with SalesSource co-founder Karan Singh
Collin Stewart, CEO
30 January 2019
For most young and scrappy startups, closing a deal is a top priority. It doesn’t matter who the prospect is – a deal is a deal and if you want to grow, you need customers.
Of course, when your outbound team begins to proactively reach out to prospects, in the hopes of closing more deals, companies begin to define who they target: first by defining their Ideal Customer Profile and then, based on that profile, their larger target market.
The trouble is, says Karan Singh, co-founder of acclaimed sales consultancy SalesSource, companies miss the mark on this exercise in two ways:
- Companies often default to broad terms and opt to go after “the largest companies in the world” or “every school in North America.” Defining a target market is hard.
- Companies don’t think about iterating on their target market – they think it is a one-time thing.
To the first point, the result of such broad planning is
“When I first joined Cloudera [in 2013], our presumption was that our target market was the global 2,000 – the biggest companies in the world. It was a good starting point, but in a couple of years, we tripled the size of our sales team. When scaling that rapidly, you want to be thoughtful about expanding your target market as needed,” says Singh, on a recent edition of The Predictable Revenue Podcast.
“Our sales team coming to us with who they thought were target accounts. And the accounts they were bringing to us were, candidly, easier for them to close than Coca-Cola. But, that wasn’t necessarily better for the company. Then a couple years later, we were thinking about going public, which requires you to explain your target market and why you are viable for the long term. It was then we realized that half of the pipeline we had generated for the next year was for the wrong set of accounts – accounts that would take $100,000 in our time and effort for $50,000 in lifetime spend. And we had no idea before it happened.”
Building the right infrastructure early
Despite the inherent challenge in defining one’s target market, Singh suggests doing so early; it will ensure your sales team has the right accounts to target as soon as possible, and that your company has a baseline definition of your market to work from as your product and customer changes in the ensuing years.
But to hone in on that initial market, Singh says, you have to start small: with a concrete Ideal Customer Profile (ICP).
“Being too broad is the easy approach. It is a crutch. You can’t just say the ‘biggest companies in the world.’ What are the customers that are ideal, and who would be the opposite? If you can be really honest about those two groups, it helps to define your target market because going from an ICP to a target market is relatively easy,” says Singh.
“Defining an ICP is conversational – get the right stakeholders in a room, think through their ICP via a framework I use, then transfer that over to a target market.”
According to Singh, the necessary stakeholders are sales, marketing, and finance. From a sales perspective, that means one sales operations leader, one sales leader, and one individual contributor (someone who has been in the trenches). From marketing, Singh suggests inviting someone from product marketing, and someone demand generation (demand gen is at the tip of the spear and needs to weigh in on the ICP). Finally, finance is invited so everyone at the table can understand the relevant corporate objectives (churn or new logo land grabs).
“As long as you have those individuals in a group setting, I think you can get a very healthy conversation going around your ICP,” says Singh.
“That kind of group will make sure you account for everything you need to consider for this project.”
But, that’s the just the “who.” Now you need to consider the “how.” What are the questions you should be asking?
(Editor’s note: we chatted with Singh’s colleague Lars Nilsson, co-founder and CEO of SalesSource about the importance of sales having a seat the executive table. You can read about our chat here, or listen to the entire interview here)
Singh’s ICP framework
When designing your ICP, there are a few different lenses, or concepts, through which you have to attack the project. They are firmographic, behavioral, and technographic.
The firmographic lens consists of company demographic information, most of which is readily available on Linkedin or other more industry-specific data sources. For example:
- Company IT Spend > x
- Annual Revenue > x
- Industry: Financial Services, Manufacturing / Auto, Retail,
- Technology, Health/Pharma(?), Public Sector
- Transaction Volume
- Disrupted by Technology Industries
- Regulated Industries
- Employee Count
- Sophisticated web presence (clickstream analysis)
The behavioral lens refers to the actions of a prospect that could be interpreted as increasing their propensity to buy. This leans is a little more tricky to ascertain. Some of the potential actions are:
- Increase (spike) in reading content related to what you sell
- Increase in searches on the vendor’s website
“At Cloudera, we knew we had intent data from prospective prospects. They were downloading a bunch of our open source connectors, or doing things on our website,” says Singh.
“That was a really good indication that their propensity to buy was going up. You need this behavioral indicator, it can’t just be firmographic.”
Finally, the technographic lens refers to the existing install base that this prospect has. Do your prospects have complementary technology to yours already in place? Or, are they using competitive technologies? For example, if you sell purchasing software and you integrate with NetSuite, you’d want to know if a company you plan to target uses NetSuite as the ERP system.
That could be a huge leg up in getting a sale done.
“You want to see what their install base is, and use that information as an indicator of their propensity to buy,’ says Singh.
“The good news?
The last step in your ICP design is building in the right infrastructure so when you have bookings in place you can re-analyze your target market and determine if your original hypotheses are still valid. If you are an early stage company, a lot may change in just one year – your product market fit may be entirely different than you initially thought, for instance.
“It is about putting in the cadence and the methodology to iterate on your target market,” says Singh.
“That ability to analyze and re-analyze is critical to growth.”
For more on Singh’s thoughts on how to build an ICP, define a market, and grow a company, check out his full interview on The Predictable Revenue Podcast.