Targeting mindset Part 1: The cost of confusion between ICP and TAM

Have you heard of GIGO? Commonly used by data scientists, it stands for "Garbage In, Garbage Out." This principle holds that poor input inevitably leads to poor output, and applies not just to algorithms but to sales funnels as well.

The input of your sales funnel is influenced the most by your targeting. It significantly impacts the 25 most frequently measured RevOps metrics throughout the sales cycle. Yet, many companies struggle with even the basics.

If you suspect your targeting might be off, or you just want to ensure you're on the right track, welcome to the first part of our blog post series dedicated to mastering targeting.

The Cost of ICP vs. TAM Confusion

There's a strong correlation (or causation?) between companies struggling and answering to "What does your ideal customer look like?" in a way "Our customer can be any company from 200 to 10,000 employees with ongoing digital transformation".

Such definitions mistake TAM (Total Addressable Market) for ICP (Ideal Customer Profile). TAM describes who might be your customer. ICP explains who actually needs to be your customer as soon as possible.

Most companies don't have a clear ICP definition; they only operate with a vague sense of TAM. This typically leads them into endless cycles of:

• Battling spam filters,
• accepting ignorance from your prospects, or...,
• …dealing with their constant rejection

But if you still got the leads from this operations, it also brings another set of challenges and activitiesWhat is the cost? 

• Time spent on (dis)qualifying irrelevant leads
• Increased time to close the deal (won and lost) 
• Lower retention, revenue-per-customer, etc.

How to recognize TAM and ICP in practice?

You may have one TAM, but within it, we believe multiple ICPs should be identified, even for startups and small companies.

Let us show you examples of our definitions.

Our TAM is:

1. B2B companies
2. scalable products
3. post product-market fit
4. active acquisition (i.e. not relying on organic growth).

I.e. Our customer is not a B2C company, almost any agency or manufacturing company and also not a company that doesn't directly control its distribution.

But one of our ICPs:

1. B2B
2. SaaS
3. scaleup
4. sell to e-commerce
5. dedicated team of 3-10 SDRs
6. doing outbound sales
7. cold-calling
8. CLV between $15-50k
9. CRM - Salesforce or Hubspot
10. and their conversions are heavily influenced by acquisition timing such as seasonality of the business

Why don't most companies have ICP definitions? What should each ICP definition have? What does the process of creating it look like?

We tell you in the upcoming articles. Subscribe to our newsletter, we’ll let you know!