How to build verified ICPs
Bad-fit customers are a liability.
A very expensive one because
their maintenance costs often substantially exceed what they pay
the time CSMs spend trying to “fix” them are lost opportunities to further grow your top customers
working with them has a negative impact on CSMs and contributes to burning them out
they dilute your roadmap as they want all sorts of features that won’t change a thing
You need to break up with them for damage control and replace them with better ones - your ICPs.
Here’s how to find yours by reverse-engineering:
1. What does an ideal customer look like from your perspective?
If I would have to make an educated guess, I’d suspect you’d define it something like this:
Pays a lot
Demands little and
Easy to work with
2. Who are the customers that pay a lot for your product?
It should not be difficult to answer as the information should come in handily from your payment processing software or your bank statement. There’s no exact formula where to draw the line but most likely the top 20% will give you a good start.
3. Why are they paying a lot?
Answer: “They have fully adopted our product and keep buying more resources”
While that statement is true it talks about the consequence and not the underlying reason. They pay a lot because they get a lot of value from your product that makes them keep buying more.
4. Who else could get as much value from the product?
What is it that your high-paying customers actually get out of your product? Revenue, profitability and customer success are inseparably connected.
That means the first characteristic of your ideal customers is: A valuable problem to solve (or more than one). If your product helps customers solve 5 working hours a month or helps them reduce costs by 0.1% with no further growth potential it does not make sense to acquire them in the first place.
5. Can they solve it?
Being the (not-so) proud owner of a valuable problem means little if your customers can’t solve it. Of course, it’s your mission to help your customers as best as you can. But while you may have the best team in the world not everything is under your control
If your customers lack basic skills and knowledge or are not willing to put in the required effort your attempts will still fail. The second part of your ICP is the customer success potential.
So when you look into your high-profitable-high-successful customer segment you want to understand why they are where they are. What are their skills, knowledge, experiences, traits, processes, etc. that are decisive for their success.
6. Can you monetize it?
Now it’s time to go back to the revenue and growth perspective. As outlined earlier your most profitable customers got where they are from buying more resources and/or features from you.
So the third part of your ICP is the growth potential. How likely is it that your customers can further grow their value buying more from you? Do they have more potential use cases? More teams? Does the company grow fast and likely needs more social media channels, contacts, dashboards, etc.?
7. Where does all that information come from?
Here comes the final question. Buckle up because that’s going to be scary - you have to talk to your customers and understand their business and journeys :)
It will be difficult and it will take time but every bad-fit customer that is replaced with an ICP is a huge win.