Mastering ICP for SaaS: The Ideal Customer Profile Playbook

Imagine this scenario: Your marketing and sales efforts are generating high-quality leads. These leads are seamlessly converting into customers. These customers appear highly satisfied with their experience and eventually become product evangelists of your brand. Your brand grows through word of mouth.

Sounds too good to be true?

Companies like HubSpot have successfully achieved this exact scenario.
How? By refining 1 key concept in their organization: Ideal Customer Profile.

The results for HubSpot were as follows:

• Customer retention went up from 65% to 82%

• Customer lifetime value doubled from $25k to $52k

• Revenue retention grew from 70% to 100%

That’s some serious growth in the SaaS space!

ICP is like finding a cheat code that powers every aspect of your strategy and optimizes your effort to cater to your ideal customer.

In this article, we will unpack the concept of ICP so you can get the maximum out of it for your SaaS business. We will unpack how to find your ICP and optimize it for the best results. We will also discuss overcoming the key challenges you might face when narrowing down an ICP. 

As we go through the concepts, we will share real-world examples of ICP development from the point of view of Kumar Karpe, the Co-Founder and CEO of Kapittx.

Before starting Kapittx, Kumar was the CEO of TechProcess Payments. Previously, he was the CEO of Ingenico ePayments India (formerly TechProcess) and was instrumental in the turn-around of TechProcess into a leader in Digital Payments in India. Before TechProcess, Kumar did different leadership roles at IBM, the last being the Director – Financial Services Business for India/South Asia. 

Kumar gave a talk at the GTMDialogues community event, where he shared the journey of Kapittx, its early focus on building an ICP, and how it led to the transformation to a high-growth entity.

Treat this article like a masterclass to set the steps for your next GTM strategy.

Let’s dive in.

What is ICP?

There are several different ways to think about ICP.

In simple terms, it is the description of your perfect buyer. They are the buyers who understand and relate most to your value offering.

ICP is the description of your perfect buyer. They are the buyers who understand relate most to your value offering.

They are the prospects experiencing the pain you solve. They are ready, willing, and able to buy your product or service.

These customers are the easiest to sell to. They have minimum objections and have the shortest sales cycles. 

As a company, you should focus your resources on acquiring them for your business.

In Gen Z terminology, think of it like a dating app for your business. You swipe left on time wasters and match with the ones most vibing with what you are offering. 

The Importance of Ideal Customer Profiles (ICPs)

When the concept of ICP is drilled down correctly, it will become your de facto compass of growth. 

By clearly defining the characteristics of their ideal customers, organizations can fine-tune their overall strategy and align their efforts toward repeatable and scalable approaches.

Here are 7 reasons why building an ICP is vital for your business:

1) Streamlined Focus

An ICP lets you focus on the most valuable accounts. It helps you concentrate marketing, sales, and engineering efforts on this precise segment. This enables the optimization of efforts and resources to cater to this specific segment which leads to maximization of customer satisfaction and business success.

2) Targeted Marketing

A well-defined ICP can help you understand your most valuable customer’s characteristics, pain points, and preferences. You can use this information to launch laser-focused ads. This will help you optimize marketing spend, increase conversion rates, and achieve higher returns on investment.

3) Efficient Sales Efforts

An Ideal Customer Profile can help your sales team in their lead generation and prospecting initiatives. By determining the attributes that make an account highly valuable, sales reps can hone their efforts on interacting with prospects that match only these characteristics. This focused approach heightens efficacy and boosts sales productivity.

4) Customer-Centric Engineering

The ability to understand ideal customers’ unique needs and pain points is critical for engineering teams. By incorporating this knowledge into product development, companies can avoid foundational mistakes and costly misdirections. This saves precious engineering time for startups. They can now focus on building solutions only for their most valuable customers.

5) Avoiding Resource Wastage

A clear ICP prevents companies from chasing customers outside their target market. By dodging misaligned efforts, you can save resources that would otherwise be spent on less valuable accounts. This allows for better resource allocation and more efficient use of time.

6) Scalable Strategies

Your Ideal Customer Profile (ICP) will give you insights into the common characteristics and behaviour of your most valued customers. You will find repeatable patterns in how they interact with your marketing, sales, product UX, and customer satisfaction teams. 

