Author: Kae Team

In the first part of this two-part series, we defined the ‘Ideal Customer Profile’ (ICP) and how you can go about defining it. In case you missed that, you can check it out here. In the second part, we shall look at refining your ICP to be able to use it for optimising your target audience.

After you have iterated and zeroed in on an initial ICP, it is time to work on other key aspects of the go-to-market (GTM) strategy. We suggest doing the following:

1) Positioning statement: A good way to start on the GTM is to come up with a clear and concise positioning statement. This positioning statement should be able to articulate your value proposition for an ideal customer. A typical format for this would be like below 

 For (Target Customer) that (Needs/Cares about), (Company/Product/Service) is a (Category/Solution) that (Benefit). Unlike competitors,(Company/Product/Service) is (Unique Differentiator) 

           Examples of positioning statements:

• • Avis: For business people who rent cars, Avis is the company that will provide the best service because the employees own the company.
    
  • Amazon: For consumers who want to purchase a wide range of products online with quick delivery, Amazon provides a one-stop online shopping site. Amazon sets itself apart from other online retailers with its customer obsession, passion for innovation, and commitment to operational excellence.

Another very good way to think about this is to have an analogy positioning. This is when you tether your values with another successful/iconic brand and make the value proposition very easy to understand.

 For eg. Superhuman: Tesla for e-mails

2) Building user/buyer personas and creating personalized messaging:While B2C messaging is often personalised, It is very easy to forget sometimes that even B2B customers are humans, and the messaging needs to connect with them on a personal level to make a buying decision. This is where building personas (user/buyer) becomes important. What you want to be able to do is identify more things about your customers beyond the segmentation of ICP. You are looking for subtle but important things like ‘What key value are they really looking for?’, ‘What emotional trigger really makes them take a decision?’, ‘Do they have any cognitive biases?’, etc.

Identifying and enhancing your customer’s human behavioral traits and fleshing them out as personas such as a ‘Sales Stuart’ who is looking for the best price or ‘Developer Dave’ hunting for optimum productivity can help you sharpen the messaging and channels strategy. Continue iterating on these personas as and when you collect more information and data.
 

Validating and reiterating the ICP
 
As the business progresses and you add customers, you should continue periodically validating and reiterating the ICP. This can be done by:

1. Looking through your customer segment mix
2. Looking through metrics/indicators/evidence of value derivation by different segments
3. Reiterating the ICP

 
A few ways to measure the value derivation would be:

1. Usage/Engagement metrics:How are different segments using/adopting the product
2. Customer retention/churn data:Segment-wise customer churn or retention data. This directly translates to the Lifetime value of the customer
3. Customer Satisfaction (CSAT)/Net Promoter Score (NPS) data:Segmented NPS/CSAT data gives a lot of insights into the ICP segments.
4. Sales data: Insights on segment-wise Sales cycles and conversions also give indications on the ICP.

Another way of visualizing this would be to break up personas through usage patterns – engagement and retention metrics:

The ideal customer group should be doing much better compared to other segments and should have average metrics on most of the above KPIs. If that is not the case, it is time to reiterate the ICP.

Aligning Efforts towards ICP

Once you have clarity on the ICP, it is important that you make maximum efforts towards that segment. The following questions help in that direction:

1. What percentage of your customer base (by numbers and revenue) is your ICP?
2. What are some things that you have done/ are going to do to strengthen the value proposition towards your ICP?
3. How are you planning to align your Sales and Marketing efforts towards the core customer group? 

Firing your customer

Firing your customer is perhaps as important as, if not more important than defining your core customer. The following questions will help you understand how focused your organization is. It is important that you let go of the customers who are far away from your ICP segment.

1. Which customers have you fired in the last months and why?
2. Which customers (Non-ICP) are you firing in the next 6 months?

Conclusion

Thus, clearly defining your ICP and being regular with this exercise can do wonders for the efficiency of your business by helping you reach the right consumers with the right messaging. The important point to note here is that this exercise is not a one-time effort and does require constant updating to maximise your business’ output.

This article talks about the importance of defining an Ideal customer profile in the initial days (when you have none or very few customers) and provides a framework for doing so.

Founders are often tempted to capture as much value (or revenue) as possible from different types of customers. To do this, they often wastefully spend their energies and resources on capturing multiple types/avatars of customers and therefore lose sight of the company’s core value proposition and focus. As a founder, you must identify and focus your energies on the customers who are going to be most successful for you- the ‘Ideal Customers’

First of all, it is important to expand on the term ‘Ideal Customer Profile (ICP)’. An ICP is not the customer that gives the most revenue, it is also not only the customer with the easiest sale potential. An ideal customer is one who is deriving the maximum value from your offering and whom you can serve best (compared to alternatives). This translates to:

1. Easier Sale and lower cost of acquisition
2. Better retention and higher Lifetime Value
3. Customer Advocacy and referrals

You should also not confuse ICP with customer/buyer personas (‘marketing Michelle’ or ‘HR Harvey’). A buyer/user persona comes after you have defined a broader ICP and is used to create messaging that helps you connect best with different personas in that ICP group. An ICP defines Who to sell to, while a persona defines How to convey the value proposition of your offering to this customer.

