What Is an Ideal Customer Profile (ICP) and How to Create One?

“The ICP is a foundational, organization-wide decision impacting downstream sales and marketing efforts.” 
                                                                                                                                                           Gartner

Today, nearly every business tries to cut expenses due to tightening budgets and high procurement costs. 

 

Consequently, sales professionals face new challenges and pressure to hit their targets with fewer resources. The only way to survive in this environment is to work not only harder but also smarter. But how can one do that?

 

A proven method is to focus on prospects that best match your business. 

 

How can you find them? 

 

By defining your Ideal Customer Profile (ICP), you not only increase chances to close more deals but also ensure targeting customers that bring long-term value to the business. 

 

What Is an Ideal Customer Profile?

An Ideal Customer Profile (ICP)  describes a company or an organization that would be a perfect fit for your products or services. Simply put, it defines the best possible customer for your business. 

 

The Ideal Customer Profile typically includes the potential customer whose problems you can solve and who provides long-term value for your business.

 

The purpose of creating an Ideal Customer Profile is to help the company and the sales teams focus efforts on leads that are most likely to convert to customers that deliver real value. 

 

What’s the Difference Between Ideal Customer Profiles and Buyer Personas?

Often, the terms Ideal Customer Profile and Buyer Persona are used interchangeably. However, they are not the same. Here is why.

 

The ICP defines the perfect company or organization to target, focusing on firmographics such as industry, size, location, and tech stack. It helps teams identify high-fit businesses. So, ICP is more relatable to the B2B industry. 

 

On the contrary, a Buyer Persona is an individual decision-maker within an organization. So, the focus is on their role, goals, challenges, and buying patterns.

 

Each organization has a target audience, and in most cases, that audience is divided into different customer segments. Therefore, it is common to have several buyer personas for each target customer. Since customers have varied needs, distinguishing between the different types of buyers is beneficial. 

 

While the ICP guides who to target at a company level, the Buyer Persona informs how to engage with the right person within that company. Together, they create a powerful strategy for attracting and converting the most valuable customers.

 

Why Is an Ideal Customer Profile Important?

Creating an Ideal Customer Profile is critical for every business in every industry. 

 

Why?

Having an Ideal Customer Profile is beneficial for qualifying leads. This, in its turn,  helps you reduce inefficiencies. Creating a template for an ideal customer to compare any new leads against is an easy yet highly effective method for answering whether this customer will make a purchase.

If the answer is no, you’ll save your team time, effort, and resources for both sales and marketing efforts.

Having an ICP is useful for the sales and marketing teams as well as the customer support teams. 

For example, if a potential customer’s needs exceed what your organization can deliver and this isn’t recognized earlier, it can turn the potential win into a burden. It might strain your customer support teams and divert valuable resources.

How to Build an Ideal Customer Profile

Who is your ideal customer? This question may seem simple at first glance, but is it?

You need to consider different criteria to find those ideal customers, including the industry, geography, revenue, budget, and more.

However, there are several key factors to consider when building an Ideal Customer Profile.

Sales professionals typically focus on two major components:

1. Existing Customers (if you have them)
   
   

2. New Audiences or Target Segments
   
   

ABC-XYZ Matrix

Once you already have a customer base or have collected their data, you can use the  ABC-XYZ Matrix method to identify your most valuable customers.

 What Is the ABC-XYZ Matrix?

This matrix classifies customers based on two criteria:

Purchase Volume (ABC):

• A – High spenders
  
  

• B – Medium spenders
  
  

• C – Low spenders
  
  

Purchase Frequency (XYZ):

• X – Frequent buyers
  
  

• Y – Occasional buyers
  
  

• Z – Rare or one-time buyers
  
  

Example:

If your average order value is 100 USD, customers who purchase above that are considered “High Spend,” while those below fall into the “Low Spend” category.

Similarly, if the average buying frequency is two purchases, anyone above that is considered “Frequent.”

When you cross-reference these two dimensions, you get a clear picture of your most valuable segments. For instance, a BX customer would be a medium spender who buys frequently, still quite valuable.

 

Ideal Customer Formula

If you’re launching a new product or service and don’t yet have customers to analyze, you can use a 5-point Ideal Customer Formula to define your ICP:

1. Financial Capability.Whether they can afford your product or service.
   
   

2. Need. Whether they need it badly or whether it solves their problem.
   
   

3. Timing. Whether you are reaching out at the right moment.
   
   

4. Trust. Whether they trust you and your brand.
   
   

5. Decision-Maker Access. Whether you are contacting the decision-maker. 

    

    

Conclusion

Defining your Ideal Customer Profile is critical for your business. By defining who your ideal customer should be, you can differentiate your customers, saving time and resources.

 When you have defined your Ideal Customer Profile, you don’t chase customers that are not worth pursuing, turning this into an awesome jumping-off point when evaluating your business.