You can leverage this information to develop standardized workflows and processes that can be scaled as your business grows. You can filter the best practices into patterns and repeatable processes to ensure consistent delivery of quality to customers across the sphere.

7) Enhance Decision-Making

An ICP can be the guiding mechanism for your strategic roadmap. It will give informed choices about which marketing opportunities to pursue and which features to build next. This minimizes the guesswork and increases the chances of success.

With ICP at the core, you will set your business for customer-optimized clarity and ultimately thrive in a competitive market.

ICP vs Target Customer

One common confusion while creating your ICP is mistakenly assuming it as your target customer. That is not the case. There is a vital difference between the two:

Target customer is used to describe a company that might buy from you. An ICP is focused on the most desirable customers for your business. They are the prospects that are most likely to buy from you.

Target customer is a broader term for customers a business can serve with its products or services. It is the general market category that your solution can serve. On the other hand, ICP is a refined and distilled segment of your most valuable customers who are ready, willing, and able to buy from you. 

You can think of ICP as a specific subset within the broader target customer segment.

ICP vs Buyer Persona

Another common misconception is using ICP and buyer persona interchangeably. There is a clear distinction between them based on their scope and focus.

An ICP is a strategy that identifies the characteristics and behavior of the ideal customer for a business/account as a whole. 

A buyer persona goes granular with a fictional or semi-fictional representation of your ideal customer. It is based on a mix of research and educated speculation. It helps you understand the goals, challenges, and opinions of potential clients. 

You can leverage this to formulate your marketing, sales, and customer success strategies.

HubSpot did it with “Marketing Mary”. This gives a shared understanding within your organization about a specific persona to target. Some organizations go even as far as creating a physical representation of their avatar. They display them in their meeting rooms to remind employees about being customer-centric with every process.

While your ICP tells your organization the kind of accounts to target by defining the qualities that match your most valuable customer, your buyer persona is focused on the individual within that account. It tells your team about the individual they are catering to with content, prospecting, etc.

The ICP comes at the beginning of the sales cycle, helping you get the most qualified leads. The buyer persona determines how to sell to the specific individual. 

In other words, ICP tells you which accounts to target. The buyer persona enables how to communicate with the individual in that account. 

Core Aspects of Your ICP

One common struggle businesses face is getting their market to resonate with their solution. Even with an incredible piece of tech, your product will fail if you do not have the market excited and resonate with your solution.

It is important to establish some qualifiers or core aspects to extract the ICP from your target market.

Here they are:

1) Firmographics

Begin by considering the firm-wise details of your target market.

You can ask questions like:

• What industry are they in?

• What vertical do they specialize in?

• What is their current revenue and growth rate?

Firmographic filters are as follows:

• Company size

• Generated revenue

• Geography

• Industry type

These filters will help avoid working with companies that consistently lose market share.

You can use databases like Crunchbase and tools like LeadRocks to get granular with firmographic details.

2) Demographic Traits

Study the demographic traits of your best customers. 

Ask questions such as:

• How old are they?

• What is their gender?

• Which ethnicity do they belong to?

Demographic filters are as follows:

• Age

• Gender

• Ethnicity 

You can use tools like SurveyMonkey to survey your customers and get details on demographic traits.

This is different from your buyer personas. Buyer personas go beyond demographic information. They go more granular with insights into user behaviour, preferences, goals, and pain points.

3. Technographic Tools

Your ideal customer may use a specific set of tools that complement or compete with your solution.

Identify the tech stack used by your best customers or think about the tech prevalent in the market. Use tools like BuiltWith or scrape sites like G2 to see the tech used by your target market. 

This information will help you streamline your sales processes towards the customer segment that is most likely to adopt your solution based on where they lie in their tech architecture.

4. Psychographic Drivers

You need to consider the mindset, beliefs, and values of your ideal customers. Certain mindsets will be more receptive to your new solution, while others may show resistance. 

For instance, people with a growth mindset are more receptive to adopting new tech compared to those with a fixed mindset. 

You might ask: How do you even validate the psychographics?

