TAM, ICP And Buyer Personas: How They Relate And Why They Matter

By Nick Wentz, VP of Marketing at Clearbit

Successful B2B marketing and sales require you to be strategic about who you talk to and how you talk to them. You have to focus on the specific markets, target accounts and stakeholders that are going to have the greatest impact in scaling growth. This strategy involves not only identifying who you’re targeting, but also who you aren’t going after.

So, how do you get there? Let’s start with some basic concepts. Marketing and sales professionals often talk about total addressable market (TAM), ideal customer profile (ICP) and buyer personas. While these terms mean different things, they are sometimes conflated and used interchangeably. But it’s important to understand what they really are, how they differ, and why they’re essential to dialing in your marketing and sales programs.

Marketing Technology News: Decentralized Identity Solutions Are Key To Web3 Advancement

What is Total Addressable Market (TAM) and how is it calculated?

Total addressable market (or TAM) is an estimate of the total size of the revenue opportunity if every person who found value in your product or service were to buy it. TAM provides a valuable baseline for projecting potential revenue, growth and usage.

There are a couple of different ways to calculate TAM. You can rely on outside research, market analyses and recent analyst data to come up with a projected number. Or you can base your calculation on previous sales, using a formula like:

TAM = total # of potential customers x annual contract value (ACV)

So, if a market’s average contract value is $15,000 and there are 3,500 potential customers, the market opportunity is $52.5 million.

To figure out the number of potential customers, you can use third-party market research and reports and/or business databases.

TAM is essential to helping companies determine whether they should pursue a market and where to put their money and effort if they do. But it can change over time due to a number of factors – like new technology, changing customer preferences or shifting demographics – so it’s good practice to regularly reevaluate this calculation.

Marketing Technology News: Rebranding a Company: Here’s Two Ways

What’s an Ideal Customer Profile (ICP)?

An ideal customer profile (or ICP) describes companies that are best suited for your product or service and mostly likely to become repeat customers.  If you think of TAM as telling you how big a pond full of potential fish is, ICP helps you identify the best fish to catch.

A data-driven ideal customer profile is built on a combination of company attributes, such as:

  • Industry
  • Geographic location (country or region)
  • Company size (a.k.a. number of employees)
  • Business model (SaaS, B2B vs. B2C, etc.)
  • Estimated annual revenue
  • Alexa rank
  • Technology used

For example, a standard ICP might look something like: “e-commerce companies headquartered in the Americas who use Shopify, Magento, or BigCommerce.”

A well-defined ICP enables you to focus your sales and marketing efforts (and budget) on activities – like lead qualification, advertising, outbound efforts, account-based marketing and personalized marketing – that are more likely to generate a high ROI.

Marketing Technology News: The Majority Of Social Media Ads Reach Only 5% Of Their Target

What are Buyer Personas and How Are They Created?

Buyer personas are archetypes that offer a more detailed picture of the individuals behind the purchase: their motivations, their pain points, buying habits, etc. By representing the best people to build relationships within ICP companies and target accounts, personas help you to refine your message targeting, campaigns and content so you can build repeatable, scalable business.

While buyer personas are sometimes dismissed as being too theoretical or broad to be useful, when they’re built on quantitative and qualitative data (especially customer input), they can provide valuable context about what motivates a buying decision.

Here are some questions that are typically used to define a persona:

  • What are common job-related demographic trends — like role, title, or seniority level?
  • What’s their role in buying and implementation? Do they have purchase authority?
  • What are their core responsibilities, and what does success look like for them?
  • What are their top pains and challenges?
  • What are their KPIs and job goals?
  • Who do they report to, and how is their promotion measured?

It’s common to have more than one buyer persona to account for key differences in motivations, product or feature set relevance, go-to-market motions, or buying journey roles.

How do ICPs & Personas Differ? 

To scale growth and/or move upmarket in the B2B world, you have to deal with two levels of audience: companies and the people within them. Technically, ideal customer profiles are meant to describe target companies while personas describe the target stakeholders or buyers with those target companies. But in reality, when someone says “ideal customer” or “ICP”, they may be referring to a combination of data that describes your ideal customer (great fit company and great fit stakeholder).

So, to sum up:  TAM is the total accounts that could buy your product, ICP is the portion of your TAM you should be convincing to buy, and personas are your best type of contacts within ICP accounts.

Remember that these definitions are just guidelines. Not every single paying customer will fall into your ICP. Not every prospect will hit all the ICP or persona characteristics. And they will evolve as your business and the market changes.

buy modafinil where to buy modafinil