- 1. The foundations of a SaaS ideal customer profile
- 2. What information should your ideal customer profile include?
- 3. Refining and optimizing your ideal customer profiles
- 4. What’s the easiest way to build a reliable ICP?
- 5. Frequently Asked Questions
- 5.1 Why do RevOps teams need to create ICPs?
- 5.2 What information absolutely needs to be in my SaaS ICP?
- 5.3 How can I use revenue data to refine my ICP?
How to build reliable Ideal Customer Profiles (ICPs) for SaaS companies
Creating ideal customer profiles (ICPs) for SaaS companies is a vital first step in building a successful sales and marketing strategy. Without accurate targeting of which companies and personas are most likely to buy your product, your go-to-market efforts will be just a stab in the dark leading to wasted resources and far fewer conversions.
Defining your ICPs may take time, effort and resources but, as with most things, revenue operations teams can do it the hard way or the easy way. But you’re in luck because this post will show you how to do it the easy way!
The fiercely competitive nature of the SaaS sector means that optimal targeting is more important than ever. Potential customers are spoiled for choice in a market where worldwide spending has increased by almost 50% in the past two years and is expected to grow even further to around US$ 600 billion in 2023.
The ‘build it and they will come’ attitude isn’t enough to make your brand stand out, no matter how robust your product. Developing an accurate and relevant SaaS ideal customer profile is the difference between success and failure since it serves to inform your entire go-to-market (GTM) strategy. It also helps you understand whether your target market is big enough to accommodate your existing business model and thus achieve your revenue goals.
1. The foundations of a SaaS ideal customer profile
The best time to start answering the question ‘what is your ideal customer profile’ is when you’re a newly launched startup and your product has yet to go live. At this point, you have a concept and, ideally, a product that’s ready – or almost ready – for release. Since this may seem a bit overwhelming for new startups that are just out of the gate, or even for established firms that are about to launch a new product or service, it’s best to do it in stages.
The first question you need to answer is who is most likely to purchase your product. That person or, in the case of B2B SaaS, that business, is your ideal customer persona. Although at this point you most likely won’t have enough data points for a bulletproof definition, this simply cannot wait until you do. In any case, start with collecting market research and real data about your existing customers.
Throughout the process, you’ll also want to keep a list of your potential competitors and see who they’re targeting. Carrying out competitive research requires evaluating not just your competitors’ products, but also how they communicate with their target audience. For example, their followers on social media can serve as a powerful indicator of their target demographic. If you’re a bit more established, you can also look at what conclusions you can draw from the data about your existing customers.
So the first step is to define your target audience — a market segment in which everyone shares a common pain point which your product seeks to solve. For example, a SaaS company that develops email marketing software might seek to solve the issue spent on creating consistent email marketing flows by making it quicker and easier for businesses to do just that. In this case, the target audience could include marketing leaders, email marketers, virtual assistants or solopreneurs.
But this doesn’t mean that everyone that falls into one of these categories is an ideal customer. How you solve the problem is also important. Going back to the example of an email marketing platform, the solution in question might be more suitable for large enterprises managing multiple email accounts in different regions. Or, it might be more appropriate for smaller businesses seeking a lightweight way to automate their email marketing. Another consideration is the broader tech stack. For example, if one of the platform’s differentiators is that it integrates with a popular CRM like Salesforce, you’ll want to target businesses that use Salesforce rather than other platforms.
Finally, it’s time to tie everything together with an ideal customer profile. This is the process of first distilling your target audience down to potential customers and then to those perfect customers who meet a specific set of criteria. The end result is a customer profile that’s broad enough to encompass an entire group of potential customers whose problems your product can solve, but targeted enough to fit into a niche that isn’t too competitive.
2. What information should your ideal customer profile include?
For B2B SaaS companies, your ideal customer profile will typically be a business rather than an individual. This hypothetical company needs to represent the characteristics of those you want to target in your GTM strategy.
Here are some points you’ll want to include:
- Company size and headcount
- Industry and areas of expertise
- Geographical location and language
- Organizational structure
- Annual revenue and growth rate
- Existing technology stack
- Product requirements and limitations
- Compelling events, such as recent funding rounds or new hires
Next, you’ll want to create your customer persona. After all, simply targeting the business as a whole inevitably lacks that personal touch. Your ideal customer profile should include the actual personas within the company you’re targeting. In our example of an email marketing platform, those personas might include email marketing managers in the case of a larger company or, in the case of small businesses, the chief marketing officers themselves.
