. They are aware of how their offer will benefit their customers even before reaching out. Companies that don’t target their ICP, face some of these problems:
Content doesn’t target the audience adequately so the engagement is low
Low-quality leads and low conversion rates
Longer sales cycles and inefficient use of marketing/sales resources
No increase in lifetime customer value
High churn rate, and ultimately unhappy customers and employees.
All this can be avoided with a clearly defined ideal customer profile. So let’s see what is considered to be the ideal profile.
How to Create an Ideal Customer Profile?
An ICP will be different for every company, which means that there’s no one right way to define it. Therefore, we can’t offer an exhaustive list of information you need to gather. However, here’s an ideal customer profile template that you can use as a starting point and expand on it.
Company size/revenue/budget - are they able to pay for your lowest-priced offer?
Industry - do they belong to a vertical you can successfully collaborate with?
Location - are they in a location that you operate in?
Legal limitations - are there any limitations that prevent you from working with them (laws, regulations, age, etc)?
Offer limitations - do they have any requirements you may not be able to meet (fast response time, frequent changes in scope, additional features demands, work after hours, different time zones, etc.)?
Length of time in business
Stock market status
Technologies they use
Market positioning and messaging
Here’s an example of how you can organize all characteristics in a sheet:
Besides information about the company, your ICP can also include information about that company in relation to your offer:
What is their goal?
What are they currently doing to achieve it?
Why would they choose your solution?
Why wouldn't they choose your solution?
How can your offer change their current approach and address the main pain point?
What is making your offer the most appealing?
What are the most important elements of your offer to them?
…and the list goes on. You may not include all of this information in your ideal customer profile, or you may expand it substantially. This depends on your company’s needs. Now that you know what information you're after, let’s see how to get what you need.
Gathering Information for an ICP
Although your ICP is not real at the moment, it should be based on real data. Here’s how you do it.
Look at your current customers
Take 10 of your current ideal customers and make a list containing all the information about them. Remember, your ideal customers are the ones who gain immense value from your offer and are aware of that. Create a sheet with names of existing customers in columns and rows containing info about them. You will be noting down the information we mentioned above. If you need to, reach out to your customers and ask them for their feedback and insights into some of the questions we included in the list above.
Bonus tip If you don’t have 10 ideal customers, you may not have a large enough sample of companies to conduct your analysis. In this case, work on getting your existing customers on the level of an ideal customer, or onboard new companies until you gather enough clients to analyze.
If you are a new company, you likely don’t have any customers yet. In this case, you need to research the market and your industry to build a hypothesis. It’s never ideal to guess, but you will be testing out your hypothesis. Once you create a test ICP, reach out to your target audience and conduct surveys and interviews to gauge your ICP fit. You can also create landing pages and conduct A/B tests until you determine what works better. Don’t forget to check out your competition and see who they are targeting and what results they are getting.
Next step is finding common elements. You should be able to find patterns that will later help you define your ICP. The larger the sample, the easier it is to find these patterns. Also, the more characteristics you find, the easier it will be to connect them. Mark them in the sheet so you can focus on them later.
Creating an Ideal Customer Profile
Now that you gathered all information you need, you should combine this newly acquired knowledge and insights to create an actual profile. You don’t have to find 50 common characteristics - that’s too much. Aim for a clear and concise profile that you can remember at the top of your head.
Ideal Customer Profile Examples
Here are 3 examples of ICPs. Note how they don’t contain everything we talked about. When putting together their ICP, companies focus on what matters to them.
A company offering multiple gym memberships with only one subscription to IT companies
Problems we’re solving: We’re offering a more affordable but more versatile alternative to companies looking to add more value to their employer benefits with a fitness membership. With our solution, companies can give more to their employees and increase satisfaction, without going over budget.
Our ideal customer is an IT company with 200-400 employees, located in San Francisco, CA with a budget over $20k, looking to offer their employees benefits such as a fitness membership in multiple gyms in the Bay Area.
Transportation services for construction companies
Problems we’re solving: We’re offering our transportation infrastructure, and taking over all organizational aspects of construction material transportation, from pick up to drop off, while taking care of safety rules and regulations. Our solution saves time and money.
