The Importance of Understanding Your Ideal Buyer Persona (IBP)
Why SaaS startups should delve deeper into their Ideal Customer Profile (ICP) to gain more granular, purchaser-level insights
In today’s market environment, understanding the specifics of your target customer is critical. One could say that’s always been the case, but I’d argue that during the peak market of 2020–2021, there were many different customers for products that in today’s more difficult environment have much tighter customer prospects.
As one generalized example, many horizontal software startups were selling their solutions to customers of all sizes across industries during the bull market. However, those same startups are now realizing — as a result of lots of churn and elongated sales cycles over the past 18 months — that their solution may be a “nice-to-have” in one industry vs. a “need-to-have” in another industry; or they have learned that their solution is a “nice-to-have” tool for a smaller organization and a “need-to-have” tool for a large enterprise. In either scenario, the outcome is a shift in GTM focus toward the industry and/or size of organization that has a larger and more acute need for the solution.
As a second example (I’m using HR here, however this is applicable across departments), many HR-related software applications were being purchased bottoms-up during the bull market, with a mid-level manager making the purchase decision for their own team. However, this type of sale has now become much tougher due to new policies and increased scrutiny on spending, and it’s now the Head of HR or Chief People Officer — along with the CFO or even CEO, depending on the size of the company — who is making that purchase decision. In this scenario, the outcome is a shift in GTM focus toward the buyer(s) within the organization that (1) have a problem that requires your solution; (2) have the authority and budget to sign off on purchasing your solution; and (3) have the ability to establish processes and drive adoption of your solution within the organization.
These two examples above highlight two different-yet-critical methods of distilling down the all-important question of “who is your customer?”. The first method, which is one most SaaS startups now embrace, is the idea of ICP: Ideal Customer Profile. ICP tends to be focused on company-level characteristics: “senior care facilities”; “luxury retail brands with 10–50 physical locations”; “high-growth software companies with 500–5,000 employees”; “restaurants with greater than $1M in annual revenue”. These ICP descriptions are what you typically hear from a software company when you ask “who is your customer?”. However, as valuable as it is to identify your ICP, it is as important to deeply understand your Ideal Buyer Persona (IBP) within your ICP in order to achieve strong product-market fit.
What is Ideal Buyer Persona (IBP)? If ICP, as defined above, is focused on company-level characteristics, then IBP is focused on purchaser-level characteristics: it’s a grounded-in-reality representation of your ideal customer within your ICP based on market research, customer (and prospective customer) feedback, and sales funnel + product engagement data. The IBP is not only a “who”, but also a “why” and a “how”: who is buying your product within an organization, why are they buying your solution, and how are they using your product internally (or, in some cases, externally). Knowing and articulating each of these IBP elements, alongside defining your ICP, provides a much more granular understanding of your customer and will be of significant value to your business. Let’s dive further into the IBP elements of “who, “why”, and “how”, along with the value that comes with understanding each component.
“Who”
“Who” is perhaps the most straightforward element of the IBP. If you’re selling a sales productivity tool, the “who” is likely the VP Sales or CRO. If you’re selling an e-commerce marketing automation tool, the “who” is likely the VP Marketing or CMO or Head of E-Commerce. However, there are many situations where the “who” becomes less clear, either as a result of the product you’re selling, the org size of the ICP you’re selling into, and/or the decision-making criteria for software procurement within your ICP. (As you’ll read below, the “why” and the “how” also impact the “who”.)
To piggyback off the aforementioned examples: if you’re selling a sales productivity tool, while it is logical that the sales leader would be the core IBP, the CEO or CFO or other parts of the sales organization might also be included in the IBP. Perhaps you’re selling into a very small organization and therefore the AEs and BDRs are included in the decision-making process as early “founding” employees. Perhaps your ICP is SMBs and therefore the CEO is part of every expenditure decision made. Perhaps your ICP is Fortune 500 enterprises, to whom you sell seven-figure-contract software, and therefore the CFO must sign off on all procurement.
As a more streamlined example, if you’re selling an e-commerce marketing automation tool, the IBP may extend beyond heads of Marketing and E-commerce and include leaders from other parts of the org including Product, Data & Analytics, Customer Success, and/or even IT/InfoSec (given the tool deals with sensitive customer data and regulatory issues such as GDPR). Whatever the case, it’s important for SaaS startups to deeply grasp the “who” element of your IBP so that you can appropriately target the right stakeholders within a prospective customer, tailor your messaging appropriately, and strategically engage the various members of your IBP throughout the sales cycle.
“Why”
Once you know “who” is considered as part of your IBP, it’s time to dive into the question of “why” they are buying your product. The “why” is the key insight you establish that dictates not only your sales motion, but also everything ranging from product development to marketing. For many SaaS startups during the bull market, their “why” was muddied.
To continue with one of the examples above, a sales productivity tool may have believed it was being purchased as a revenue-driving tool (which, in the bull market, could have been the case), yet is now realizing that — with B2B sales slowing dramatically for a majority of the SaaS population — the data their software captures is actually more about driving efficiency internally, resulting in their solution being more of a cost-savings tool. Understanding “why” your IBP within your ICP is buying your product is critical for accurately relaying your value proposition, understanding the competitive set you’re selling against (e.g. the list of companies selling software to help drive more sales is a different competitive set than the list of companies to help drive more data capture and internal efficiency), and providing foresight into “who” might be included in your IBP that you previously did not anticipate (e.g. if your “why” is now cost savings, the CFO will likely be involved in the decision-making process to model out what those potential savings look like relative to the cost of the software).
“How”
The last component of the IBP is “how” your customer is using your solution. “How” is essentially the manifestation of the “why”: if a customer is buying your sales productivity software in order to drive more sales (“why”), then you must understand “how” they plan to utilize your software internally in order to effectively accomplish that goal. (More generalized: if a customer is buying your software in order to accomplish X [where X could be to increase revenue, decrease costs, capture more data, drive faster product development cycles, etc.], then you must understand “how” they plan to utilize your software internally in order to effectively accomplish X).
To provide a different example to further illustrate the point: you may sell a product where there is both an internal and external use case. For instance, you might sell scheduling software that employees can use internally to schedule meetings among employees, but who also use your software externally to schedule meetings with their own customers. With respect to “why” they are buying your software, the former is more of an efficiency use case across an organization, whereas the latter is more of a customer success use case (or even a sales use case).
If, upon analyzing your own revenue and logo retention metrics, you determine that the external use case is in fact leading to many more new customers and driving higher net dollar retention among your existing customers, then you now have a clearer picture of the “why” (improve retention / drive more sales) and next need to figure out “how” they will be using your product (in this case: by enabling more seamless scheduling with customer success). Since the external use case is completely different than the internal one, the “how” is also completely different and informs the way in which you market your product (e.g. to Customer Success leaders vs. Operations leaders vs. People leaders), who your competitive set is (e.g. customer success tools vs. internal calendaring tools), and “who” the IBP might include (e.g. Head of Customer Success vs. COO or Chief People Officer).
To summarize, honing in on Ideal Buyer Personas (IBPs)— along with Ideal Customer Profiles (ICPs) — helps SaaS startups better understand who their target customers are at both a company level and a purchaser level. Having one without the other is an incomplete picture, whereas having both yields significant benefits including: better-tailored marketing strategies, more accurate prospecting, clearer articulation of value proposition relative to the competitive set, more efficient sales motions, improved product development cycles, and better overall customer experiences. Taken together, these benefits lead to strong product-market fit that is a prerequisite for building an exceptional SaaS business at scale.