You might not be able to do it upfront, but you can arbitrarily define the psychographics of your best customers. This will refine your sales and marketing strategies by producing content that resonates with the psychographics of the best customers. This will help you qualify them from the target pool.

5. Decision-Maker Roles

Identify the various roles within organizations involved in the buying process. If you target mid-market or enterprises, multiple individuals might be involved in the buying process. Identify them. 

Next, your marketing and sales teams should establish connections with each role. A successful sale needs building relationships with buyers and decision-makers across the board.

Signals to Look for in ICP

Now that we know the core aspects, it is time to look for the signals to determine your ICP.

Kumar shares a formula for ICP based on signals. Here it is:

Problem, motivation, and money are factors governed by the customer.

Ability is governed by you as a business looking to serve your customers.

The trigger factor is jointly dependent on you and the customer.

Let’s understand each of the signal factors in detail:

1. Problem

We need to look for a problem consistent across the same set of customers. This problem should be repeatable and not change.

2. Motivation

The 2nd signal factor is the need to solve this problem or the motivation to solve it. There should be a compelling reason to solve this problem and solve it now. The compelling reason can be a commitment to shareholders, cost and revenue implications, compliance issues, etc. This motivation has to be consistent.

3. Money

The 3rd factor is about the money. You need to ascertain the willingness to pay among your customer segment.

4. Ability

The next factor is ability. You need to see if you, as a business, can solve this problem most efficiently. In other words, you need to see how to solve this problem with the least friction to the customer and at least cost to you. This way, you can adapt to serving this customer profile with the lowest friction for you and the customer. This will positively impact scalability.

5. Trigger

The 5th signal is about triggers. You need to see if the customer is willing to solve the problem now and solve it specifically with you. Look for characteristics within your organization and of your customer accounts to find reasons for them to solve the problem now and with you as their only choice.

Repeatability

If you notice the various factors, you will notice the common theme of repeatability. The problem should be consistent, the motivation should be repeatable, and so on.

Why is repeatability important?

Kumar shares the example of two customers – One in the banking industry and the other in insurance. 

The problem for the banking company will be based on its custom needs compared to that of an insurance company. Each of their motivations to solve it will be different. This is because they are from different industries and customer segments.

Each one will prefer custom solutions that suit its industry. 

If you try to unilaterally solve both of their problems unilaterally and wrap them in a single ICP, it will be a strategic blunder. You will soon be dealing with custom demands and separate messaging for each. Your product development and engineering team will be bogged down in multiple misdirections, not fine-tuning for one specific segment. 

It will be a recipe for failure.

To avoid this, you need to apply the repeatability qualifier to the ICP equation. You need to see if the problem, motivation, and other factors are the same for the accounts and meet all the checks. Only then can they be grouped into the same ICP.

Hence, it is vital to focus on repeatability as a critical quotient when writing the ICP framework. 

With the element of repeatability, you will develop standardized processes and workflows that best solve the customer’s pain points in a repeatable fashion. 

With processes established, there will be low friction in delivering the results to your customers. Your engineering and customer success team will optimize to deliver the best results for this one specific customer profile. This will help you templatize your business and scale it rapidly.

How to test if the formula is working?

If all these signals become applicable for different customers, you have nailed your ICP, and it works. You now have an ideal customer profile with similar characteristics and signals that apply equally to different customers in your Ideal customer segment.

The Concept of Tribe and Minimum Viable Segment 

Before implementing the ICP, we need to understand the concept of Tribe and Minimum Viable Segment.

When startups search for early customers for their MVPs, they often rely on personal relationships (friends, family, etc.) to be their first customers. 

They are your initial customers, but they are not the Ideal Customer Profile for your business.

To explain this point, Kumar gives the example of purchasing a bullet bike.

When buying a bullet bike, who would you consult for reviews? Would it be the scooty owner, the bicycle owner, or the member of the Bullet Bike Club? 

The answer is obvious. You will go to seek an opinion from the Bullet Bike Club tribe. 

ICP is nothing but finding what your tribe is.

As an early-stage startup, you need to start looking for a tribe. 

Tribe is the early market that is going to give you growth.

