You probably know already that you can’t build a product to satisfy everyone. That’s why you need to zoom in and aim to serve the unique needs of a specific group of potential users.

However, that’s easier said than done. Discovering the right type of user to target is challenging, and the common wisdom of focusing on a niche first often does more harm than good.

In this guide, we’ll show you how to identify your ideal customer profile.

Table of contents

What is an ideal customer profile?

An ideal customer profile describes a hypothetical user that is most likely to benefit from your product. Identifying your ideal customer profile helps you focus your team’s efforts on features and initiatives that will serve those users who are most likely to spend money on and return to your product.

Put simply, an ideal customer is a perfect match for your product and business. It’s the type of user that:

  • Gets the most value out of your offering
  • Is highly engaged with your product
  • Is easy to sell to
  • Refers your product to their colleagues without prompting

For these reasons, identifying and doubling down on your ideal customer profile should be one of your primary and foremost goals when launching an early-stage product.

How to identify your ideal customers

That sounds great, but how do you identify your ideal customers? Start with these three steps:

  1. Develop a hypothesis
  2. Analyze user behavior
  3. Understand those users

1. Develop a hypothesis

It’s almost impossible to identify ideal customers upfront; they are usually discovered over time (and it takes months, if not more) and they often turn out to be a completely different type of user than you initially expected.

But you have to start with somewhere, right?

Start with creating a hypothesis about who your ideal customer might be and why. After all, you are building a product to solve someone’s pain points.

Keep your hypothesis loose. Narrowing down your target persona too much will only constrain your thinking and observation in the long run.

Although the common tip is to focus on a niche, I don’t believe this is a good early tactic because you don’t have enough information to make a sound decision.

Instead of hypothesizing something overly specific — for example, “an overworked employee working 80 hours a week in the consulting industry,” — try something more broad — for example, “a corporate professional.”

Again, it might be counterintuitive, but your goal in the early stage is to explore the market and discover your ideal customer profile. If you fixate too much on a specific niche, you might miss out on a bigger fish in the pond.

2. Analyze user behavior

So you hypothesized a target persona, built a product with specific use cases in mind, and launched it on the market.

Now you wait.

Discovering product-market fit and your ideal customer profile is like fishing. You prepare to catch a specific type of fish, throw the hook, and wait to see what bites. Often, the fish that bites the most isn’t the one you expected to catch in the first place.

Focus on pushing as many people through the product as possible (quantity over quality) and look for the top 1 percent of engaged users.

But, don’t jump the gun too early. You want to attract as many people as possible to use the product to get the most significant insights. Your top 1 percent out of 100 users might be a pure coincidence. Your top 1 percent out of 10,000 is probably something meaningful.

Don’t look at your top 20 percent percent, 10 percent, or 5 percent. Look for the most engaged 1 percent of the users. Your bait (product) attracts these people the most.

3. Understand those users

The next step is to reach out to your 1 percent of users.

You want to understand as much as you can about them. Get rid of all your initial assumptions about your target persona. You’ll learn it in a bit.

During interviews, aim to discover the following insights:

  • Why did they come to your product?
  • How do they perceive the product? Do they think your app is an e-mail client, a to-do list, a communicator, a project management task, etc.?
  • What pain point does it solve for them?
  • If your product didn’t exist, what would they use instead? Why?

This will help you better understand your customers and provide insights into your product as a whole. For example, let’s say you tried to build a new async communicator and your ideal customers perceive it as an alternative to Gmail. There’s a big difference between making a chat app and a mail app.

Doubling down on your ideal customers

An increased understanding of your ideal customers will help you adjust your product roadmap to attract more customers. That should be your focus. If you can’t dominate the niche that already loves you, then you have no chance of winning the broader market.

There are two main things you should take care of:

Narrow down the focus

In the beginning, you built a broad product to attract a wide number of users. Now it’s time to niche down.

Focus on what’s delivering the most value for your ideal customers. If your product has 10 features, but your top 1 percent of users only use three, then focus on these three.

Make these features more prominent, improve their functionality, and regularly talk to your top 1 percent of users to understand what they lack.

I’d even go as far as completely stripping the remaining features. Reducing the noise and complexity will help you in the long run.

Nail your marketing and positioning

While, initially, your goal was to attract as many users as possible, now you want to narrow down the focus to your ideal customer profile.

Ultimately, it’s better to get a hundred new customers who will love and refer to your product than a thousand random customers who’ll churn within a week.

Three tactics here include:

Positioning properly

It doesn’t matter what you think your product is. What matters is what your customers think.

If you built a product management app, but your customers believe it’s more of a “personal task list,” hate to break it to you, but you unintentionally built a personal task list. Don’t go against the wind.

Going where your ideal customers are

Learn how your ideal customers discovered your product and double down.

For example, you may spend 80 percent of your growth budget on paid ads, while your ideal customers come to your product mostly from your free YouTube video. Remember, you are no longer trying to attract the masses but, rather, a particular type of customer.

Referring to the alternatives

During interviews, you should ask your users what they would do if your product didn’t exist. Use that in your communication.

For example, if your product is a better alternative to Salesforce for some specific use case, then communicate it as such. Tailor the communication to address the pain points of your ideal customers.

Ideal customer profile template

To use this ideal customer profile template, begin by researching your existing customer base, analyzing user behavior, and conducting interviews with your most engaged users. Next, collect information about the demographics or firmographics, psychographics, behavioral traits, pain points and challenges, and goals and aspirations that define your ideal customers.

Use these insights to refine your ideal customer profile. Remember, your ICP is not static and should be updated periodically to reflect changes in your target market or business objectives.

To create your ideal customer profile (ICP), use the following template:

  • Demographics (B2C) firmographics (B2B)
    • Age, gender, location, education, income level (for B2C)
    • Industry, company size, revenue (for B2B)
  • Psychographics
    • Values, preferences, attitudes, interests, lifestyle
  • Behavioral traits
    • Purchasing habits, preferred communication channels, product usage patterns
  • Pain points and challenges
    • The problems or issues your ideal customer faces that your product or service can address
  • Goals and aspirations
    • The objectives your ideal customer wants to achieve with your product or service

Wrap up

When it comes to building products, the advice to focus on a niche first often backfires.

While focusing on a niche is a good strategy, you must first discover that niche. And to discover that niche, you must first expose the product to a vast number of people. It’s close to impossible to “define” a proper niche upfront.

The better approach is to:

  1. Start with a loose hypothesis and target a broad group of users
  2. Identify the most engaged users you get
  3. Understand them better
  4. Make an informed and validated decision to niche down
  5. Win the niche

Once you win your first ideal customer group, then and only then should you expand further and target additional segments of users.

First, go broad, then niche down, and then expand.

Featured image source: IconScout

The post What is an ideal customer profile (ICP)? Template and examples appeared first on LogRocket Blog.

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