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Developing an ICP: Best Practices to Position Your Business for Growth

Oct 12, 2020

Defining your ideal customer profile is key to differentiating your business and achieving the most profitable growth, but what steps are involved, and how can you get it right?

By KPItarget

For many businesses, attempting to grow in a competitive industry can feel a lot like treading water in red ocean, with cutthroat competition swimming at every turn. The good news is that there is a life raft — a process-based approach that any business can utilize to help qualify leads, align sales and marketing strategies, and ultimately find the blue ocean of untapped opportunity.

It all starts with developing an ideal customer profile.

The Ideal Customer Profile Defined

The ideal customer profile (ICP) is the cornerstone of any successful account-based marketing (ABM) strategy. It’s best defined in terms of the function it serves: An ICP articulates the perfect-fit customer for the unique services and solutions that your business provides.

Defining your ICP involves researching firmographic information (market size, revenue, number of employees), as well as behavioral information (how those businesses consume content, how they purchase service solutions, where they look for thought leadership).

This information helps you identify pain points that your business directly solves, and target customers that provide you with the greatest opportunity to grow. Critically, those whose pain points align perfectly with solutions you provide.

Although you’re building the profile of a fictitious, ideal customer, you’re modeling this information on carefully researched, real-world inputs that will help you and your team identify  those customers that can bring the greatest lifetime value to your organization.

Why Take Time to Develop an ICP?

All too often, companies lose the forest for the trees, punting strategic planning to sometime down the road in order to focus on the demands of today. The problem with this approach is that the ideal time often never arrives, as businesses spin their wheels prospecting and nurturing leads that will never close.

Not every lead is created equal. Your ICP helps you define what a perfect-fit customer looks like, so you don’t waste time chasing down no-fit matches. Defining your ICP can also help you develop clearer direction for the future of your business, informing everything from the best options for new product and services development to where your marketing and sales budget is most effectively allocated.

As you begin to narrow your focus, you’ll want to consider some broad inputs, such as company revenue, number of employees, geography and job titles you’re targeting. But overall, you want to be as specific as possible as you develop your ideal customer profile.

Here are five important areas to cover as you begin the all-important work of defining your own ICP:

Market Research & Analysis

Begin the process with research into your target market. Think in terms of two tiers of diligence: secondary research and primary research.

Your secondary research of the overall target market involves both quantitative (market size), and qualitative (market opportunities) work. Primary research of your target market involves observing and interviewing current and/or potential customers to better understand their pain points, how they consume content and their areas of greatest need.

From here, the next phase involves analyzing the quantitative and qualitative data to determine what segment of the market holds the most potential for you. Ask yourself, who needs the services or solutions that we provide the most? Then narrow your focus.

Where is the hole in the marketplace that your business is uniquely positioned to fill?

Bret Rachlin, KPI Target Chief Revenue Officer, points out, “Taking the time to analyze your market to determine your ICP is time well spent. Take your time upfront, so you can confidently execute your go-to-market strategy. Get your ICP right by going slow early, so you can go fast later, and grow just as quickly.”

Competition

The next step is to review direct and indirect competition to determine who (if anyone) serves these market segments. Remember that this is an exercise in specificity. Sure, a lot of businesses might benefit from your services, but what might be missing from the greater offering that your competition provides, that you solve in a different way?

To answer these questions, you’ll have to do a little digging. Let’s say you’re a graphic design agency. What’s missing in the greater value proposition that your competition is currently offering your target market? Is there a gap in production quality? Is it turnaround time? Perhaps there’s a prevailing lack of originality when it comes to creative concept development.

Ultimately, you want to land on a very specific subsection of the target market. For example, your graphic design agency’s ICP includes small businesses with $2 million to $5 million in revenue, that require outside assistance in formatting their proposals, email campaigns and paid advertisements. 

Using a real-world example, Mailchimp decided to steer its marketing and sales efforts away from enterprise accounts, to focus on small businesses and sole proprietors, by delivering an email marketing solution that is extremely easy to use. This differentiated them from large email marketing providers that serve enterprise accounts with complicated solutions. 

Developing an ideal customer profile helps to align your service offerings with the real-world requirements of customers that you’ve already determined are worth the time and resources to prospect. This alignment represents the first push into blue ocean.

“Narrow your focus, so you’re not all things to all people,” says Rachlin. This means taking the time now to identify your ideal customer profile so that you have a reliable compass to guide your efforts going forward.

Pricing

Once you’ve conducted your market research and analyzed the competition, you’ll also want to analyze your target market to determine potential pricing options and define your particular pricing strategy.

Will you be charging a premium, or will you be the low-cost provider? How does your pricing reflect the brand identity you wish to create within the marketplace? Does your cost of services lend itself to a subscription model or other novel pricing approach? What about free quotes, promotions or payment structuring?

Analyze the competitive landscape in your market to gain a better understanding of how to use your pricing strategy as a competitive advantage.

Look for the Blue Ocean

After conducting a thorough analysis of the competition, consolidating your market research and determining your pricing, you will be able to home in on your ICP. It may end up looking a lot like a current client that you already feel is the ideal fit for your company.

If this is the case, your ICP should consider similarities that may exist with this customer, including their industry, geographic location and their business’s stage of growth. (But of course, you already covered that base in your initial market research.)

A vertically-focused strategy that keys in on customers who provide the most long-term value to your business can keep you from spinning your wheels on customers who otherwise waste valuable financial and human resources.

Rachlin stresses the importance of defining solutions based on specific customer requirements as the key to developing a winning ICP. “It’s better to be an expert to a smaller target market where you can stand out and dominate than a generalist for a larger market where you’re one of many providers,” he explains.

Analyze and Refine

Over time, you’ll come to discover areas where you can tweak your ICP to achieve even better results. For example, it could be something as relatively small as adjusting the locations you serve within a particular geographic region, or as large as determining that your ICP includes startups that have raised a certain amount of venture funding, rather than just startups in that area that have raised any funds at all.

Review your ICP on an annual basis (at minimum) to ensure that your whole team is aligned toward a common purpose, and that your marketing and sales teams have the direction and tools they need to succeed.

The time you spend defining your ICP now will more than pay dividends in the long run. Don’t waste any more time prospecting leads that don’t fit the profile of the kind of customer you know you need in order to grow, scale, repeat.

Get in touch to learn more about how KPI Target is helping businesses large and small leverage ideal customer profiles to create marketing strategies that provide real value and drive tangible results.