Having said that, how do you find them?

You do that by finding the minimum viable segment. 

The minimum viable segment is about keeping your segment as small as possible to dominate it. Once you dominate it, you can claim leadership even as an early-stage startup. 

If the segment is not viable enough, then something is wrong with your customer segment selection.

In summary, finding your tribe requires determining the minimum viable segment that aligns with your business offering.

Prioritizing the minimum viable segment can be more valuable than other methods of segmenting customers. It will help pave the way for sustainable growth as it will prove that there is market demand. This will act as social proof and inspire the mainstream market to adopt your product. 

How to Implement ICP and Build It

Now that the concepts of tribe and minimum viable segment are clear, it is time to go to the actionable steps to build an ICP.

The obvious question is: How do you find your minimum viable segment to build your ICP? 

When starting with Kapittx, Kumar and his Co-Founder Anand spent the first six months solely researching their customers. They engaged and interviewed them, understood their take on the problem, found the pain points, and built a framework accordingly.

After the research, Kumar selected 2 segments as their minimum viable segments (FMCG and IT). These customer segments were viable enough to help Kapittx break even.

You can do the same by building a list of your Dream 100 accounts you want as clients. This will be the audience you think can be your ICP. 

You can do LinkedIn outreach and interview your potential users in this company. As an incentive, you can offer a whitepaper report or free complimentary access to your product once it is shipped.

You can then double down by setting up your marketing infrastructure for ICP.

Apart from direct customer interviews, you can also take other actionable steps to set up your marketing infrastructure for ICP.

The Marketing Tech Setup

They include the following:

1. Setting up Google Tag Manager

2. Setting up a LinkedIn ad account

3. Adding the LinkedIn pixel on your site

4. Setting up the FB ad account 

5. Adding the FB retargeting pixel on your site.

6. Ensure that all the necessary tracking setup and analytic tools are placed correctly to capture site visitor data.

Content Creation And Distribution

This is where the intel from talking to your Dream 100 will have its first practical use. You can create focused content that solves specific problems of your Dream 100 via the “Jobs to be done” framework. 

With this framework, you will find the jobs to be done by your Dream 100 and create solutions via content on your site (blogs, whitepapers, case studies, videos, etc.). 

Next, you can publish the posts on relevant marketing channels frequented by your Dream 100. You can drop a mail or message to the Dream 100 customers, letting them know about the whitepaper or post. This can be helpful for their use case as it is based on their problems.

Pro tip: If you are not able to gather enough intel from your Dream 100, you can look for the top 10-20 market leaders in your niche and study their audience. You can use a tool like SimilarWeb to get granular demographic details about the site visitors of your top competitors. 

Search Ad Campaign Launch

Launch targeted Google search ad campaigns for the focused keywords. Next, collect visitor data through web interactions. These interactions can be page views, form submissions, content downloads, etc. This will help you gather valuable insights about user behaviour and the problems they relate most with.

Data Analysis On LinkedIn Insights

After accumulating a substantial number of visitor matches, you can leverage LinkedIn insights. Analyze visitor attributes like job titles, industry affiliations, engagement patterns, and company sizes. Next, determine commonalities and trends within the audience. 

ICP Refinement Based On Data Patterns:

Use the data from LinkedIn insights to build and refine your ICP. Look for recurring characteristics among the audience insights to define and validate your ICP on job titles, industries, company sizes and other relevant attributes.

Pro tip: To find the tech, you can use the BuiltWith Chrome extension mentioned earlier in the article. With this extension installed, you can go to the ICP account’s website and extract the tech they are currently using on the site.

You can follow this playbook to establish and refine your ICP. This is a very data-backed approach, as it is based on real-world audiences and behaviour. It enables targeted content creation, tailored ad campaigns, and valuable insights. 

Once clear on the ICP, you can start iterations on your product to build it according to their custom needs.

Optimizing Your ICP

When finalizing your Ideal Customer Profile (ICP), it is crucial to delve deeper into what can help you narrow down on the right customer segment. 

Kumar uses some valuable pointers to drill down the ICP. Here they are:

1) Time To Close The Deal

Time is critical. 