A customer persona should include, at a minimum, the following information:
- Job title and position
- Reporting structure
- Decision-making process
- Team size and goals
- Areas of expertise
- Needs and pain points
- Urgency in finding a solution
Another point to consider is whether you’re targeting decision-makers or influencers. In most cases, you’ll want to target both while personalizing your communications to each audience. For example, an email marketing manager at a large company might only be an influencer, with no decision-making capabilities when it comes to purchasing new products. However, since they’re on the frontlines of a given pain point, their position may give them influence over the actual decision makers, or they may be the ones who are tasked with doing an initial evaluation of the competing products. Decision makers, on the other hand, might be less concerned with the technical details and more concerned with high-level value, such as the impact a proposed solution might have on overall team productivity or revenue.
Finally, you need to consider the fact that you may actually have multiple ICPs. As companies progress along the different steps of the customer journey, the person you need to target can change. While the ICP you created initially may have been the right one for landing the account, is that still the persona you should target for expanding the account or for cross-sell and up-sell?
Another way to look at it is at the industry level since each vertical may have different organizational structures, needs and pain points. As a result, you can’t expect the same ICP to be relevant across the board. The bottom line is that you must reevaluate your profile definitions every couple of months to make sure nothing needs to be changed.
3. Refining and optimizing your ideal customer profiles
An ideal customer profile that is relevant for the SaaS market isn’t something you create once and use to inform your GTM strategy on a permanent basis. Rather, it’s a constantly evolving set of personas that need to be aligned with changing market conditions and data-driven insights collected by your marketing and sales teams.
After all, you can’t reasonably expect to build a perfectly accurate picture of your target customer until you’ve been in business for some time and have had the chance to see what works and what doesn’t. Sometimes, for example, a product ends up appealing to an entirely unexpected audience. One way to determine and fine-tune your ICPs is to carry out an in-depth analysis of your current revenue streams.
Without running regular evaluation and fine-tuning, your revenue sources and GTM motions may become less reliable over time. As market conditions shift, one of the key things to focus on is your IPC. So keep a finger on the pulse of your target audience through periodic re-evaluation, refinement and fine-tuning.
You can do this either qualitatively or quantitatively:
- On a qualitative level, you can determine which of your product’s use cases have become more (or less) compelling under the new market conditions. For example, the rise of hybrid work models has resulted in many businesses focusing on different priorities and use cases, such as remote accessibility and cost efficiency.
- On a quantitative level, you’ll want to look at which prospective customers represent the most promising leads. These may be customers that share the most similarities with your existing ones, or you may actually need to start getting enough customers before you are able to fully refine your ICPs.
Fine-tuning your ICPs is an iterative process that involves tracking the win and loss rates for each persona and, just as importantly, the reasons behind them. For example, existing selling processes might work better for one persona compared to another, or sales pipeline velocity might be faster for particular segments. By analyzing these data points, you can determine the value of each persona and decide where to invest your resources.
Net dollar retention (NDR) is a great indicator of which customers are either churning or renewing/expanding their subscriptions. Where there are commonalities between them, such as industry or business size, these characteristics can be combined with product usage and other tech stack data in order to refine the ICP.
4. What’s the easiest way to build a reliable ICP?
Understanding which personas are the most valuable to your company is vital for building any sustainable business model. Once you’ve identified your ICPs, RevOps teams can then align marketing, sales and customer success operations on them, which will help you establish a far more adaptable and future-proof business.
The good news is that there is an automated way to identify all your SaaS ideal customer profiles. With a fully automated revenue analysis solution that allows you to dig into your data at a highly granular level, any business user can easily break down their metrics until they have all the information they need to determine what ICPs they should target. Admittedly, this is only relevant for companies who have accumulated some information about their customers so they have enough data points to analyze.
Want to learn how automated revenue analysis can help you on the road to an optimal GTM plan? Schedule a demo with one of our revenue experts.
5. Frequently Asked Questions
5.1 Why do RevOps teams need to create ICPs?
Creating Ideal Customer Profiles (ICPs) for their companies is critical for revenue operations teams because it helps them identify and target the right customers. This leads to improved targeted marketing and sales efficiency, higher customer satisfaction and retention, and scalable revenue growth. Remember, your ICP is a living document that should be continually updated as you learn more about your customers and their needs.
5.2 What information absolutely needs to be in my SaaS ICP?
While the specific details of an Ideal Customer Profile (ICP) may vary, there are several pieces of information that should be included in any ICP for a SaaS company. These include company size, industry, geographic location, job titles and roles, and pain points and challenges. Taken together, these create a comprehensive picture of your ideal customer that will guide your marketing and sales efforts.
5.3 How can I use revenue data to refine my ICP?
Start by analyzing your data to identify which customers generate the most revenue for your business, then segment them based on their characteristics and behavior to identify the commonalities among your customer base. Next, identify areas where your ICP aligns with your revenue data and where it may need to be refined, and then go ahead and refine it based on the analysis. As noted above, the ICP needs to be continuously tested to ensure that it remains optimally effective.
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