As the head of PMM for multiple B2B SaaS companies over the past twenty years, I've owned the definition of ideal customer profiles (ICP) and buyer personas. In those roles, I served as the bridge between product, marketing, sales, our customers, and the broader market. As we've all experienced the past few years, marketing faces much more scrutiny and a mandate to drive more efficient growth.
Of all my strategic responsibilities, defining and championing our ICPs was always a source of significant anxiety—especially when working for companies in mature categories. Deep down, I knew that if I could provide a data-driven ICP, our GTM efforts could be more aligned and efficient.
Despite knowing that deeper customer data and research could unlock our ICPs, I had to rely on legacy leadership assumptions, lightweight data (e.g., win rates, average contract value, and top-level industry), squishy customer interviews, and, in the end, emotional and qualitative guessing. The term impostor syndrome sums up how I felt when doing the ICP share out of LoFi ICPs at the annual sales kickoff (SKO).
Many of you may think a top-level industry definition is enough, but it often falls short. A simple example from the Finance industry shows why: Credit Unions call their customers "members," while insurers refer to them as "policyholders."
Elevating that example to the more strategic business (and something that may cost you your job), the consequences of fuzzy, broad ICPs will lead to wasted GTM resources and inefficient spending.
- Marketing campaigns that are too broad, or even worse, target the wrong non-ICP segments.
- Salespeople waste valuable time chasing unqualified leads, which results in longer sales cycles, lower close rates, and frustration while closing customers that churn.
- Customer success teams are playing defense on dissatisfied non-ICP accounts that are likely to turn.
It's time to challenge the traditional approach to ICP development and ask ourselves some tough questions:
- Are our current ICPs helping or hurting our company’s GTM execution?
- Are we truly capturing the full potential of our customer relationships?
- Are we prioritizing short-term wins over sustainable, long-term growth?
- Are we overlooking key metrics that indicate customer lifetime value and retention?
If these questions make you pause, it's a sign that your ICP strategy might need a refresh.
A More Strategic Approach
Imagine an ICP strategy that goes beyond initial sales metrics and considers the entire customer lifecycle. This approach incorporates key metrics like:
- Customer Lifetime Value (CLV): The estimated total profitability of the customer throughout their relationship with your company.
- Logo Retention Rate: The percentage of customers you retain over a specific period.
- Net Recurring Revenue (NRR): Represents the growth/decline of a customer cohort over time.
- Win-rates: The do matter and provide helpful context when prioritizing ICP segments, but they’re secondary to CLV
- Total Addressable Market: Quantifies the size of the market opportunity (=average selling price * prospect accounts).
By incorporating these metrics, you can identify the most valuable customer segments – those who not only convert but also stay, grow, and become advocates for your brand.
The Benefits of a Holistic ICP
A holistic ICP strategy can help you:
- Optimize your marketing spend: Focus on acquiring customers with high CLV and retention potential.
- Develop targeted retention strategies: Identify at-risk customers and proactively address their needs.
- Drive expansion revenue: Identify opportunities for upselling and cross-selling to high-value customers.
Moving Forward
Building a genuinely effective ICP requires a shift in mindset. It requires collaboration across departments, a commitment to data-driven decision-making, and a focus on the entire customer lifecycle.
By embracing this holistic approach, you can unlock sustainable growth, build a loyal customer base, and drive long-term success for your SaaS business.
I’d love to get your thoughts and share what I’ve learned!
