A few months ago, I interviewed Sanjeev N.C., Co-founder of Supermeme.ai, a microSaaS company that turns text into memes using AI. Here’s something interesting he said. 

“When we started Supermeme.ai… one of our areas of focus had been people like me, basically, marketers, social media managers, and others who want to build their personal brand on social media. But another persona that surprised us were educators. We found out that this is actually a popular use case for Supermeme, that teachers are trying to spice up their lectures and presentations with memes.”

This is a classic example of how you discover that the product you've built with a particular audience in mind is equally—and sometimes, more profitably, valuable to another customer cohort. You discover this Ideal Customer Profile (ICP) only if you look closely at data from your CRM system, product usage, customer conversations, and industry or vertical-level firmographic data among others.

In this article, we will look at why it's important to discover and define your ICP, see examples of how your ICP can change, and understand the process of ICP discovery. Let's dive in.

Why define your Ideal Customer Profile (ICP)

Of all the prospective customers in all the world, you have to reach the one who is the perfect fit for what you’re selling. To find more like them, you define this ideal customer using a set of attributes and focus all your marketing and sales efforts towards catching their attention. This is what’s called an Ideal Customer Profile (ICP).

How is ICP different from “target customers”? For one, it’s far more precisely defined. A target customer is almost anyone who might buy your product/solution. But your ICP is the one who can be most valuable. Your Total Addressable Market (TAM) can be as large as the Pacific ocean but your ICP is only a small percentage of that.

Declan Mulkeen, CEO of Strategic IC explains how it feels to define an ICP: “if you can actually explain to me why you've decided [this is your ICP] and what historical data you can show me that has proven that these are profitable accounts, that they are easy to win, they're easy to maintain. And, they're companies that will stay loyal to you, if you can back that data up. And, obviously there's an alignment clearly between what you're actually offering and what they're looking to buy. If you can match all those things, then that's okay. But, that's very often where the cracks appear, so to speak, in target account building.”

By focusing on your ICP instead of selling to just anyone, you have multiple advantages:

• Efficiency skyrockets because you target the efforts and resources of Sales, Marketing, Customer Success and everyone else towards the accounts that matter.
• You stop chasing customers who may see only limited value; by focusing on high-value customers, you recover CACs faster and increase LTV. 
• You get sharper clarity about your product and who it is for—a foundational exercise for product roadmaps.
• Your acquisition and retention strategy become more effective, as will downstream efforts like GTM motions.

“We didn’t focus on ICP at all, but once we did our public launch, we started getting a flood of different people coming in. Filtering through the leads spurred me into putting a much tighter definition around qualification for deals.”  - Barry McCardel, co-founder and CEO of Hex | Source: Lenny’s newsletter

Can your ICP change with time?

Clearbit shares this story about when they realized they had to redefine their ICP. “For the last six years, and following a Series A raise in year five, we'd been growing rapidly with an "all you can eat" approach to leads: as long as a demo request fit within our loose ICP definition, sales spoke with them.”

But when they looked at their renewal revenue, expansion and customer lifetime value (LTV), they were dismayed. “We found that the Pareto principle holds true for us: around 86% of Clearbit's long-term revenue comes from around 18% of the leads that enter our funnel. In other words, we had been spending too many resources on the 82% of leads that didn't show much long-term revenue impact.”

They took a closer look at this 18% of customers and realized they were extremely high-value: regularly renewing subscriptions and increasing their spending with the company. By focusing only on this segment, Clearbit could potentially make their marketing and sales operations very lean and still manage to grow.

This also reflects how your ICP can change when your company’s goal changes. For instance, if you’re going after top-line growth, then it makes sense to sell to anyone who’s willing to buy. But if you’re looking at profitability and efficiency, then you need to sharpen your efforts. Which means, relooking at your ICP. Thus, ICP discovery is not a one-and-done exercise but something that needs to be periodically revisited.

The Science + Art of ICP Discovery

In an issue of Lenny Rachitsky’s newsletter, he interviewed leaders from major tech companies about their journey towards discovering their ICP. In this table, I have selected a few SaaS brands whose names you'll recognize—and how they defined the attributes of their ICP in the early days.

