Membership login

TAM & ICP - The Need To Focus Your Sales Machine

Illustration of Total Addressable Market (TAM) and Ideal Customer Profile (ICP). inspir'em blog.

Creating new, qualified pipeline is the lifeblood of every sales organisation.

However, when products and services potentially appeal to large market segments (a large Total Addressable Market, or TAM), start-ups, and scale-ups all too often make an error. Attracted by the wealth of opportunity in front of them, they operate too widely and dilute both sales team and organisational effort, leading to lower revenue than predicted.

A sales organisation that sees quarter-over-quarter success is laser focused on its addressable markets and ICPs (Ideal Customer Profiles). These exist along with carefully selected Personas to ensure that the product is hitting the right market with the right rewards.

Go to Section: 

 

How do we define an Addressable Market?

An addressable market is usually broken down into 3 segments:

 

 

Whatever definition you use, an addressable market is a market segment, usually an industry or part thereof, where your product or services specifically addresses the customer need.

Tip: Avoid misunderstandings downstream by documenting how you are interpreting the definition for your products or services.

Many organisations have several addressable markets within their Total Addressable Market, or even their Serviceable Addressable Market, as they can sell into multiple industries. For example, you may have:

 

 

Whilst the focus on the key industries is the general idea for having this segmentation, you’ll see from the list above that TAM 4 'Other' could be a large bucket of industries. You might be thinking - why bother if they are not a priority today?

It’s best practice to list all customers in a TAM in your CRM, even if that customer may not be a target today. In the future, you may bring out a new product or onboard a new customer and choose to segment these markets further. Keeping the data tidy will pay dividends in the end.

 

How do we quantify an Addressable Market?

There are lots of ways to quantify the opportunity of an addressable market and there are many research firms who have information online where this is already calculated – like Gartner or Forrester.

However, the simplest calculation is:

This calculation is useful for your business to set priorities, your investors to understand the opportunity, and your teams to understand the opportunity ahead of them.

 

How does an ICP differ from an addressable market?

An ICP - an Ideal Customer Profile – is a more granular segment within the target market.

For example:

 

ICPs can be segmented by any measure which you can obtain publicly e.g., turnover, employee count, profit, market offerings and location.

ICPs can also have multiple criteria, e.g., Revenue & HQ Country.

The idea again is you narrow the field to ensure your teams are focused on winnable deals which drive the right revenue for your business.

By segmenting the addressable market into ICPs, you will also naturally start to segment deals-in-flight based on opportunity, fit and deal size. When reviewing your opportunities and forecasting, this can be useful information. You will start to understand the shape of your business in addition to where you are being successful.

Ideally, for forecast risk mitigation reasons, you would want a mixture of small, medium and large deals in the forecast to ensure you will meet your numbers.

 

What about Personas?

Once market fit has been determined, you can then turn your attention to Personas – the term used to describe the key people who are experiencing the pain you are trying to solve.

With Personas, we want to identify:

 

 

Our view at inspir’em is that Personas may change slightly within the TAMs / ICPs so try not to be too narrow in your identification of the job titles / roles of the people who are most interested in what you are selling.

Again, the idea of the targeted Personas is to help the whole organisation focus on the needs of the people most likely to benefit from your solution and champion a purchase.

Whilst there will always be buyers slightly outside of the target market – our efforts and dollars should be focused on getting the biggest bang for the buck.

If you are looking for a template to quickly define your TAM, ICP and Personas, download our TEMPLATE from our resources page here.

 


 

If you are interested in new ideas, inspir’em sales meeting exercises and lesson plans are available to continue the development journey of your teams.

Contact us today to further boost your sales and see your revenue grow.

For more tips on applying MEDDIC in the real world - join our community at inspir’em today.