Updated: Mar 25, 2022
You’ve probably heard or seen the term ideal customer profile (ICP) thrown around at some point and get the general gist of it. An ICP is a hypothetical customer who would get the most out of your product or service. In a lot of cases, the ICP is either poorly understood or vastly underdeveloped. For more qualified leads, improved user experience, and overall lifetime value (LTV), follow the guide below.
The Dreaded “Optionality Tax”
Before you start, look at Hubspot’s situation as a cautionary tale. In 2012, their ICP was so muddled that they landed on two ideal customers: a small business with less than 10 employees and a marketing manager at a company with up to 1,000 employees. As it turned out, they had different pricing, product, and support requirements from one another, and by not deciding which ICP to stick with, Hubspot was forced to focus on both. A lot of compromises were made, and the team lost sight of their own goals. As Hubspot CEO Brian Halligan mused, “By not deciding on one of these personas, we paid a gigantic, invisible ‘optionality tax."
While this example lives in the B2B world, it should still serve as a valuable lesson to companies of all sizes, no matter the industry. When there isn’t a clear persona, it’s difficult to get clarity around what makes your product or service indispensable.
This is especially relevant for D2C businesses because it’s a wasted opportunity not to have a defined ICP. The direct contact with customers through every sales stage provides a trove of data that market research can’t quite match. In other words, it’s fundamental information to use for a strong ICP.
Dive Into the Right Data
It’s crucial that the ICP ties into your customer data, so that you can easily distinguish between good and less-than-ideal leads. Think about what specific data and analysis you have to delve into by first finding out who your “best” customers are. Pull demographic research data to focus on their characteristics and highlight specific questions, such as:
Who are your most profitable customers?
Have they provided any feedback?
What’s your average customer lifespan?
Are they great to work with?
In addition, see if you can link website behaviour to these “best” customers by using Google analytics or your CRM. Zoning in on these areas creates an all-encompassing view of your customer profile to start developing a robust ICP.
Get It Straight From the Source
If it wasn’t clear before, here it is again: the ICP can’t be influenced by personal feelings or opinions. It’s built on facts and data. So, after conducting your own research, it’s worth it to reach out to the customers you’re focusing on to gather qualitative information and round out your existing data. It doesn’t have to be in-person — you can collect answers using survey tools, too.
Start by narrowing down main categories that’ll be used in the ideal customer template, based on what matters most to your company. Get the basic information but also try to delve into their motivations and goals, and zero in on why they find what you offer so valuable. These are your “best” customers, so finding the common thread among them takes you one step closer to discovering the ideal profile.
Examples of categories:
Company data - Basic information around their business, such as what industry they’re in, their marketing budget, and the size of their company.
Goals and challenges - Figure out what their priorities are, their biggest successes and failures, and their expectations for the near future.
Purchasing decisions - Break down why they decided to work with your company above all others — what standout qualities does your brand offer? What are their teams’ processes for making purchasing decisions?
Create Your Profiles
Once you’re finished, take your discoveries and start creating a profile using the following template:
When the ICP is fleshed out, present it to the people who actively work with customer data. This doesn’t just mean the obvious, like marketing or sales, but also product and finance teams. Get these groups to buy into the ICP so that they’ll be able to focus their time and resources on the right customer.
Some Things to Consider...
There’s a common misconception that ICPs are limiting, but in most cases, they can be freeing. No longer would you have to wonder whether you’re spending your resources on the right audience, or be pulled in disparate directions to make the same decisions over and over again.
However, that doesn’t mean there aren’t any pitfalls in the process. Make sure you don’t fall into any of these traps when creating the ICP:
No wishful thinking. It’s good to dream, but you can’t go about creating the ICP without rhyme or reason. Your ideal customer should always be rooted in your “best” existing customers — people who are already using your product or service and are organized to serve well.
Don’t be too limiting. Try not to be too specific. The ICP should be a broad description of your ideal customer base that encompasses the attitudes, behaviors, and preferences of a collection of individuals, rather than a true-to-life snapshot of the one person.
Be wary of creating too many personas. While it’s true that there are often multiple personas within a single ICP, your customers aren’t that different from one another — they have similar challenges, goals, and reasons why they’re working with you.
TLC for the ICP
Nothing kills engagement faster than an out of date ICP. The rule of thumb is to test at least quarterly. Be wary of any new product launches or company pivots, and reassess the ICP ahead of those events.
It’s also crucial to be cognisant of how updated ICPs could affect all areas of operations. After every change, make sure that everything from comp plans to customer incentives are realigned to serve your internal team and ideal customer.
Now that you’ve learned how to build a great ideal customer profile, take a moment and learn more about target audiences.