We recently discussed one fundamental research activity you must complete when starting a business: Conducting a Market Analysis. A market analysis helps you understand whether your idea is feasible by researching the conditions of your industry and the broader marketplace.
Your next step is to take this work and drill it down to another level. Understanding your customers is essential so you can sympathize with what’s most important to them. If you do, you’ll have a better shot at building strong, lasting relationships with your customers.
So the question is — how do you go about researching customers in an organized way?
The answer is developing your first Ideal Customer Profile (ICP). You should have at least one ICP for your business. Over time, you may end up with more.
Let’s take a close look at what an ICP is, how to create one, and where to locate your most reliable resources for the process.
What is an Ideal Customer Profile (ICP)?
An ideal customer profile is a snapshot of the type(s) of people who can benefit most from your product. Every decision you make for your business must keep your ideal clients front of mind.
Your ICP should represent customers most likely to:
- Seek out your products or services
- Become repeat customers
- Recommend you to potential customers
Together, these are the customer qualities that will generate the most profit for your business. By developing your ICP, you’re learning what your ideal customers want from you, how to communicate with them, and how to tailor products and experiences to their needs.
How to develop an ICP
Developing an ICP starts with research and ends with a concise write-up of your ideal client.
You should spend the majority of your time on research. If you’re serious about growing a successful business, you must base your ICP on reliable consumer data.
This is not a time to rely on assumptions and anecdotes. Taking the time to review consumer data might not be everyone’s favorite activity, but it pays off. Equipping your business with well-researched ICP will lower your risks, improve customer outreach, and help you maintain a roadmap grounded in consumer demand.
Researching your ICP
Your ICP must identify who your customer is in significant detail. Some of these attributes are easier to uncover, such as who they are “on paper” — age, gender, location, et al.
But your ICP ought to reach deeper into your ideal customer’s sense of self. It should seek to uncover:
- What they do for work and play
- What’s important to them (and what isn’t)
- What they believe in
- Whom they strive to be
- What they struggle with
Understanding the answers to these questions will help you deliver valuable products/services — ones that spark joy, solve problems, and contribute to their sense of identity. These attributes inspire loyalty and can increase your profit over time.
When researching your ICP, look for information related to each of these categories:
- Demographics: Age range, gender, location, and education level
- Work information: Typical job title, industry, and skill sets
- Psychographics: Attitudes, aspirations, and belief systems
- Pains and desires: What’s important to them and what they struggle with
Demographics and work information are easier to find. Psychographics, pains, and desires are a little more challenging. Let’s review each category’s sources and how to combine them into one cohesive profile.
Consumer research sources
When considering sources for your research, look for credible outlets. Federal and independent research institutions are your best bet.
The US government provides thousands of free, reliable datasets for small businesses:
- Income statistics from the BLS to research demographics and earnings
- Consumer Expenditure Surveys from the US Bureau of Labor Statistics help you understand where consumers are spending
- US Census Bureau data for demographic research
- Consumer Price Index to look at nationwide cost and spending trends
These datasets will be great for your demographic and work information research.
While typically useful for market research, the Consumer Price Index can also help you uncover consumer pain points. For example, when prices for a specific product are increasing, and your offering provides a useful alternative, now you’ve got proof that you can solve a real problem for your target customers.
Independent research bodies also provide specific datasets on consumer psychographics, pains, and desires. These reports usually cost money. But, it’s a justifiable expense if the data has the potential to improve your decision-making.
Some of the industry-leading sources for consumer research include:
Analyzing data and writing your ICP
Think of the ICP write-up process as using data to tell a story.
You should develop a concise description that covers all the attributes you uncovered through your research. Use the information to create a narrative about your ICP.
Let’s say your company is developing a rechargeable electric lawnmower. As you do your research, you find data from the Consumer Price Index showing a steep increase in gasoline prices.
Your target customer will likely find this price increase a major pain point.
Think through where this pain point intersects with the consumers who’d find your product useful. Your ICP may start looking like landscaping business owners. Perhaps they’re interested in avoiding volatile gasoline cost fluctuations that impact their bottom line.
As you continue building out your ICP, you’ll want to determine other attributes of this customer profile, including demographics, income level, and more.
Use these learnings to develop targeted messaging and marketing campaigns — and reach your ICP when it’s time for them to replace their fleet of gas-powered mowers.
Note: if your research indicates you have more than one ideal client, don’t combine them into one profile. Write them up separately.
Your ICP should help you target products to solve consumer pain points and develop marketing messages that attract qualified customers.
The description should summarize what you uncovered in your research. You must strike a balance between being targeted — but not too small a percentage of the market that you’ll run out of customers quickly.
Ideal Client Profile:
- Age 25-45, mostly men, earning between $80K-$120K/year, education level between high school and Bachelor’s degree.
- Owns landscaping business with revenues between $300k-$500k/year, employs between 1-10 full- or part-time workers. Price sensitive due to slim business margins.
- Concerned about price inflation and the volatile labor market affecting the bottom line.
- Considering offering better on-the-job perks/experience to inspire employee loyalty.
Using your ICP to make sound decisions
Your ICP can help you make informed decisions for your business. The information you discover will improve how you:
- Prioritize your most valuable customers
- Develop products and services
- Deliver customer service experiences
- Reach customers with marketing messages
- Build lasting repeat customer relationships
As you grow your business, consider whether you may have the capacity to incorporate other ICPs into your efforts. With each new ICP will come new product/service development opportunities, marketing messages, and business strategies.
This is why it’s so important to differentiate your customer types. If you don’t, you risk diluting your message, having impersonal customer interactions, and missing out on relationship-building touchpoints.
Conclusion: Plan your business effectively with SOAR Innovation
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Download the Complete Guide to Entrepreneurship for detailed advice on planning, launching, and improving your business. SOAR Innovation also provides a suite of direct services to enhance your operations.
Contact us to get started — and connect with our community of Eastern Kentucky entrepreneurs.