Our ideal customer is a construction company, more precisely - a general contractor, located in Chicago, IL, and operating within the state, with a budget of $10k/month, looking to subcontract construction material transportation since they don’t have their infrastructure. This company has a great internal organization and rarely has urgent requests.
A company selling first aid kits and offering training to the hospitality industry
Problems we’re solving: We’re offering in-house first aid training to hotels with a lot of staff members, thereby saving them the resources they would spend on logistics for that many people to go to another location for training. Together with kits, we’re offering a complete solution in accordance with all hotel rules and regulations, so it’s quick and simple for hotels to get everything with a single company.
Our ideal customer is a luxury hotel located on the West Coast, with up to 200 rooms and more than 300 staff members. Their budget is $15k+ and they are looking for a complete solution when it comes to necessary training and materials for providing first aid.
How to Determine if Your Ideal Customer Profile is Successful?
As always, once you implement something new in your business, you need to make sure it actually brings good results. The easiest way to do this is to look at the metrics to assess your ICP fit.
Measure the net promoter score (NPS)
This metric will show how likely are your customers to recommend your offer to someone else. Have your customers give a score from 1 to 10. Group the answers by score (group 1: 0-6, group 2: 7-8, group 3: 9-10). Disregard all the answers between 7 and 8. Then subtract the percentage of group 1 from group 3 to get your NPS.
Measure customer satisfaction
This metric answers how satisfied the customers were with the experience. Have your customers score their experience on a scale from 1 to 3, 1 to 5, or 1 to 10. Divide all positive scores by the total number of responses and multiply by 100 to get the percentage of satisfied customers.
Example: (20 positive answers/50 total answers) x 100 = 40%
Conduct a Superhuman product-market fit test
Doing a product-market fit test will give you an answer to “How would you feel if you could no longer use (your offer)?” You’re looking for “very disappointed” answers from your ideal customers. Remember, your ideal customer profile benefits so much from your offer that they should feel a real (negative) difference without it. In general, if more than 40% answer “very disappointed”, you can claim you found your product-market fit.
Product usage metrics
There are multiple useful product usage metrics to gauge product engagement and improve it. You can look at the product activation rate and adoption, time to value, number of key user actions per session, feature usage, stickiness, etc. If you found your ICP-fit, all of these metrics should be showing good results
Besides increased success in marketing and sales, there are some other indications that you nailed your ICP. The customers you target based on ICP should:
Happily pay regularly for the value you provide them
Always give positive feedback and praises to your team
Become your company’s advocate so you get referrals through them
Offer new opportunities or help to expand your business for mutual benefit
You don’t dread talking to them and offering support because they aren’t too demanding
They are happy to be featured on your website and offer their testimonials
How to Use Your Ideal Customer Profile
To achieve great results, you need to implement your ICP in all parts of your business. Share it with all your teams to ensure consistency and efficiency in all efforts. Here are some specific ways to use your ICP.
Achieving a Message-market fit
How you talk about your offer is key to attracting customers. This is what message-market fit is for. Your new ideal customer profile can and should be used to inform your company and brand messaging. Once you understand who your ideal customers are, you will know what kind of messaging will resonate with them. All of this will help your marketing team reach customers which will engage and ask more about the offer.
No more wasting the resources of your sales team. They now know who your ideal customer is and they can focus on them. While searching for prospects, your sales team will be able to tick off characteristics a potential customer has. If they match your ICP - there’s a quality lead! These prospects are highly likely to make a purchase and be extremely satisfied with their decision. This is because knowing your customer helps your sales team tailor their way of communication with the client. They can present a solution that solves a real problem for them, spike interest, and build mutual trust.
Not every company is the right fit for your offer. When your messaging and prospecting are guided by your ideal customer profile, you’ll achieve several key points in growing your business:
Increase engagement by targeting the right customers for your offer
Get high-quality leads, increase conversion rates and LTV
Shorten sales cycles and make the best use of your marketing/sales resources
Most importantly, make your customers happy and continue to grow!
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