Segment Your Market to Improve Resource Allocation


Analyze your customers & prospects to improve resource allocation & financial performance

Earlier this month we began the first article in our three part series – Brand Identity; build and maintain your companies’ most important asset – your relationship with customers. We reviewed in detail the elements of an effective brand identity strategy and illustrated how over time, your brand image and brand reputation will lead to committed relationships with your customers. This is because a consistent image builds familiarity. Familiarity strengthens relationships, and relationships build revenue. Ultimately, branding builds your market place reputation and drives improved financial performance to the bottom line. This month, we will begin to lay the foundation for your brand identity strategy starting with an examination of effective customer segmentation methods.

In today’s multiplying and fragmenting customer environments, the gap between various segments has grown substantially, creating a state of near polarization. The exciting news is that fragmentation is creating opportunities for astute organizations to focus only on a few segments and position themselves as thought leaders to the establishments within those segments, targeting only the most valuable customers by offering highly focused and tightly integrated services.  This requires your organization to define and manage segments in a way that helps it to clearly differentiate your unique selling proposition and the value you can offer to specific groups of customers and engage them accordingly. (see figure 1)


Segmentation.fig.1

Click on image to enlarge

 


In our example, we have classified customers into three simple categories; strategic, targeted and the new prospect base. The accounts have been segmented by primary attributes such as size (EBITDA), current status of relationship, revenue potential, competitive knockout candidacy, SIC codes and the “temperature” (hot, warm or cold) of sales leads. Using these criteria in our example, we identified eleven strategic accounts, 200 targeted accounts and 3,000 additional potential customers. Once this segmentation and sizing data is know, a corresponding sales and marketing strategy can be employed for each segment that is financially sound and corresponds with expected future revenues. For example, the top eleven strategic accounts will be engaged through a combination of consultative direct sales, solution selling and relationship nurturing activities – a joint effort between marketing, senior management and strategic account teams.

Once you are comfortable with the market sizing and segmentation attributes for your own market, you will need to identify and optimize your resource allocations with sales force incentive and promotion plans that focus on the customers, products, and selling activities that generate the highest response to your sales and promotion efforts. To do that, sales leaders often ask themselves many questions such as what are the market segments and industries we should focus on? Do we target those businesses that are currently highly profitable or those that are less profitable but have long-term potential? What geographic areas do we focus on: local, regional, national, or even international? What products and services should we focus on? Those with long selling cycles and higher margins or short selling cycles and lower margins? Should we target services with high short-term impact and low carryover or with low short-term impact and high carryover (such as branded web portals)? What activities should we focus on? Should we be hunting for new customers or nurturing relationships with old customers? Should we be selling or servicing? How do we allocate relationship experts, product experts, and industry experts? Your answers will require input from a cross-section of stakeholders, and will yield the information required to develop your organizations resource allocation strategy.

The industry leaders have established an actionable segmentation strategy across their entire business; aligning segment-level customer engagement plans with revenue goals and performance results. To achieve success, they integrated products, services, messages, and resource allocations in a way that creates real value for customers, increases operational efficiency, and delivers measurable financial results. Moving ahead with a segmentation plan is important because it enables your organization to increase the value of your relationships with customers.


About the Author
I am an accomplished advanced and disruptive technology analyst. I help organizations manage their overall marketing strategy and efforts including market analysis, identification of business opportunities and risks, strategic alliances and partnering, systems engineering and customer requirements, business development programs and marketing, advertising and communications initiatives & plans.

For office hours and contact information, please use this sites contact form.


 

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