I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
In a previous article we laid out why knowing your ideal customer profile (ICP) and total addressable market (TAM) is critical to growing your revenue. They bring focus and efficiency to your team, and they enable you to execute targeted go-to-market strategies like account-based marketing. But if you don’t already have your ideal customer profile defined, figuring out where to start can quickly become daunting.
The pitfall most companies face is that they’re marketing and selling to the accounts already in their CRM and marketing automation systems. To expand their list of targets, they advertise and run marketing campaigns to bring new accounts into their database. But is this really the most effective approach to finding new customers? It’s not, and here’s why:
As you run campaigns against your existing database, your message generally hits the same targets again and again. Eventually your success metrics start to weaken and your target market begins to get fatigued. It becomes harder to find new opportunities, but not because you’ve exhausted your market. More likely, it’s because you’re not targeting everyone in your market.
Here’s a simple example: you open a lemonade stand and pitch your drink to every kid who walks past. You soon sell lemonade to every kid in the neighborhood, then interest (and revenue!) dries up. Your challenge is finding new customers, but who should you target? Well, both kids and adults like lemonade. People outside your neighborhood also like lemonade. Thirsty people, and those in hot climates, really like lemonade. You get the idea.
So while your initial target market was “kids in your neighborhood,” it only took a little work to expand that market by thinking about your ideal customer. Without an ideal customer profile (ICP), however, you’re casting a net and hoping targets swim into it. But with an ICP, you’re better armed to look for and find everyone in your total addressable market.
Ideal Customer Profiling Brings your Total Addressable Market into Focus
Understanding your total addressable market ensures you’re targeting every potential customer. But determining your total addressable market (TAM) isn’t as easy as saying “every company in the so-and-so industry.” First, you need to define your ideal customer profile, or ICP.
Here’s an example: INITECH is selling human resources software to “every B2B company.” They haven’t defined their ICP because they think everyone wants their product. Well, a one-person consulting firm doesn’t need HR software. Similarly, a multi-billion-dollar company who built their own solution in-house isn’t interested either. But, maybe a fast-growing company with a new HR executive needs new software to help with recruiting and onboarding dozens of new hires every week.
For INITECH, they can begin to define their ICP as companies with HR executives who’ve been in the role less than one year and whose employee count is growing more than 20% per year.
ICP and TAM don’t just help you find more customers, they help you focus on the right customers. Marketing to prospects that have no need for your offerings just wastes time and money. And conversely, you’re missing out on revenue if you aren’t targeting everyone who fits your ICP.
Defining Your ICP
At a minimum, defining your ICP should include a geographic region, a target title or level, and an industry. It’s better yet if you can drill down to additional firmographics, like company size. Other criteria might include quantifiable data, like increasing revenues or recent M&A activity, and qualitative data, like whether the company is innovative or has a strategic business initiative related to your offering.
New, data-intelligent technologies are also popping up to help you quantify your ICP even more granularly. Back to the INITECH example, maybe their ideal customer needs new HR software because they just acquired another company. Scouring the web for that type of data is unrealistically time consuming. But using software to constantly scan tens of thousands of sources and alert you when a company closes an acquisition could be a great signal of a hot lead. (You can learn more about using market signals and intelligence to help define your ICP in this recent white paper, “Measuring the Impact of Market Intelligence.”)
As a bonus, ICP also helps marketing and sales better qualify and route leads. According to sales and service performance company MHI Global, approximately 35% of sales opportunities are duds. If you could refocus only on those that fit your ICP, your conversion rates (and rep productivity) would surely improve.
It’s easy to disqualify a lead based on their location, but it becomes more risky as you add firmographics and buyer data because B2B data is quickly rendered inaccurate. Getting accurate and current data on accounts and contacts is becoming increasingly difficult. The prospect filling out your online form might not know their current revenue, or the prospect who your marketing team scanned at an event a few months ago may no longer work for that company. That’s where a data cleansing, enrichment, and/or validation service could be of use. These data services also help to identify existing targets who may actually fall outside of your ICP, but who you’re targeting based on incorrect or outdated data in your database.
Putting it All Together
By laying the groundwork to define your ICP you’ll be equipped to quickly find gaps and opportunities for market growth. Start simple. Look at the firmographic trends of your best customers (those that are likely to renew or purchase more), and evolve from there. In the next article we’ll highlight how to further leverage your ICP by turning it into a targetable prospect list.
With over 20 years in technology marketing leadership roles, Joe currently serves as the VP of Products & Solutions Marketing at InsideView responsible for evolving the company go-to-market strategy and leading the company’s expansion to new market segments and solution offerings. You can follow Joe at Twitter and LinkedIn.