An Ideal Customer Profile (ICP) is a data-backed description of the pain points and firmographic characteristics that define your hypothetical ideal customer – the type of customer that would most benefit from the products and services that you provide.

For the purposes of creating an ICP, ideal customers may be defined as those who:

1. Experience the pain point addressed by your product or service,
2. Experience the pain point frequently, such that it has become a top-of-mind issue,
3. Are actively searching for a solution to the pain point,
4. Are prepared to adopt the right solution for the pain point, and
5. Have the available budget and resources to pay for an implement your solution,

When these conditions are met, the ideal customer has demonstrated a business need for your solution, along with their readiness, willingness, and ability to make the purchase.

It’s also important that you can make a profit by selling to your ideal customer – that means that your anticipated customer lifetime value (LTV) for an ideal customer must be greater than the total customer acquisition cost (CAC).

For B2B SaaS companies pursuing an account-based marketing strategy, creating an ICP gives you the ability to effectively prioritize your sales efforts, allocating the greatest number of resources to winning the accounts that are most likely to benefit from doing business with you.

Targeting firms that fit your ideal customer profile is likely to result in shortened sales cycles, elevated rates of customer satisfaction and retention, and faster ARR growth for your business.

From the ideation stage, through to the launch and growth stages of building a SaaS business, creating ICPs helps sales and marketing teams refine their understanding of the ideal customer and develop new insights into ideal customer characteristics, including pain points, firmographics, demographics, jobs to be done, and readiness to adopt a solution.

Creating ideal customer profiles can also help SaaS businesses narrow down and segment their Total Addressable Market (TAM), personalize marketing campaigns, and allocate sales/marketing resources more efficiently to win customers.

Narrowing Down Your Total Addressable Market (TAM)

If you’re a B2B SaaS business, your total addressable market includes all firms that could benefit from using your products. Depending on the nature of your product, your TAM might include anywhere from a few hundred companies to a few hundred-thousand. 

Creating an ideal customer profile allows you to segment your TAM based on how well each firm fits your ICP. As a result, you’ll be able to focus your marketing resources on reaching the segments of your TAM that are most likely to purchase.

Personalizing Your Marketing Campaigns for Ideal Customers

The more you understand your ideal customer, the more you’ll be able to customize your marketing messages and construct strong value propositions that speak to their pain points. 

Efficiently Allocating Sales/Marketing Resources

By creating ICPs to better understand the ideal customer, firms can better allocate their financial and human resources to prospects with a genuine need for their products and the greatest likelihood of purchasing a solution. By focusing their efforts on winning the right customers, SaaS companies can lower their CAC and accelerate their overall time to profitability.

The best way to create an ideal customer profile is by analyzing your highest-value existing customers to understand the pain points, firmographic characteristics, and solution-readiness factors that they shared in common when they discovered your product. 

There are three great ways to uncover this information and start applying it to create an ideal customer profile:

1. Talking to Your Sales Team– Account managers spend most of their time talking to current and future customers of your business. As a result, they have plenty of information that can help you understand the characteristics of high-quality prospects and start creating ICPs.
2. Analyzing Customer Data – Analyzing data from Google Analytics or your sales CRM can provide you with additional details for your ICP, especially if you’re interested in correlating behavior on your website with sales outcomes.
3. Surveying/Researching Existing Customers – Researching your customers or directly surveying them can reveal additional details about their customer journey that might not appear elsewhere. 

Using these three strategies, marketers can gather information on the firm’s best customers and use it to create ICPs that will directly influence your future digital marketing strategy.

When constructing an ideal customer profile, marketers should include information about the ideal customer’s business needs, firmographics, behaviors, and any additional data that correlates with strong sales outcomes and customer experiences. As a starting point, your ideal customer profile should include the following eight components.

Industry

Does your SaaS business sell to a wide audience of users across multiple industries, or is your solution focused on addressing the needs and pain points of a specific industry? 

Location

Does your business provide service to a defined geographical area? Are there any locations or regions where your product or service is unavailable? Does it make sense to focus your marketing efforts on a specific country or region?

Round of Funding

Does your target customer have the cash available to purchase and implement your solution? Are they in a growth stage where your solution makes sense as an investment?

Number of Employees

How many employees does your ideal customer have working for them? How does the size of the firm impact their readiness, willingness, or ability to purchase your products?

Revenue

How much revenue does your ideal customer generate on a monthly or annual basis? At what level of revenue generation would it make sense for your ideal customer to purchase your solution? How does generating revenue exacerbate or relieve the pain points driving the customer’s business need for your solution?

Decision Makers

How many decision-makers at a prospect organization would need to be involved in a decision to purchase your SaaS solution?

Business Objectives

What are the core business objectives of your ideal customer? How does your solution help them achieve those objectives?

Product Attributes

What other products or services are your ideal customers using as part of their daily operations? How does your product integrate with their existing workflows and technology stack?

Do you know the difference between an ideal customer profile and a buyer persona?

While an ICP focuses on the specific characteristics of the firms you want to attract as customers, the goal of constructing buyer personas is to understand the personal and individual characteristics of the people you will encounter in decision-making roles within those firms.

While ideal customer profiles focus on firmographic characteristics like budget and location, buyer personas focus on the demographics (age, occupation, education, income) and psychographics (attitudes, values, beliefs, goals, motivators) of the decision-makers you’ll be working to influence through your marketing efforts.

Directive Consulting uses enriched 1st-party data to define your total addressable market, carefully construct ideal customer profiles, and engage your high-value potential customers with personalized marketing campaigns that convert. 

It’s all part of our Customer Generation strategy that’s been shown to positively impact business KPIs like average contract value, trial conversion rate, CAC, and LTV.

Learn more about Directive’s Customer-Led approach to B2B SaaS Customer Generation