Understand your ideal customer profile
First published at Tuesday, 14 February 2023
Understand your ideal customer profile
This is a blog article out of a series where I reflect on what I learned during funding, growing (, and selling) SaaS product companies. While I write those things down for myself, since I believe self-reflection is a crucial learning tool, I also want to share my thoughts with anybody who might be interested. I'm looking forward to your comments on any of these topics. An overview of all related topics can be found below. I have a bunch of these blog posts lined up, so you also might want to follow me if you like this one.
In my previous companies I've never even heard about the ideal customer profile (ICP) but this helpd me (and also other members of the founder and product teams) a lot when priotizing and making decisions in general. What is this and how does it affect the technology stack?
Generally the ideal customer profile describes the company which you'd expect to benefit most from your B2B SaaS product. There'll be a trade-off between a more specific profile which will make easier to focus in marketing, sales and product development and a less specific profile which will have a bigger potential market. While this is not my central area of expertise I'd try to focus on a quite specific ideal customer profile at the beginning and widen this later once you really managed to service this customer profile well. This is going to make product development easier for everybody involved. In investor meetings you should still be able to explain potential other markets your product will be able to target.
Attached to the ideal customer profile there are buyer personas: Which roles or people at the companies you target will be involved in decision making and, again, benefit the most from your product, so they can act as ambassadors for your product? For Frontastic, for example, the primary buyer persona was the ecommerce leader, who wasn't necessarily a very technical person but more looking to improve sales goals and marketing goals. On the other hand always at least one technical leader was part of the buying process as a verifier of the stack. For us, but I assume this generally is true, the buyer persona will depend heavily on the ideal customer profile. If you target small startups a C-level member will be part of the buyers team, if you target companies with >1000 people the buying team usually will be different and so will be the buyers motivation and willingness to take risks.
What do you learn from an ICP?
So much for the background, but how does this affect your technical decision making?
For me the key factors to take away here are, by specifying your expected target customers, you learn about:
A friend of mine once said that for any magnitude (10 times the requests) in scaling you'll need a different architecture. If you already scale for 100 times of the requests you'll actually see you are going to waste a lot of money, while scaling for a factor of 100 below the requests you'll see you are going to hit a wall. So being able to guestimate the customer size will allow you to make predictions about the required architecture.
Level of "enterprisyness"
A simple example you'll find almost everywhere which will depend on the size of the companies you target is: What kind of login mechanisms do you need? Simple sign-up, single-sign-on using Google, or SAML? Attached to that are often requests for granular permission systems, audit logs, and identity management.
The actual requirements, of course, entirely depend on the product you are building, but the topic of authorization should give you an idea what I'm talking about.
Target the correct buyer persona
While everyone of us wants a perfect product in all areas of the product this obviously is not possible given time and money are usually limited. To understand the most important validation factors of you ideal customer and buyer persona will allow to focus on these topics first and optimize the experience in those areas.
This is one of many reasons why I'd strongly suggest that even technical leaders stay in constant close contact with your sales and pre-sales teams.
How does an ICP look like?
In a startup change is the only constant and your ideal customer profile will also change on the way towards finding you product market fit. An example ideal customer profile we used for a while:
It's all about transactional business models
Online turnover $■■■m to $■■■m (or having ambitions of that)
Want to differentiate on experience and move fast
Retention is a key metric
They will decide or have already decided to go headless
Have frontend developer(s) in-house or work closely together with their agency
Aim to work in cross-functional teams with frontend developer in team
We even communicated this to our prospects, because we believe in transparency and close collaboration. If the customer understands what you are targeting and optimizing for they either will know that they're a perfect match or where they could maybe experience hicc-ups. They still might sign, but there should be mutal awareness what that could mean for the ongoing partnership.
Try to be as specific as possible about your ideal customer profile and the resulting buying personas to optimize your product and technical scalability for exactly this customer profile. You shouldn't try to convince and win every customer, since you'll have to optimize for something.