As Kumar points out, it is not only about the problem statement you will solve but about the time taken to solve the problem.

Understanding how long it takes to close a deal is essential in determining the viability of a customer segment. 

Certain segments may have longer sales cycles as various factors like decision-making processes, budget approvals, or industry-specific regulations come into play.

By evaluating the time it takes to close deals for different segments, you can take a call on which segment to go for. 

2) Size Of The Deal

The size of a deal has a significant impact on your revenue and growth potential. Large deals can lead to substantial financial returns. However, these deals also require complex sales processes and higher customer expectations. 

As an early-stage startup, you need to carefully consider the size of the deal the customer segment brings and see if it is compatible with your scaling and profitability goals. Based on that, you can laser-focus on an ICP compatible with the deal size you want to go for.

3) Change Management

Change is an inherent part of any business.

You need to consider the change involved in executing the deal from both your end and the customer’s end. A wrong customer is dangerous. He will suck your organization into misdirected efforts, making you gasp for sustainability and survival. 

That being said, there are some sample questions you can ask:

What originates the problem?

What environment creates this problem?

How much is it costing in time and money for the customer?

What attempts did the customer make to solve the problem?

What is the urgency to solve with a different approach?

With these pointers and questions by Kumar, you will be able to drill down to create a well-defined ICP.

To implement the ICP, Kumar and Anand built a repeatable Matrix. Whatever they learnt about the customer, they put it in the Matrix. 

By applying the pointers and questions, they narrowed down their ICP to SAP working in insurance, the focus being the Chief Revenue Officer, working in NY, USA.

The narrower you get, the sharper your ICP

They refined it to a granular level. This helped them develop repeatable workflows and processes that catered to this specific ICP, thus catering to multiple clients that match this ICP description. 

Their delivery became sharp, fast, and laser-focused to produce maximum results for their ICP. This led them to scale Kapittx rapidly without bogging down on building custom solutions and messaging for every customer.

Multiple ICPs: A Real Challenge

Managing multiple ICPs poses several challenges for your B2B SaaS. You need to implement different marketing campaigns and tech programs for each industry you are targeting. Your sales team has to conduct distinct prospecting campaigns and the same should resonate with your content too. You also have to demonstrate success in each industry you are targeting with relevant case studies and tangible outcomes. 

More often than not, early-stage startups will find themselves straddling from one industry to another. If you do not make a trade-off, you will spread your resources too thin. This will lead to suboptimal results that appeal to none. 

To avoid this, early-stage startups should carefully select one ICP and focus all their efforts and resources towards it. This can be challenging if you have paying customers from both industries. However, this single ICP approach will lead to the most focused use of your resources, leading to sustainable growth in the long run.

Kumar did something similar with Kapittx. Kapittx selected FMCG and IT companies as their minimum viable segments and saw success in both. 

But as great as the initial success was, the 2 distinct industries started taking their toll on the engineering side. This is because the demands for both industries were completely different. This affected delivery times for solutions. Noticing the impending chaos, Kumar took a hard call and de-selected FMCG despite seeing tremendous success in the niche. 

As Kumar says, “It is not about who you can sell. It is about who you want to sell.”

This de-selection helped Kumar build a global brand for Kapittx that is uniquely positioned to serve IT companies.

The Concept of The Delivery Wheel

The delivery wheel is a perspective to test if your ICP is well-defined.

The delivery wheel is a cycle consisting of product development, market launch, training, support and iterative customer feedback. 

The delivery wheel starts with building the minimum viable product (MVP) and then goes on to market launch. Next, it goes to the customer enablement. As customers use the product, their evolving needs may require customizations or third-party integrations, which are then incorporated into the product. This continuous improvement cycle ensures that the product evolves to meet customer expectations, driving sustained success in the market.

If your ICP is not clearly defined, then the delivery wheel keeps changing with the customer. This can be chaotic for early-stage startups.

This is because there is no clear guidance on the specific needs and preferences of the target market. 

Kumar uses the delivery wheel as a litmus test for Kapittx’s ICP.

Without a well-defined ICP, there will be continuous changes to the multiple aspects of the delivery wheel. The product development, launch strategy, training, support, and other moving parts will keep changing with every new customer segment. This leads to a lack of focused direction.

