Find the Ideal Customer Profile for your SaaS!

Startups and SaaS ventures are digital companies that require constant evolution and quick adaptation to the market. It is well known that these businesses adapt their offer through time. They launch new features and platform improvements to deliver the best service they can. The entire organization is (or at least should be) focused on providing a customer-centered service.

In order to achieve a customer-centered culture in a company it is mandatory identify the ideal customer. The definition of an Ideal Customer Profile is a basic exercise that sometimes is either ignored or not done. The SaaS ventures that don’t have a well defined ICP will probably underperform in their ARR and their churn-rate.

It is important to note certain aspects of the ICP creation:

1. It is an exercise that promotes an ideal profile to prospect, close, and maintain, however it does not limit the sales and marketing teams to sell to other profiles.
2. The customers that fit in the ICP should represent most of the revenue for the company. These are the customers that will receive and give the most value of the service.
3. The identification of the ideal customer is not static nor definitive. It evolves with the organization accordingly. Small & young ventures will have a different ICP than mature & bigger companies.
4. It shouldn’t be confused with the persona creation for UX, testing & others. In fact, knowing the ideal customer should come before the persona creation. Why? Because if your persona is a Sales Regional Manager, it will surely behave differently if your ICP comes from Retail then one from Advertising.

How to identify your ICP?

This task needs involvement from the leaders in the organization and those who understand fully the WHY of the product. The product was built to solve a need, and this need is specific of its source. A product cannot solve everyone’s problems, it is too broad. When a company tries to please everyone, it says a lot but nothing at the same time. There is no audience, hence there is no language to be spoken, no advantages to be covered and no motivation to be found in hiring a service.

There're different areas to be covered to obtain the ICP. Start by going to the root of the product, why was it created, what problems does it solve and what value does it bring to customers. This introspection exercise allows to have an initial perspective on the profiles that the product covers “naturally”.

Check your current customers. Set different criteria to evaluate them from acquisition to post-sales. Which accounts were easier to close? Which kind of businesses are important for your ARR? Which businesses have growth potential for upselling or cross-selling? These criteria are up to you and should be aligned with your objectives. Find commonalities in the best accounts you have and work from there to build a profile around them.

Another good characteristic to review comes from the Churn Rate. What companies are contributing to it? Knowing which customers, you want is as important as knowing which customers you don’t really want. Even though this may sound limiting, the cost invested on getting accounts that don’t fit the ICP will be greater than the value you can receive from those accounts.

Close.io provides a good ICP template with questions you can use to identify your ICP. The answer of these questions has an impact not only on the strategic id of the ICP, but also an operational impact. SDRs & Business Developers can use these questions when prospecting leads to identify and qualify the best leads to move down the funnel. Select the ones that most closely have an impact on your business and you’ll have a prospection template for them to use.

Test your ICP

As mentioned above, the ICP is not fixed. And of course, it has to be tested before fully pivoting your strategies towards that profile. The experimentation phase to test an IPC is simple to do. It needs 3 basic elements.

Timeframe: The test to prove the success of an IPC can’t be too short nor too long. A period between 3 to 6 months can let the company prospect leads, close accounts and provide enough customer support to know if the identified profile works or not. Be exact on the selected timeframe.

Objective: The ICP has an impact on all the areas of the company. Therefore, when selecting objectives these may not only be sales oriented. The objectives shared by Lincoln Murphy in his ICP Framework are:

1. x amount of additional revenue
2. x new customers
3. x customer advocates

You may choose according to your business the best objectives.

Capacities: The profiles should fit the company’s efforts naturally. No further actions, improvements or additional work should be taken in order to get the customers. If you do need to make improvements then that is not your ideal profile, at least for now.

Impact of the ICP

I find it important to note briefly the impact that having an IPC has on the organization. The most obvious area that benefits from this clarity is the commercial team. They now can prospect and qualify better leads. Account Executives will find easier to negotiate and close accounts. On the other hand, Customer Support and Customer Success teams will be able to understand their customers and provide better onboardings, support and accompaniment to their accounts.

Other areas will improve as well. The Marketing team will know which audience they need to direct their efforts. How to talk to them, which words they need to use to improve SEO rankings and site visibility. It is clearer to know the best content for the selected profiles and the channels to find them and convert them.

Finally, the product team will know which features the customers want. Developers and Product Managers will have a clearer vision on the road to take in order to improve the tech and service of the SaaS. Having an ICP makes all the areas of the company be on the same page.