The Cost of Wrong Targeting
Last year US retail milk sales topped $45 billion. However, that was not always the case. For 40 years prior to 1993, milk consumption declined. $13M in yearly ad budget was insufficient to get people into drinking milk. Why? They targeted the wrong market.
The story of their shocking discovery is one for the marketing books.
After four decades of losing millions in marketing campaigns and seeing no actual results but declining sales, the milk producers hired an agency to do extensive research. The agency discovered that for years the milk producers kept targeting people who did not drink milk to grow their market. Hypothetically they were right: Coca-Cola and Pepsi were going full ballistic in their outreach to capture the market for drinks. Milk producers wanted to push the benefits of milk to more people than ever before and aggressively market it in the hopes that it would translate into paying customers. It was an expensive failure.
The research agency hired by the milk producers discovered that the right Ideal Customer Profile(ICP) for them was to go after existing customers who already drank milk but drank it along with a complementary food like an Oreo cookie. The results of this extensive research led to milk producers launching the legendary “Got Milk?” ad targeting existing customers. That one campaign alone boosted milk sales by 7% within the year of its launch - the first rise in sales in four decades. The success of that research continues to this day for the US milk producers - a multi-billion dollar industry now.
Importance of the Ideal Customer Profile
Are you wondering why we, “a Revenue Intel & a Full-funnel Analytics Platform,” are talking about milk sales? The answer is the Ideal Customer Profile. Thirty years after the “Got Milk?” campaign that made milk producers’ fortunes by fixing their wrong ICP of four decades, the ICP ghost continues to linger on across organizations.
Gartner states, "The ideal customer profile (ICP) defines the firmographic, environmental and behavioral attributes of accounts expected to become a company’s most valuable customers."
If your MQLs continue to grow, but SQL conversions are dropping, your story is not much different from the pre-1993 milk producers’. Your marketing budget is spent on bringing the wrong set of prospects - a mistake that has downstream consequences in the entire funnel.
Gartner's research into ICP development practices has found that in some companies, the ICP is either poorly understood as a concept or poorly defined. Even in companies that have defined an ICP, its use is limited to marketing briefs or new hire orientation sessions.
According to Gartner, companies that invest in a well-defined ICP achieve compelling business results, including:
- Faster sales cycles
- Higher conversion rates
- Great average ACV (annual contract value) and LTV (lifetime value)
ICP drives both strategic and tactical GTM motions across Marketing, Demand Generation, SDR/BDR, Sales, and Customer Success.
Betting on the wrong ICP can cost millions of dollars of burn and months and years of opportunity loss, if not the survival of the company.
In Jeff Bezos’ 2021 shareholder letter, he stated that “customers complete 28% of purchases on Amazon in three minutes or less … and half of all purchases completed in less than 15 minutes.”
Wonder why that statement from Bezos was worthy of a mention in his shareholder letter.
ICP Definition and Refinement is still more an Art than a Science
Knowing who your ideal customers are, leads to faster sales cycles. That’s true of a B2C business like Amazon and true of a B2B. If you do not know what your buyer needs and do not offer value to a prospect immediately, you will get ghosted even before you have a chance to say hello, much less to bring them to a meeting. That’s where defining ICP comes in. You want to attract the right prospects be ready to show them the value, and have them make quicker decisions leading to shorter sales cycles.
However, the ICP is not a static segment. It evolves as the company, its product, its competition, and its market and category evolve.
ICPs migrate across dimensions such as company size, vertical, buyer persona, title, region, etc. In fact, it is not surprising to find that conversions, velocities, and win rates, can change even within a quarter, especially in turbulent market and economic environments such as now.
Active ICP refinement is a critical pillar of GTM strategy and tactics. However, ICP refinement (by segment, region, size, persona) and prioritization still seem an art not backed by enough data and actionable recommendations.
Currently, the reality is that there is no systematic and scientific way of suggesting ICPs based on real conversion behavior. Demand Gen and GTM teams end up with qualitative surveys, sales team feedback, ad-hoc spreadsheets, analysis, and anecdotal evidence to build a hypothesis on the right ICP and make iterations on the experiments to arrive at the ICP.
ICP development aims to identify leads and accounts most likely to become your high-value customers.
If you have a low SDR Qualified to Sales Accepted (SAL) conversion rate - it's proof that your ICP segmentation is poor.
And this time, until sales finally identifies that it's the wrong ICP: marketing has invested money into campaigns attracting the wrong leads and continues to do so, SDRs have spent hours researching and warming these leads up, sales has spent hours prepping and demo-ing the product to them. Only to realize at the end of it all - the lead/account was a bad fit all along and mark it as not sales accepted - leading to poor SQL to SAL conversions.
Post ICP development, you are not plagued by costly MQLs that will not convert, your pipeline is not beefed up with unreal opportunities, and your forecast is closer to reality than ever. The path to revenue is paved by one less hurdle to worry about - one big hurdle is taken care of.
As we like to tell at RevSure: the butterfly effect in GTM is real. A wrong ICP trickles down the funnel, and your pipeline becomes a pipe dream.
Avoid the Adhoc ICP Hustle: Use Real Conversion Behavior to refine ICP.
Most companies still use a mix of qualitative surveys, sales team feedback, and sheets to parse historical data to figure out the ICPs. Don’t get us wrong - that is a fair approach. However, this approach is held back by the limitations of analyzing in sheets and siloed tools used for the exercise. “Give me one more spreadsheet!” said no leader ever. It is a far too slow activity for a market that changes faster than London's weather.
The need of the hour is for a systematic data-backed approach that uses feedback loops from emerging conversion, pipeline generation, win rate, and velocity behavior of different segments in the decision-making.
Hence the need for implementing a solution that continually learns from the patterns in your data to validate your hypothesis of an ICP or, even better, tell you if you are attracting the wrong prospects at the cost of marketing budget.
It's far more probable that you will miss out on identifying.
"Leads from the pharma industry containing InfoSec Director in the title from companies with >250 employees have a 29% chance of converting from MQLs into SQLs".
That level of predictive analysis and pattern-building is best left for a tech solution. It alerts you to act, saves time, earns customers fast, and frees up your best people to strategize from this tech-driven real-time insight rather than spending days in spreadsheets figuring them out.
Hustle is more than a poster on office walls or coffee mugs. In GTM, it is how soon you bring a dollar into the bank. And there’s one way to ensure those dollars arrive sooner - RevSure.AI.
Happy (Scientific) Hustling!