The original version of this article, authored by Tom Scearce, was published by TOPO, now Gartner.
The ideal customer profile (ICP) defines the firmographic, environmental and behavioral attributes of accounts that are expected to become a company’s most valuable customers. It is developed through both qualitative and quantitative analyses, and may optionally be informed by predictive analytics software.
Unlike the term “target customer,” which is often used to describe any company that might buy a product or service, the ICP is focused on the most valuable customers and prospects that are also most likely to buy. The ICP should not be confused with the total addressable market or total available market, which are calculations or estimates of the universe of potential target customers.
The ICP is a foundational, organizationwide decision impacting downstream sales and marketing efforts. It aligns marketing, sales, service and executive teams to the highest-value accounts. It also creates focus on scalable and repeatable strategies and tactics to engage and convert top accounts. And it drives target account list creation, segmentation, organizational structure and other key activities.
Research into ICP development practices has found that in some companies, the ICP is either poorly understood as a concept or not properly defined. Even in companies that have defined an ICP, its use is limited to marketing briefs or new hire orientation sessions.
By contrast, in high-growth companies, the ICP is integral to marketing and sales strategy and execution, and we have documented the practices of these high-growth firms.
Takeaways include the following:
- The ICP is a critical, strategic document that guides key downstream efforts. An effective ICP requires close consultation with key stakeholders, careful analysis of data and thoughtful implementation.
- The goal of ICP development is simple: Identify the accounts most likely to become high-value customers. Objective measures of value like annual contract values (ACV) and lifetime values (LTV) facilitate the segmentation of target accounts and go-to-market alignment.
- The ICP is developed by gathering and analyzing qualitative, quantitative and (optionally) predictive data. Gathering qualitative inputs through close interaction with stakeholders leverages the organization’s diverse expertise and fosters cross-functional buy-in.
- Quantitative analysis of historical prospect and customer data helps identify the common attributes of the most (and least) valuable accounts. Analyze data from CRM, ERP and other systems to identify firmographic, environmental and behavioral attributes that correlate to value (e.g., ACV and LTV).
- With adequate data access and guidance, third-party predictive analytics vendors can enhance ICP development. Use this software to analyze large internal and external datasets to reveal additional attributes that correlate to high-value accounts.
- ICP segmentation allows organizations to tailor go-to-market plans based on expected value. Assign accounts to tiers based on expected ACV or LTV. Then define the account team structures, offers, plays and target lists that are appropriate to each account tier.
- ICP development is not an academic exercise. It is a plan for action. Now that it is complete, the ICP must be shared across the entire organization and embedded into sales and marketing programs.
Designing your ICP is critical to sales and marketing success. Companies that invest in a well-defined ICP achieve compelling business results, including:
- Faster sales cycles
- Higher conversion rates
- Greater average ACV and LTV