Beyond the Numbers
How Focusing on ICP Can Drive Long-Term Revenue Growth
Beyond the Numbers: How Focusing on ICP Can Drive Long-Term Revenue Growth
Acquiring new customers is the topmost priority of any growing business. In pursuing expansion, some companies target a broad customer base instead of their ideal customers. The approach does produce short-term gains. However, it puts businesses in debt with long-term consequences. It’s like adopting a spray-and-pray approach with a bazooka rather than hitting the targeting with a sniper rifle.
It’s as absurd as it sounds.
An ideal customer profile (ICP) defines the behavioral, firmographic, and environmental traits of customers who are expected to become the most valuable accounts for a company. Customers who don’t fit the ideal customer profile (ICP) increase churn downstream, ultimately raising the total acquisition cost. It pivots your team’s focus from customers that suit your business’ ICP.
Suppose you’re selling a software product with premium features. You should target your sales and marketing efforts toward a market segment with a higher willingness to pay a premium price instead of targeting all segments including those with more potential users but a lesser willingness to pay. You might acquire fewer customers by focusing on your ICP, but they’ll have a higher lifetime value.
When you look at the bigger picture, this focus will result in substantial annual recurring revenue (ARR) growth in the long run.
Achieving high lifetime value with a low acquisition cost
A smaller group of leads that fit your ICP profile gives a better return on marketing investments. They appreciate your products’ unique values and are more likely to convert to pipeline opportunities and revenue. Such customers continue to purchase from your business over time and are more likely to refer new customers to your brand.
When you zoom out, investing in acquiring customers who align with your business’ ICP drives in more inbound leads. They come at almost negligible acquisition costs and are more likely to convert as they come in through solid word-of-mouth. This further lowers acquisition costs per customer and initiates a snowball effect where your product user base starts growing exponentially.
Ultimately, you create a pool of customers that advocate for your product and drive more referrals, achieving higher customer lifetime value for your brand.
Understanding and Refining Your ICP
For many organizations, the defined ICP may exist on paper alone without validation in the real world, or even if it has been validated in the early days, that may no longer be valid. Without understanding who the real ICP is, revenue teams will shoot arrows in the dark, hoping to hit the target. In today’s macroeconomic environment, that is a sureshot recipe for trouble. Revenue teams are much more likely to succeed if they were to instead “switch on the lights” and measure how different customer segments perceive your product and respond to your GTM efforts and how that maps to the defined ICP.
When you consistently iterate this process, it unveils more about your ICP and puts your marketing on autopilot. It helps narrow down the messaging that hits the sweet spot with your ideal customers. Ultimately, every ICP-focused marketing effort resonates with your target audience and increases your conversion rate.
To summarize, aligning your sales and marketing to win a few customers that fit ICP is better than going broader and winning many customers. But to do this right, you need to continuously monitor how different market segments are responding to your GTM operations, and refine your ICP definition based on that. Not doing that will cause your growth to stagnate in the long run. You might have a pipeline to show initially, but with negligible confidence in conversion and revenue.
Refining your ICP: Comparing overall enterprise funnel conversions to enterprise funnel conversions in a specific sector (FSI) Source: BigLittle RevenUp
BigLittle Can Help You Finetune Your ICP
Our product RevenUp is a Revenue Observability and Intelligence solution for GTM teams looking to drive consistent long-term revenue growth. By working with and at a level above the operational GTM tools, BigLittle helps organizations gain better visibility into what customer segments have historically been strong revenue streams for the business and which marketing and sales outreaches helped convert them. Get in touch with us to know more.