As a result, each customer’s unique requirements will govern the product’s progress. This may lead to misdirections and inefficiencies. All this adds up to making the business non-scalable.

Defining an ICP provides the necessary framework for aligning the delivery wheel with the specific needs of the ICP, enabling a more streamlined and effective product development and delivery process.

Identifying the Better ICP

Let’s study two ICP case studies and see if you can tell which one is the better ICP?

1) CFO at a manufacturing company with a turnover of $20M: The pain point is inaccurate financial forecasting due to outdated systems and manual processes. This results in missed revenue targets and increased operational costs.

2) CFO at a B2B martech SaaS startup in NY Metropolitan Area with less than $10M in yearly revenue. The pain point is lack of billing flexibility due to legacy billing systems. This results in limitations in charging usage-based pricing and missing out on profitable pricing plans. 

Which one of the two case studies has a better ICP?

Answer: The second case study has the better ICP. This is because it narrows to a sub-niche (B2B martech SaaS) and specifies the city (NY Mteropolitan Area).

The common rule is to go granular by applying all the filters discussed earlier in the article (firmographic, technographic, demographic, psychographic, and roles).

The ICP Statement

Based on the above case studies, here are some ICP statement examples:

“ An e-commerce company in Bangalore with revenues of $10-20M who need help managing inventory and fulfilling orders as their growth is viscerally outpacing their operations.”

“Medical centres and hospitals in London metropolitan area with more than $100M in annual revenue, in desperate need of a digital patient management system that works across all of their various internal departments.”

“Personal finance management application SaaS startup in Dubai with less than $10M in yearly revenue who needs a more robust payment gateway.”

Note the specificity of the statements. Use the same principles to construct yours. Happy swiping!

Be as specific as you can when defining your ICP statement.

Benefits of ICP

There are 3 game-changing benefits of an ICP for your organization:

Drives Product Roadmap The Right Way

With a well-defined ICP, you can gain clarity on your ideal customer’s needs and preferences. This information becomes invaluable when shaping the product roadmap. 

By aligning product development efforts with the ICP, you can prioritize features and enhancements that directly address customer pain points. 

This targeted approach leads to a more focused and relevant product offering. It also enables increasing customer satisfaction and market competitiveness.

Faster Go-To-Market Strategy

By having the entire engineering team focused on building core features for the Ideal Customer Profile (ICP), you can execute a faster go-to-market strategy. The team will now optimize resources for the ideal customer profile, saving time-wasting endeavours on building custom solutions for customers outside of ICP.

Customer Success Improvement

 By understanding the ICP’s needs, pain points, and goals, you can deliver solutions that are tailor-made for them. This leads the customers to give better testimonials and reviews for your product. The social proof currency goes a long way to grow your brand within your customer tribe.

Conclusion

In summary, implementing an Ideal Customer Profile brings numerous benefits to your organization. It fosters meaningful conversations with the right accounts, drives product development in the right direction, enables faster go-to-market strategies, and enhances customer success. 

By leveraging the power of the ICP, startups can optimize their sales efforts, build relevant products, streamline engineering efforts, and ultimately achieve sustainable growth and success in the market.

I would like to conclude by giving you an actionable mental model. The next time you have a board meeting planning your product or marketing/sales strategy, keep one seat empty. This seat is to represent your ideal customer. 

Treat this seat as the most important seat in the boardroom. All your strategies and campaigns should be optimized to serve him best. 

If you have this mental model in mind, you will be set on your path to growth.

Key Partners

Pentathlon Ventures:

Built with the ethos of “by the founders, for the founders”, Pentathlon Ventures is Pune’s only Institutional VC Fund with a strong focus on B2B SaaS. If you are exploring a fundraiser or looking for feedback on your fundraising strategy, Pentathlon Ventures is your strategic partner for valuable insights and support to propel your B2B SaaS venture to new heights. 

Scale It Right:

Scale It Right is a demand gen company built to support early-stage SaaS startups in setting up, executing, and scaling their demand gen engine and contributing to pipeline & revenue, from Day 1.