Are you leveraging your ideal customer profile (ICP) to prioritize your sales and marketing efforts? This is a key question you must ask yourself. Every company needs to have an ICP. But just having one is not enough. It must be quantitatively defined and documented. You need to understand the revenue potential by account, product, and buyer. Because when you have incomplete information, resources are not allocated correctly and performance falls short.
Defining Your ICP
What defines your ideal customer and/or prospect? This means identifying the characteristics of an account that most values your products or solutions. Why does this matter to your organization, and specifically to the sales and marketing teams? Because there’s an opportunity cost associated with chasing down someone that is not in your ICP. It results in an elongated sales cycle, and lower average deal size. And It results in marketing efforts that aren’t focused on the right accounts. There is a large benefit to identifying organizations that have a higher likelihood of purchasing your products and solutions.
So, how do you determine what good looks like? Start by looking in the past. What were your best accounts? What were their attributes? Identify the companies with the largest lifetime value to your organization, with the lowest cost to acquire. Additionally, look to your internal resources for information. Your sales team spends their time interacting with the market on a daily basis. Leverage those insights and incorporate them into the ICP formation.
Determining Account Potential
Next, you must determine account potential. What does this mean? This is the revenue potential at the account level. It’s based on historical performance of similar accounts. First, segment your current customer base into logical clusters using industry, size of company, and growth rate. Then determine the spend for the upper quartile of the accounts in each of the buckets. What is the optimal spend for similar types of customers? This helps you determine what “good” looks like. And this will help you be directionally correct, and ultimately determine where to focus your efforts.
Using the Information
Once you’ve determined your ICP and where the potential lies, what do you do with this information? Again, this information should point your sales and marketing efforts to the right accounts. For example, this information should direct your demand generation efforts. The “spray and pray” approach of years past is no longer effective. Instead, when campaigns are targeted to your ideal customer profile, your demand generation increases by up to 5x. It also leads to better leads for the sales team, which better allows the marketing team to set the sales team up for success.
And if your sales team is focusing their efforts on accounts within your ICP, it will have downstream implications. This includes increasing customer lifetime value, and lowering acquisition costs. Additionally, this data can be used to make key sales strategy decisions, such as territory design. Territories can be created based on bottoms up potential versus just assigning a rep to a city. This data can also be leveraged for things like quota setting, compensation, and even sales coaching. Essentially, your ICP affects all parts of the sales and marketing strategies. Use it to make data driven decisions.
At the end of the day, strategy is the allocation of people, time and money. You must choose what to do and what not to do. And you need the data to make these decisions correctly. Account segmentation allows you to do this by creating an ICP, calculating account potential, and then leveraging the data to make key decisions.