Do you see how varied the attributes are? They are firmographic but also geographic, behavioral, or demographic. You can see how some ICP definitions are very specific while others are broad. Think about these companies today and you will also see how, as they grew and evolved, some of them have changed their ICP definitions while others haven’t. 

How to define your Ideal Customer Profile

A step-by-step approach to defining your ICP and creating an ideal customer profile template looks something like this.

Step 1: Define the core problems your product solves for.  Your product could solve a lot of pain points or add a lot of value to businesses. But which of these are core? 

Step 2: Analyze your best customers. Which customers use your product most frequently? Which customers have the highest retention and satisfaction rates? Who brings in the most revenue or has the highest lifetime value? These make a good starting point.

Step 3: Identify demographic and firmographic data. Demographics are the characteristics of the people within these companies (e.g., job titles, decision-making power, age, experience) while firmographics are characteristics of the company itself (e.g., size, industry, revenue, growth stage).

Step 4: Trace behavioral characteristics. Look beyond the surface and understand the behaviors and needs of your ideal customers. How do they make purchasing decisions? (e.g., do they prefer self-service or need a full demo?) What specific goals or KPIs they want to achieve with your product (e.g., reducing time spent on manual tasks by 50% or increasing conversion rates).

Step 5: Map what tech they currently use. Understanding their tech stack can help position your product better. So, look at what tools they currently use, what capabilities do these have and how do they work around any limitations? This is also a good way to know if your product is compatible with their existing tech stack (switching is always harder) and knowing who you’re competing with.

Step 6: Understand their goals and challenges. You know what your product can do, but does this meet the needs of your ICP? What does their everyday look like? Where do they lose time? What goals or objectives are they chasing and can your product help them? 

Step 7: Test, validate, iterate. Now that you have a basic definition, schedule a lot of conversations and see whether you’re right. Lean on your sales and CS teams to make these more enriching because as the front-liners, no one understands customers better than they do.

But the truth is, this is not how ICP discovery actually happens on the ground in early-stage companies.

In most cases, founders begin with a thesis based on their experience or knowhow, test it out within their network, and just get started. It’s only when conversations beyond that first level happen or you take the first version of the product  to the market that you discover who is willing (or not) to pay for your product.

ICP Studio by DataviCloud: Simple, Fast, Flexible

What if we told you that your ICP definition process can be put on steroids? That's what we've built ICP Studio for—to simplify and speed up the process of ICP definition.

All you need to do is link your existing data sources—CRM, billing system, product analytics tool, ad campaign manager, GA, spreadsheets… if it has an API, we can connect to it in minutes. Minimal coding on your part, if at all.

Once this is done, our ML algorithm looks through your existing data sources to identify and map customer attributes, feedback from Sales or Marketing as captured in your CRM, customer support tickets, and so on. This data is then enriched and triangulated with firmographic information, industry and vertical-specific data, etc. to build your Ideal Customer Profile with just a few clicks and filter selections.

How it works:

• Select Your Data
  Choose from our pre-defined customer attributes. You can select the fields that are most relevant to your business.
• Define Your Clusters
  Specify how many customer segments you want to create. This flexibility lets you tailor the analysis to your objectives.
• Name Your Model and Dashboard
  Personalize your insights by naming your model and dashboard, making it easy to reference and share with your team.
• Visualize Your Insights
  Once your model is set up, you’ll access a visually engaging dashboard. This displays your customer clusters, providing a clear view of different segments.

ICP Studio by DataviCloud is built for simplicity, so that both business users and tech users can get powerful customer insights without coding/Excel expertise. 

Our ML algorithm does the grunt work of querying, computing and automation while your team uses their expertise to refine and adapt the clustering process to meet your specific business needs and objectives. The dashboard will also be dynamically updated as your data changes. Which means at all times, you’ll have a clear and current view of your ICP. 

We’ve been testing out this supertool with our design partners and they’re loving it. Curious to see how your ICP stacks up with our data-driven approach? Sign up for a demo here.