How to Create an Ideal Customer Profile (ICP)

Tactics post image
Tactics post image

An Ideal Customer Profile (ICP) helps you identify, source, and prioritize prospects — but how do you create an accurate ICP in the first place?

Two words: finite resources. 

It takes time, money, and people to attract, convert, and delight new customers. 

And as a savvy professional, you want to target prospects who will deliver the best return. You can’t market to everyone.

Besides ensuring that your existing customers are a good long-term fit, the ICP framework also helps new customers feel valued, supported, and part of your community long after the sale. 

If you know your ICP well, then you’ll be aware of how you can solve your prospects’ problems now and in the future.

What is an Ideal Customer Profile?

An ICP is a combination of firmographic and behavioral characteristics that define an organization’s most valuable customers. By creating a general profile of an organization’s best accounts sales and marketing teams can develop measurable strategies that convert these top buyers.

Alignment with Sales and Marketing

Writing an ICP is a strategic exercise that requires sales, marketing, and leadership alignment.

An ICP can inform your entire sales and marketing strategy, from content creation to advertising to sales outreach, by answering these questions:

  • What type of messaging resonates with your best customers? Increase effectiveness by focusing on repeatable and scalable strategies that reach and nurture the right prospects with the right message.
  • What disqualifies them from buying? Shorten sales cycles by reducing time in the awareness stage of the buyer’s journey. Qualified prospects may already be using your competitor or looking for services like yours.
  • How do you communicate your value? Better-fit prospects and opportunities won turn into better-fit customers who have a lower churn rate
  • Increased closed-won deals — those entering the pipeline are more likely to have the budget, interest, and talent needed for your product to have value.

How to Create an ICP

1. Find the Data

Start simply: Take stock of your current customer base and uncover their common characteristics.

The ICP can be as detailed or general as your team needs it to be. A few basic characteristics to consider are company revenue, employee headcount (either the entire company or within a relevant department), industry, location, or job titles.

Export opportunity data from your CRM and append account information as needed. Then build it out with more data points relevant to your activities and industry.

Then, look for patterns. It’s different for every business. You might notice that they are concentrated in a particular region of the country, a certain industry, a similar size, or involve a specific buyer.

2. Identify Your Best Customers

When identifying your ideal customer, don’t just look at your entire customer universe. Home in on your very best customer universe. 

Start by building out a list of your best customers (stakeholders throughout the entire organization must agree on the criteria).

Here are some common points:

  • Highest NPS (Net Promoter Score)
  • Highest ACV or TCV (Annual Contract Value or Total Contract Value)
  • Highest potential for growth
  • Highest retention rate or longest time with your company
  • Highest Customer Health Score

You should also consider the customer accounts that have been the most profitable. Once you have come up with your criteria, repeat the exercise. Aggregate the data and look for patterns or similarities.

Additional Customer Profile Considerations

Those attributes alone may be enough to write your ICP. However, we recommend going deeper. 

Customer Lifetime Value (CLV): Calculate total CLV — the total net profit a company earns from any given customer over the course of the relationship. From a forecast and planning perspective, CLV helps companies determine how much to spend on customer acquisition.

Referrals: Your “best” customers may not necessarily have the highest CLV. Highly satisfied customers add additional value in the form of referrals. Statistics show that 84% of B2B decision-makers start the buying process with a referral. Additionally, the majority of sales and marketing professionals agree referrals close faster.

Product/Service Use: The frequency at which customers use your product or service can go a long way. If applicable, drill down feature-by-feature to determine how marketable specific functionality within your offering is.

Customer Advocacy: Your “best” customers may also be the companies most willing to publicly advocate for your product or service. This can include participation in case studies, online reviews, and more.

Prominent Brands: Customers with established brands provide your organization with credibility and brand equity.

3. Find the Similarities

Some patterns may jump out at you. Others may be harder to see at first glance.

Here are some questions to ask to get you started:

  • Are they in the same region?
  • Are all organizations in the same company stage?
  • Are they in a similar industry?
  • What’s the employee count at these customers?

The granularity of your data and segmentation tools are the only limitation here.

This set of characteristics becomes the foundation of your ICP. You know it represents your best future customers because it’s based on your very best existing customers.

4. Prioritize and Implement

Based on the results of your evaluation, develop a best-fit rating to see how well an account aligns with your Ideal Customer Profile. You can then use this rating system to prioritize and align your resources and strategies, as well as identify future target companies and leads.

Here’s an example:

  • Best Fit: US-based companies, with over 500 employees, that manufacture and sell security software
  • Good Fit: North American companies, with over 200 employees, that distribute security software
  • Bad Fit: Companies outside North America, with fewer than 100 employees, that do not manufacture or distribute security software

This works in prioritizing and qualifying inbound leads to determine how you follow up or if they get passed to sales. It also provides strategic direction for your outbound or account-based target lists.

If a company doesn’t fit the ICP, there’s a good chance it’s not a good fit for your product — so don’t waste your time drifting around aimlessly in the vast ocean of prospecting possibilities.

Last piece of advice? Revisit your ICP data to evaluate fit ratings over time — say, once a year — and reassess resource allocation and strategies.