Ideal Customer Profile Defined by Net Revenue Retention - with Dan Sperring, Founder and CEO Align

**Ray Rike** (0:00)
Hello, I'm Ray Reich, founder and CEO of RevOp Squared, and your host of the Metrics that Measure Up podcast. We talked to a wide variety of B2B, SaaS and Cloud thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics and form decisions. Now on to today's show. Welcome to today's episode of the Metrics It Measure Up podcast. Today, we are joined by Dan Sperring, the founder and CEO of Align. Today, we'll be covering three main topics with Dan. First, the ideal customer profile definition. Second, best practices to identify the best ICP in buyer personas for your company. And third, how to measure the return on investment of a well-executed, ICP-centric go-to-market strategy. Dan, please take a moment to give a brief overview of your journey to becoming a guest on the Metrics Measure Up podcast.

**Dan Sperring** (1:15)
Well, first of all, Ray, I want to thank you for that opportunity today. I'm so excited to be on the show. In terms of my background, I've spent the last two decades working in marketing, sales and customer success at technology companies. Right around 2018, I was in a situation where our CEO asked me to put together a plan on how we were going to grow the North American business. As I put together that annual plan, I partnered very closely with our finance team, and through that analysis we did, what became very clear was the fastest way for the North American business to contribute to the overall growth of the organization was to overachieve our retention targets. What we saw was that by overachieving or underachieving, there was a nine-point variance in the company's top-line growth rates. What became really clear was for us to grow the business as quickly as possible, and thinking about the leaky revenue bucket, it was really around how do we close those holes, specifically related to the retention hole. Fast forward to 2021, I was working at a virtual event tech company, experienced 400 percent year-over-year growth. But in 2021, we started to see a lot of churn show up, and during 2021, what was fascinating was that we had these different variants of COVID, Delta and Omicron, and each time a variant washed over our market, things foundationally changed. What we learned through back testing some of our ICP characteristics was that the companies that we acquired in 2020, the ones that we retained were representative of our ICP.
However, there was a lot of clients that we lost that maybe we should never have sold to in the first place. This actually, this insight in terms of how do we get upstream in terms of what we're filling the bucket with, ultimately became the foundation for starting online software, which is our focus is helping SaaS companies understand their customer mix so they can drive more efficient growth.

**Ray Rike** (3:21)
Well, I must admit, Dan, it's the first time in 2023 someone has credited COVID to helping them with their go-forward strategy, but let's start at a foundational level. Everybody throws around the ICP acronym like, well, everyone knows what that is, right? It's like apple pie, but I find that it's not commonly defined. What is your definition of the ideal customer profile?

**Dan Sperring** (3:50)
I run in the same situation, Ray, where there's often a lot of nuance around this topic, and we think we're talking about the same thing, but potentially, there's slightly different variations. When we think of ideal customer profiles, we primarily think about the firmographic characteristics associated with an account, and specifically, probably your best fit customers. Examples of this characteristics would be things like the vertical, the revenue or revenue bands, employee accounts. And there's often an intangible element associated with ICPs that maybe could be things like a brand forward type of company, like a Nike or a company that's focused on customer intimacy such as Nordstrom.

**Ray Rike** (4:35)
Well, are there some misconceptions or common misusage of the concept of ICP you run into?

**Dan Sperring** (4:42)
Yeah. And so I'd say that the biggest one related to kind of misconceptions is I think often people use that concept of ICPs to refer to a general target market. And if we were to think about like a target itself and you were to think about the inner circles of the target, I would say that the bullseye and then maybe a ring or two outside of that bullseye is probably representative of the ICP. So it's really the best of the best within your target market.

**Ray Rike** (5:14)
Do you actually find people maybe are too narrow in ICP? Let's say it's a automotive distribution company that's 50 million to 250 million, that is tech forward with the following Tecnographics. Do you find sometimes it could be too confining?