Ideal Customer Profile: Firmographics

In my last post Ideal Customer Profile: Mining Your Customers, I showed how your existing customers are a great place to start to discover your ICP. This built on the previous post Ideal Customer Profile – Part 1: Introduction, where I introduced the concept of the Ideal Customer Profile.

The attributes of your Ideal Customer Profile can be separated into the three categories:

  • Firmographics: Who should you call?
  • Customer Business Problem: What problem do they have?
  • Positive Impact Potential: Will they be successful?

In this post I will address the first of these and provide a high-level overview of how to define the firmographics for your ICP.

(I write about this more extensively in my latest book: Digital Sales Transformation in a Customer First World)

ICP Category 1: Firmographics

DEFINITION: Firmographics (also known as emporagraphics or firm demographics) are sets of characteristics to segment prospect organizations; a method of identifying customers and developing customer profiles based on qualities that apply to businesses, not individuals.

It is important to understand that there is usually a difference between Total Available Market and Total Addressable Market.

Your Data Analytics application may have appeal to potential customers all over the world, but if you’re based in North Carolina and your go-to-market team only covers the United States, the market in South Korea or Australia that is available to local purveyors of solutions similar to yours is not open to you today. You can’t serve that market – so you can‘t consider it to be addressable.

If your Data Analytics application is not HIPAA (Health Insurance Portability and Accountability Act) compliant it is unlikely that you will be able to address a market segment where your software touches sensitive patient data. ERP vendors will typically sell to companies that have reasonably complex enterprise resource planning requirements. That means that the majority of the 28 million small businesses in the US – small bakeries, flower shops, and other ‘mom and pop’ businesses with simple business operations – are not part of an ERP software supplier’s addressable market.

In reality, the aggregate value of your opportunity from all of the companies who fit your Ideal Customer Profile is your Total Addressable Market.

The following firmographic factors describe your addressable market and set boundaries for your Ideal Customer Profile:

  • Industry
  • Size
  • Geography
  • Job Titles
  • Business Maturity.

Industry: Some companies will have a product or service that has broad attraction, appealing to all industries and sectors. Suppliers of office stationery, IT services or hospitality services can usually find a need for their offering somewhere in most industries. Others market a niche product designed only for a very particular industry or sub-segment within an industry. Software suppliers who provide accounting capability for legal firms will typically have very little market opportunity in manufacturing or retail industries.

The list of industries you optimally serve is possibly the easiest filter to apply to arrive at your firmographic profile. It is certainly the first. Choose the industries, or industry sectors, in which you will specialize, by considering their propensity to buy.

EXAMPLE: My ideal customer is typically found in industries like professional services, high-end manufacturing, technology and telecommunications or where intellectual property management in contractual arrangements with customers is important.

Size: Is your ideal customer a large corporation with thousands of employees, billions in revenue, and multiple locations around the world? Usually selling to these companies means a long sales cycle, needing lots of resources, with arduous vendor approval, procurement and legal processes. On the other hand, perhaps the company that fits your ideal customer profile is a small business where you’re dealing directly with the business owner. If you consider Exxon or Microsoft good examples of your ideal customer, then it is unlikely that Bob’s Grocers or Jill’s Flowers will make the list.

If you’re selling a HR software product that has a $50,000 implementation fee to get started and a $1,000 per user license fee, you’ve pretty much excluded yourself from the small company with five users. The customer would need to pay $55,000, an average cost of $11,000 per user. In a larger organization with 500 users, the total price works out at $550,000, an average of $1,100 per user.

A video-conferencing solution that links multiple offices together for better company communication only makes sense for companies that have multiple office locations. HR management software is not really needed if you only have five employees.

Your cost to acquire and service a customer should inform the size of your ideal customer. If it costs $25,000 to acquire and implement a customer then each sale must provide a profit margin of more than that. Cost of customer acquisition is often a factor that determines the minimum size of a sale, which usually correlates to size of the company to which you are selling.

So yes, size matters. Total company revenue, number of office locations, size of customer service team, number of legal staff, energy consumption, number of business travelers, and annual advertising spend are all indicators of size.

EXAMPLE: My ideal customer has more than 10 Intellectual Property specialists on staff or spends more than $500,000 each year in legal fees on Intellectual Property related issues.

Geography: This one should be self-explanatory. The factors that determine which continents, countries or regions that you sell to are more than just proximity and ability to serve. You also need to consider legislation, currency, language and culture. Business is conducted very differently in Tokyo, Tel Aviv and Toronto. Selling to and serving a customer in Paris, Texas is very different than selling to and serving a customer in Paris, France.

EXAMPLE: My ideal customer is headquartered, or has a registered corporate office, in Quebec.

Job Titles: One of the easier, perhaps obvious, ways to identify whether a company fits your Ideal Customer Profile is to establish whether certain job titles exist in the account. For example, if you are selling a Data Analytics solution to solve a problem usually encountered by Sales Operations professionals, you can check the number of people in the company with Sales Operations in their title. Selling a corporate legal solution to a company that does not have in-house counsel will probably be difficult.

EXAMPLE: My ideal customer understands the importance of Sales Operations and has five or more FTEs in the Sales Operations function.

Business Maturity: To further help you identify the Ideal Customer Profile you can consider the four phases of the business life cycle:

  • Start-up
  • Growth
  • Maturity

If Company A is in the Start-up phase, its business goals and pressures are different to the challenges faced by Company B that is in Growth mode. It follows that your products and services might be more applicable to one company and less valuable to the other.

I have started five different businesses. The wonderful thing about the very early days of a business is that it is crystal clear about what needs to happen: the product needs to be built and someone needs to buy it before you run out of money. It’s fun and frenetic.

When a company moves into the Growth phase, things change. It’s no longer just about getting customers. Growing the company requires a focus on building the business to scale. In addition to finding new customers, continually recruiting and hiring, the company needs to be concerned with keeping and growing existing customers, optimizing production, refining go-to-market processes, finding new channels to market etc. If you are selling a HR software system, a Growth company will definitely be closer to your Ideal Customer Profile than a Start-up company.

When the business comes out of Growth mode and enters the Maturity phase, the business drivers change again. Managing the cost side of the business starts to take on more importance and companies in the Maturity phase will more likely be in the Ideal Customer Profile for companies who are selling solutions focused on cost savings and efficiencies, or related to repositioning for a new phase of growth, or supporting acquisitions or divestitures.

The last phase is Decline. This sets in when the company loses the ability to change or adapt. Think Kodak or Nokia. They quit investing in new products or missed innovation trends. Instead they are just trying to
maintain their position. Some, like Nokia, will look to reposition or restart their innovation cycle. In this phase cutbacks, downsizing, and efficiency become the focus.

EXAMPLE: My ideal customer is in Growth or Maturity phases where the business operations are sufficiently sophisticated to support investment in infrastructural projects.

That checks off the first of the three ICP categories:

  • Firmographics: Who should you call?
  • Customer Business Problem: What problem do they have?
  • Positive Impact Potential: Will they be successful?

In the next post I will address Customer Business Problem.

(All of this comes together in a framework in my latest book: Digital Sales Transformation in a Customer First World)


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Donal Daly is Executive Chairman of Altify having founded the company in 2005. He is author of numerous books and ebooks including the latest Amazon #1 Bestseller Digital Sales Transformation in a Customer First World (Nov 3, 2017) and his previous Amazon #1 Best-sellers Account Planning in Salesforce and Tomorrow | Today: How AI Impacts How We Work, Live, and Think. Altify is Donal’s fifth global business enterprise.

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