Rethinking ICP

A well-defined ICP gives your team focus. You don’t have the resources to pursue every lead that comes your way—a strong ICP definition tells you where to invest your limited time, attention, and budget. It’s also critical to campaign success: You can’t reach buyers with the right message at the right time if you can’t define who those buyers are. (Many of the blah, jargony messages from marketers are because they're trying to be everything to everyone.) Having a well-defined ICP allows you to unlock strategies like account-based marketing (ABM) that allow you to use your marketing resources more efficiently. 

Of course, if your marketing team or executives are used to measuring your success based on things like website visitors, webinar attendees, or MQLs, starting to filter based on your ICP can make these kinds of metrics look a lot worse. But it should result in more revenue in the long run. This is the “traffic is down; revenue is up” paradox. By focusing on a smaller number of better-fit accounts, you’ll actually have greater long-term success—if you can get through the short-term panic of watching your numbers drop (which, we regret to inform you, are actually just vanity metrics).  

Some marketers never make it that far. They focus on reaching as many people as possible—regardless of whether they’re a good fit to buy. As we’ve written before, this is a vestige of early internet marketing where quantity was king. But running a high-volume program in the hopes you’ll happen to reach the right people is, at best, inefficient and, at worst, a fruitless endeavor. It doesn’t matter if you have a thousand webinar attendees if none are a good fit. It’s much better to have fifty, or even ten, that are a good match for your ICP. 

It’s time to channel our inner black squirrel and adapt. In this chapter, we’ll explore what an ICP is, the key steps to developing one, and common ICP issues that may arise. 

What ICP is (and isn’t)

Before we can delve deep into our exploration of ICP, it’s important to clear up some areas of confusion: the difference between your ICP, your total addressable market (TAM), segmentation, and your target account list. Let’s work through them in order from biggest to smallest.

On the outside, you have your total addressable market (TAM). This includes all customers who could theoretically buy your product. Maybe you sell software for managing an IPO and tens of millions of companies aspire to use it. But, realistically, how many are actually going through an IPO right now? It  would be foolish to count them all as part of your ICP. 

Yet, this is an only slightly exaggerated version of what many companies do. “Software companies over 5000 employees” or “enterprise businesses in the healthcare industry” are not examples of an ICP—that’s a broad picture of who your conceivable buyers could be (in other words, your TAM). Your TAM might look great in investor decks, but it’s wildly unrealistic to expect all these potential buyers to convert. To generate an effective ICP, you need to stop counting theoretical customers and start identifying who should actually buy your product. 

So, what is an ICP then? It’s a definition of who your right-fit buyers are. It tells you what you want in a buyer, based on customer data that shows who is a bad fit and who has what it takes to succeed. Of course, there are layers to this and the definition can deepen and grow, depending on the maturity of your company and your marketing organization. We’ll break this down in the next section.

Only once your ICP is defined can you start segmenting your audience and creating target account lists. Segmentation is also a critical step, but it’s not about audience selection—it’s more about messaging and campaign execution. Segmentation happens after you’ve defined your ICP.

Your ICP tells you who your best audience is, your segmentation tells you how to talk to them, and your TAL tells you where to focus your attention first.

Finally, the smallest segment you’ll have is your target account list (TAL). These are your perfect-fit accounts that are ready to buy now. Your ICP tells you who your best audience is, your segmentation tells you how to talk to them, and your TAL tells you where to focus your attention first. 

A new ICP maturity model 

Your ICP definition shouldn’t be a static thing—rather, it needs to grow and change as you learn more about your customers. It’s not enough to do an annual exercise to define your ICP, you need to continuously adapt your definition in response to the data you’re collecting. 

A static ICP doesn’t exist because your customers are growing and changing over time, and so too are your offerings. For instance, a customer who wanted an on-premises solution ten years ago is likely in the market for a cloud solution today. You need an ICP definition that evolves alongside you and your customers. That said, it’s totally okay to start with a definition that’s more basic and grows to become more detailed over time. 

