In the startup world, two concepts that are commonly mixed up are the Ideal Customer Profile (ICP) and the buyer persona. While both concepts are important in navigating sales and marketing efforts, the difference between them is important to understand to use each effectively.
Here, we’ll review what an Ideal Customer Profile is and how they’re used, why they’re important for startups to have, and how to start building one.
What is an Ideal Customer Profile?
An Ideal Customer Profile (ICP) lays out the perfect customer for the solution a business provides. Most often used in business-to-business (B2B) settings, the ICP is the type of customer that stands to benefit the most or derive the most value from a business’ product or service offering. They are the customers that are likely to remain loyal over time and to recommend a business’ products or services to others.
Characteristics used to define a business’ ICP could include (but are not limited to) data points such as:
- Industry/industries
- Company size
- Company age
- Revenue
- Valuation
- Geographic location
- Public vs. private status
How is an ICP different from a buyer persona or target market?
A buyer persona is a fictitious character that provides a generalized representation of a segment of a business’ customers and the problem they need solved. A buyer persona is typically developed using market research and existing data. A business typically will have multiple buyer personas to represent each segment they serve. While the buyer persona is related to the ICP, it’s more targeted and specific.
More commonly used in business-to-consumer (B2C) settings, a target market identifies the primary group of consumers who are likely to benefit from a business’ product or service. Target markets are based on demographics and market research. A business may have multiple target markets.
Why do startups need an Ideal Customer Profile?
The ICP can help businesses increase efficiency by clearly identifying customers that are the most likely to purchase (and hopefully repurchase) its product. For business growth, identifying these customers is key. When done well, an ICP can not only make it easier to spot solid potential leads, but it can help refine a business’ value proposition and assist in product roadmap development. For early-stage startups, the ICP will likely change as its product and services and capabilities become more refined with time.
How to create an Ideal Customer Profile
So, where to begin? An ICP is built using data on current customers. Some questions to ask to help identify which customers may fall into the ideal category include:
- Which customers are getting the most value of the product or service?
- Which customers are the easiest to work with?
- Which customers have returned the most?
Once the best customers have been identified, it’s time to determine what makes them the best fit – what drove them to purchase the product or service, what kind of value have they extracted from it? A great way to get this information is through customer interviews or surveys. Questions to consider include:
- How could the product or service be improved to increase satisfaction?
- What problems does this product solve in your organization?
- What is your favorite thing about the product?
- Does the product do what you expected it would?
In addition to these survey responses, it’s essential to look at characteristics like the ones we mentioned earlier, such as industry, location, revenue, size, etc. The goal in gathering this information is to determine what the best customers have in common. Once this information is compiled and organized, it can be used to reveal patterns and overlaps.
Final thoughts
The ICP can be a huge help in identifying good potential customers. While it may seem like a lot of work upfront, taking the time to define an ICP early on can set a business up for success in the long run. When done correctly, an ICP can help increase sales efficiency, drive revenue growth, reduce overall customer churn, improve marketing efforts, and more.
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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.
