Why Your Ideal Customer Profile Matters

Barack Obama’s landmark victory in the 2008 presidential election came from a wave of support from young Americans. In addressing such issues as global warming and college expenses, his platform addressed many of young voters’ deepest pain points. Chris Hughes, one of Obama’s key strategist and Facebook co-founder, understood the group’s habits on social media and mobile messaging, which and helped Obama generate more than 2 million Facebook supporters compared to McCain’s 600,000 supporters. It might seem obvious to us now, but Obama’s campaign team understood the characteristics, patterns, and behaviors of their target audience that gave Obama nearly 70% of voters under the age of 25.

As an early stage founder, you can learn from Obama’s campaign team in understanding the specific attributes of your target audience. This comes from a clearly defined Ideal Customer Profile—a categorical description of a customer that would reap the most benefit from your product or solution. These customers are the ones with the quickest and most successful sales cycle and the greatest customer retention rates.  

John Hurley from Radius Intelligence says, “You need a framework to stay focused on your target audience. Having a specific customer profile ensures a tight and repeatable sales process. A founder that doesn’t have a target audience in mind will suffer from long sales cycles.”

Radius uses a comprehensive data ecosystem to help companies discover, manage, and reach their target audiences. As the Senior Director of Product Marketing and Product Strategy for Radius, John knows exactly how to narrow down a company’s ideal customer. In his recent workshop with Forum Ventures founders on Identifying your Ideal Customer Profile (ICP), John describes the importance of having an ICP, how to define it, and how to utilize your ICP to close deals faster at scale.

John Hurley, Senior Director Product Marketing & Product Strategy at Radius Intelligence

Ask yourself – What makes your customers unique?

You might be thinking: “Our company sells to [xyz industry in [xyz] location with [1, 2, 3] number of employees and at [xyz] revenue band or [a,b,c] stage.” This is a decent first step, but this only scratches the surface in defining a startup’s ICP. The table below shows 3 sample accounts using the features we just mentioned and the problem that happens when you don’t dig deeper.

Account 1 and Account 2 have similar success rates and basic attributes, leading you to believe that you should focus mainly on the finance industry in San Francisco. 

However, when you go deeper and analyze the attributes of who is likely to convert, the profile of potential customer changes. 

For example: Are they in a distributed office environment? Do they use 3 or more SaaS applications? Does your product integrate with any of these applications? How big is a particular department in a company?

“Similar to an iceberg, you have to go below the waterline to see what is underneath.”

Diving deeper into the profile of the original 3 customers you can see that the two finance companies are actually very different – Account 1 converts a lot better than Account 2. In fact, the very nature of how a company operates makes the first Account more similar to the third account even though they are in different industries.

Going deeper into your ICP helps you identify the accounts most likely to become high-value customers. Deciding where to focus is essential for the early stages; the last thing you have time for as a founder is sending hundreds of personalized emails to get meetings with prospects that will never buy. You’ll be able to preserve time and resources by avoiding accounts that never close. 

Framework to Identify your ICP

Creating your ideal customer profile helps you understand what is working and what isn’t. You won’t get your ICP 100% right, especially as an early stage founder with no historical data and limited tribal knowledge. However, if you know exactly who you are going after and fail, you simply take what you’ve learned and course correct, giving you better feedback loops early on.

Below is a sample framework to identify your ICP:

Key Attributes: These are must-have characteristics of those who want to adopt your product. This is what you say when you are asked “How do you describe your customers at a high level?”

Top Region: This includes geography, market potential, and traction. Are they innovators, early adopters, fast followers or laggards?

Situation: Internal and external factors impacting your buyers that make for positive timing, access, and likelihood of adoption.

Pain: Organizational or corporate wide challenges that you can help with. What is the “hair on fire” problem?

Impact: What is the outcome or cost if those pains are not addressed?

Critical Events: This is the “why now” question – what are key events, scenarios, or triggers that lead to adoption?

Below is a sample ICP framework that John provided:

Note that a good ICP is not a laundry list of every available fact about a potential customer. Instead, it prioritizes information about what is important and contextualizes the profile to the target customer’s buying process and team. Most importantly, and ICP is a living document, especially for early stage companies.

A common mistake that founders make is that they go out without defining their ICP upfront, which makes it hard for them to see whether they are winning or losing accounts. It becomes an even bigger problem when other people in your company isn’t aligned on your target customers. Doing a quick ICP analysis allows faster sales ramp, cycles, and win rates. Ultimately, it comes back to having a deep understanding of your ideal customer—having a clear idea of your ideal customer profile helps you recognize a great prospect and creates empathy with potential customers throughout the entire sales cycle.  

You can find more from John on Twitter @Johnsjawn or check out more content on John’s predictive marketing blog here.

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Forum Ventures is ranked a SaaS accelerator by MIT’s accelerator rankings, specifically focussed on a hand-on approach Go-To-Market and fundraising for early stage companies. We have offices in San Francisco, New York City and Toronto. With over 120 portfolio companies, Forum Ventures founders have gone on to raise from NEA, Uncork Capital, 8VC, Founders Fund, Menlo Ventures, Canaan, Bowery Capital, Susa Ventures, Salesforce Ventures, SV Angel, True Ventures and many more.

Forum Ventures is backed by leading operators, including the CEOs of Zuora, Five9 and Gainsight, as well as executives at SalesForce, Cisco and Apple. Cohort companies receive funding, subsidized office space, dedicated mentorship and introductions to key investors, mentors/advisors and potential customers.