Here’s a three-step framework that—to use our black squirrel metaphor—will take you from scurrying over the underbrush to leaping from treetop to treetop.

1. Scurry

This is your starting point for defining your ICP. At this stage, you’re building a foundation with firmographic data. Maybe you’re buying data based on who you think your customers are and looking at market research. You might also be supplementing your third-party data with some rudimentary, first-party data from Salesforce or other tools. Basically, you’re looking to the past to tell you what might be true of your customers in the future. 

At this phase, your ICP is: 

• Based on educated guesswork and small data points
• Primarily reliant on firmographic data (and maybe technographic as you learn more) 
• A list in your CRM

2. Climb

This is where your ICP is really born—before this, it’s just good educated guessing. This phase is where you can get data-driven and start to score customer accounts based on technographics, product usage, and/or cloud spend, with points assigned to each one. You’re likely still making these decisions based on win rates, which does give you some good information, but not all closed-won deals make for profitable long-term customers. (Eventually, you’ll want to compare accounts that grew with accounts that churned and try to understand what’s true of the growers.) At this stage, you’re still reacting to what’s already happened rather than looking ahead. 

At this phase, your ICP is: 

• Based on observation + analysis
• Reliant on third-party and first-party customer data
• A list in your CRM and something you start to report on regularly (like in a quarterly deck) to gain alignment with your sales team

 3. Leap

At this stage, you’re modeling your data with a focus on net revenue retention (NRR). You’re factoring in not only your first and third-party data, but also external market trends, forecasts, and industry analysis. You start to become friends with your CFO because customer acquisition cost (CAC) is a key factor in defining your ICP.

This is also the stage at which you might introduce multiple ICPs (such as an established customer base ICP and an emerging market ICP) because eventually you’ll saturate your main audience. If you want your company to grow, you’ll need to expand your horizons. 

At this phase, your ICP is: 

• Based on prediction, leveraging AI, and statistical analysis
• Reliant on first and third-party customer data, industry analysis, and modeling
• A list in your CRM synced to other systems + a live dashboard

ICP troubleshooting

While that all might sound great in theory, there are some very real issues that might arise making it more challenging to implement a clear ICP definition at your company. Let’s explore some of these potential roadblocks and what you can do about them. 

Executive misalignment: An ICP-first approach can only work if your executives and leaders are all on the same page. A “growth-at-all-costs” mindset is directly at odds with net revenue retention—you can’t do both. You need executives to support net revenue retention (NRR) as your key revenue metric, and to enforce this across the organization. 

Data quality issues: You can’t create or refine your ICP definition without good data. Having inconsistent account data, broken data pipelines, siloed product data, or a poor setup can cloud your ICP definition. That’s why it’s so important to invest the time to create a strong structure for your data and good governance policies. You can work with a more basic ICP definition while you clean up your data architecture, since that foundation is so critical to the ICP work you need to do. 

Sales pushback: So you’ve rolled out your new ICP definition but find out that reps are selling outside of your ICP, with the excuse “but I need to hit my quota.” This isn’t the sales rep’s fault—it’s an issue of structure and incentives. To resolve this, you need to ensure that there’s executive alignment between the CEO, CMO, and Head of Sales around this new ICP definition (aka, the revenue team). With that in place, you can work with your sales leaders to fix the sales compensation package in such a way that sales reps are incentivized to sell to your ICP, not just to anyone who will buy. 

The future of ICP

While ICP development takes time and effort, it's crucial for focusing resources effectively and driving sustainable growth. It’s also not a one-and-done annual exercise, but rather a dynamic, ongoing process that’s continually informed by new data. 

Once you have your ICP defined, you need to balance the historical success you’ve had with this definition with future market trends. This means keeping a pulse on customer markets as well as your own. Because if there’s anything that’s true in this world, it’s that change is inevitable—and we have to adapt. That’s the black squirrel way.

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