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ICP and TAM – do you know what yours are?

Segmentation is important

Using acronyms is so popular in business world, that some of the companies actually have a list of them for new employees to learn them. In sales operations use of acronyms is very popular. Sometimes you can see talkers use them and listeners acknowledge them, without any of them really understanding what they stand for or actually know how to use the. When developing your sales organization and finalizing your go-to-market approach, two acronyms are important (ICP and TAM). Not because they sound nice, but because if you can define them right, your chances for efficient and successful sales are much higher.

ICP – ideal customer profile

One is ICP – ideal customer profile. This is a model of customer that is most suitable for your offerings and should be targeted model of your sales efforts. ICP is first defined based on your estimation who are the customers, that will benefit the most from problem your solutions are solving. Second criterium is usually your ability to service them, meaning adjusting your capacity to customer demand. But after the initial estimation, ideal customer profile is developed as combination of your assumptions and real-life feedback from the field (usually in the form of who are our best customers and which one are more susceptible to our offering). With ICP, make sure that you define it and then update it regularly. And when planning sales activities, check if you are really targeting those instead of spending energy and resources on non-ideal targets. That is if you didn’t already get all of them as your customers and you need to grow on customer set that is still available. And that leads us to second acronym.

TAM – total addressable market

TAM – stands for total addressable market. It is the size of your business potential, that should serve you to make better planning and strategy setting in order to balance input with potential output. TAM is important to understand in order to create proper size of sales activities, to develop plans based on what is possible and not what you can see and to make sound strategic decisions about prioritizing sales activities and resources. Sometimes that estimation can be difficult, but in reality, if you don’t try to do the best job and gain enough insight (with help of internal and external resources), than your potential development will always suffer, because your strategic decisions will be based on “what it is”, instead of “what it could be”.

So many organizations that I worked with, have put very little effort into these two exercises that I would find basic for any sales strategy put in place. I hope you are not one of those organizations.

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