Your ICP is a clear, common, objective definition of who the ideal buyers and users of your product are. A well-defined ICP lays the groundwork for your positioning, messaging, pricing, GTM, and even product roadmap. Once you have clarity and validation of your ICP, everything else ties into it. An important point to note is that the ICP definition is not stationary, it keeps on evolving along with the organization. As you keep on acquiring and learning about more and more customers, the ICP definition will keep changing and becoming sharper.

Defining the ICP

A good way to define your ICP in the very early days is to look at the broad market that you are trying to solve for and look for a common subset where you believe you are best positioned to serve that customer group. Look at the overall landscape of customers and competitors. You are looking for a large opportunity which primarily can be because of:

1. A gap in the market– There is a gap in the market and a large customer segment is underserved.
2. Better product/experience– There is an opportunity to serve the customers in a much better way compared to the current alternatives. A low NPS/Retention for the current alternatives points in this direction.
3. Opening of the market– There is a latent need in the market or the customer behaviour is changing rapidly for a new offering to come in and disrupt.

You should then speak with your best customers (or do surveys with prospects if the product/service is yet to be launched) and list down their attributes.

For B2C Businesses

For a consumer-focused(B2C) business, the following attributes are a good start

1. 1. Demography
      • Age group
      •  Gender
      •  Religion, Race and Ethnicity
      •  Occupation
      •  Income
      •  Relationship/Family status
      •  Geography

1. Psychographic and behavioural traits
   • Values
   •  Interests
   •  Hobbies
   •  Aspirations and Fears
   •  Social media behaviour
   •  Buying behaviour

A few iterations using customer surveys/research will lead you to your ICP.

For B2B Businesses

For B2B businesses, the following attributes are a good start

1. 1. Target Company
      • Industry
      • Customer base/Business model- For example ‘B2B company serving SMBs and mid-market customers’
      • Size- Very Small/Small Medium/Mid Market/Enterprise Businesses
      • Geography
      • Maturity/other differentiators- For example, ‘fast-growing startups’ or ‘more than 20 people development team’

1. Target customer profile
   • Profile- Ex Sales Development Representative/VP Marketing/Engineering Manager
   • Key goals of the customer
   • What is the core problem?

Put your target group into different segments and think through your value proposition from the perspective of the following parameters. The attractiveness of your solution (compared to the alternatives) for a segment will drive you towards your ICP:

1. Problem intensity– The problem you are solving can be severe and (or) frequent. Pain point intensity usually is different in different kinds of companies. It relates strongly to the industry, size, and maturity of the company.
2. Awareness and urgency– How aware is the customer of the pain point? Is it a need (urgent) or good to have?
3. Ability to pay– Does this customer segment have the ability to pay the right value for your solution? This usually relates to the size and industry of the company.
4. Ability to sell and serve efficiently– How efficiently can you acquire customers of one segment? How equipped are you to serve them? Geography and size of the company are the most important variables for this parameter.
5. Competition/Advantage over the competition– Are there any other solutions for this customer segment? Is your solution much better than the current competition? Is there a gap/underserved market segment that you can go for? Usually, this parameter relates strongly to size and geography. It is probably the most critical parameter which gives direction to a possible whitespace or possibility of disrupting incumbents.

A few iterations using customer surveys/research will lead you to your ICP. Articulate it very clearly. Try to be as specific as possible and use more nouns/verbs than adjectives.

Example: Hull.io ICP definition- “Post Series-A (scaling) SaaS startups with more than $5 million in annual revenue, who use Salesforce & Redshift.”

After nailing the ICP statement, to plan and sharpen your go-to-market (GTM) strategy, we suggest that you put together the following as well:

1. Success metric for the customer– What is the metric that the customer is likely to look at to validate that your solution is proving to be successful? (eg. it can be the lowering of churn or increasing of NPS)
2.  Success metric for you– What is the metric that you would track to validate that your customer is deriving value from your solution? (eg. it can be the number of emails sent or tickets closed)
3. Value Metric– What is the metric/unit that the customer is likely to measure that correlates with the perceived value? (eg. it can be the number of users or GBs of data storage)
4.  Time to value– How much time does it take for the customer to start realising the value of your solution?

This way, you can approach the problem of defining your ICP, depending on the kind of customer profile and end goals you are targeting.

In part 2, we will talk about steps taken, post defining your ICP.