Customer segmentation done right

# 32 – March 2013

Segmentation is about dividing your customers into different categories. Many sales forces are organised this way. The sales territories are defined by the customer’s industry. The segmentation also helps the sales force in adapting their message, and sometimes the product offered, as well

All too often, the segmentation work ends here for a lot of companies. This is unfortunate. A lot of profitability could be gained with a few extra steps.
• Customer selection
• Prioritisation
• Method of approach

Customer Selection
Customer selection is picking and approaching customers in a profitable way. The key is to identify the customer characteristics when buying our products and services. Is the customer procurement driven, where the lowest price will always win? Or do they value our value added as a supplier, which allows for higher margin?

A pragmatic approach to this task is to first analyse your existing customers. Who are the most profitable customers today? What other potential customers share these characteristics?

Prioritise and classify the customers (e.g. A, B, C) in profitability order. This will be the guiding rule for how we choose to approach these customers.

Method of approach
A field sales force is the most persuasive way of reaching the market, but the most costly as well. This high cost can only be justified if we have a reasonable margin on what we sell.

In reaching the market, more and more sales forces are being augmented through other channels:
• Telesales, to actively contact the customers via telephone.
• Customer service desk, where customers may turn to for placing orders.
• Web, providing the customers with a self-service opportunity.

How these channels are used is dependent on the customer priorities, established above.
Some customers may close the initial deal with a field sales person, but will be approached by telesales for additional orders. Others are perhaps fully serviced by customer service desk and the web portal.