Part 2: Customer Segmentation Tells You Where to Sell

May 05, 2016

When thinking about your business’ growth strategies, think about customer segmentation. Customer segmentation is like organizing your closet. Your clothes have different purposes – so do your customers. And just like your closet, there are things you want more of, and some you’d like less of.  

So, why do you need to organize what’s in your customer closet?

  • You’ll sell better. Understanding the profile of a distinct customer segment allows you to align your selling efforts to understand how the segment wants to buy.
  • Your message will be loud and clear. Tailoring your language, medium, and message to specific customer profiles allows you to clearly and effectively communicate.
  • You can emphasize the results most valuable to them. If you know what value you bring to each segment, you can emphasize different value propositions to different customers.

But, all customer segments are not equal. Some are more meaningful than others, but the challenge lies knowing which segment represents the greatest opportunities for incremental growth. The key? Finding an approach that is a good fit based on your organizational strategy. Here are few different segmentation approaches:

  • Financial perspective: Based on total dollars spent and profitability. It’s a black and white approach. 
  • Operational perspective: Based on level of investment required of you and your organization to keep the customer happy.
  • Demographic: Based on customer size, location, or industry.
  • Psychographic: Based on behavioral attributes, include attitudes and perceptions.
  • Sustainability: Based on the length of service provided. Is it measured in weeks or years? Remember, the longest lasting customers aren’t always necessarily the best.

It’s okay to only apply a single perspective, but applying two profiles is more revealing and ultimately more impactful in achieving your growth objectives. For example, create customer segments based on Financial and Demographic attributes. Or, Operational and Sustainability. Plot these on an X/Y graph with a high/low. Then, create four quadrants. Here’s an example graph:

sales graph

Now, ask yourself where does the profile of your ideal customer fall within the four quadrants? Remember, your ideal customer is the customer you want more of. These are the customers you have the greatest opportunity to create sustainable win-win relationships with.

Now, take a random sampling of your current customer base and assign them within your customer segmentation. Place them in their respective quadrant. Where do you see the distribution weighted? Do the weightings reflect what you want? Or, what you’ve been left with? Which quadrant is most strategic to you and how is it measured?

Remember, the client segment with the highest revenue, or current sales, isn’t always the right answer, especially if it reflects a segment that does not reflect the highest growth potential. Focus on the segment with the most growth potential and lines up with your organization’s overall strategic plan.

Next up – Part 3: Create an Effective Sales Plan

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