How to Create a Customer Segmentation Model
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The document outlines a process for creating a customer segmentation model aimed at enhancing sales effectiveness by identifying and prioritizing target customers based on their fit with the ideal customer profile. It includes steps for defining customer criteria, building the segmentation model, and assigning resources accordingly, while highlighting the benefits for sales, marketing, and operations. The ultimate goal is to focus sales efforts on accounts most likely to yield success, thereby improving customer acquisition and retention.
How to Create a Customer Segmentation Model
- 1. How to Create a Customer Segmentation Model
- 2. Sales Focus 2 • Does your sales team call on virtually any customer using a shotgun approach? • You may have thousands of potential customers to serve • However, you have limited time and resources to sell and deliver your services • Critical to identify target customers where you have the greatest chance for success Is your sales team focused on the right customers? © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 3. Benefits 3 • Sales: Focus resources and effort on the best target customers Prioritize opportunities in the sales funnel Acquire and retain customers more effectively because they are a better fit with your value proposition, they are more likely to buy and close faster, they produce bigger deals, remain more loyal and they are more profitable • Marketing: Clarify marketing strategies and tactics Develop Account Based Marketing communications that resonate Establish pricing strategy based on overall value proposition Focus product development on target customer needs Diminish competition who can not compete • Operations & Supply Chain: Improve margins, prioritize order fulfillment Provide aftermarket services What are the benefits of defining target customers? © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 4. Process 4 1 2 3 4 5 Define ideal customer profile Build customer segmentation model Define service focus by segment Assign resources to key accounts Communicate segmentation plan Customer Segmentation Process © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 5. 5 • Ideal Customer Profile is a tool to help us identify our target customers • It can be used to score, rank and prioritize our customers and to identify the most strategic accounts to focus on • The closer customers fit our Ideal Customer Profile, the more likely we are to enjoy a successful relationship • Customer purchasing preferences should align with our value proposition Criteria 2 Criteria 3 Criteria 4 Criteria 5 Criteria 1 Ideal Customer Profile Define Ideal Customer Profile © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 6. 6 • Geographic: Where are their headquarters and where do they operate? • Demographic: What do they do? Measurable, statistical data about the company and its business units. • Psychographic: Who are they? Values, attitudes and beliefs held by the company, its business units and employees. • Behavioral: How does the company, business units or employees act? Define Ideal Customer Profile Geographic Psychographic Behavioral Demographic Ideal Customer Profile © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 7. 7 • Headquarters location • Operational locations and reach • Regions & continents • Countries & basins • Business unit structure • Centralized vs decentralized Geographic Characteristics Define Ideal Customer Profile © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 8. 8 • Company size (revenue, employees, growth projections) • Industry segment(s) • Activity level (Rigs) • Capital or operating budget • Our historic sales revenues by product/service • Our future revenue growth potential by product/service • Pay on time (Days Sales Outstanding/DSO) • Financial stability (Debt, cash flow) Demographic Characteristics Define Ideal Customer Profile © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 9. 9 • Cultural fit (Core values) • Level of integrity & business ethics • Loyal / honor their commitments to suppliers • Buyer-seller relationship (Partner vs supplier) • Communication style (Open vs closed) • Price sensitivity (Value-based purchasing vs price-based) • Commercial terms • Safety culture • Delivery & quality sensitivity • Technical expertise & knowledge • High performance standards and reward performance Define Ideal Customer Profile Psychographic Characteristics © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 10. 10 • How are purchasing decisions made? • Centralized vs decentralized procurement • Purchasing urgency or readiness • Product & service features, needs & preferences • Technology fit (Innovative / Early adopters of technology) • Risk adversity Define Ideal Customer Profile Behavioral Characteristics © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 11. Build Customer Segmentation Model 11 1. Select 5-8 criteria for your Ideal Customer Profile 2. Score each customer against each criteria 3. Develop composite score and rank customers 4. Group potential customers into tier 1, tier 2 & tier 3 accounts Customer Criteria1 Criteria2 Criteria3 Criteria4 Criteria5 Composite Rank Segment Customer 1 95 90 95 85 95 92 1 Tier 1 Customer 2 95 85 90 90 90 90 2 Tier 1 Customer 3 90 85 85 90 85 87 3 Tier 1 Customer 4 85 90 85 85 80 85 4 Tier 2 Customer 5 90 85 80 85 75 83 5 Tier 2 Customer 6 85 80 80 85 80 82 6 Tier 2 Customer 7 80 80 75 70 75 76 7 Tier 3 © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 12. 12 Silver Accounts Gold Accounts Platinum Accounts Prioritize accounts & develop summary Segment Tier Account Type Quantity Revenue Platinum Tier 1 Key Accounts 15 ~55% Gold Tier 2 Key Accounts 45 ~35% Silver Tier 3 Non-Key Accounts >600 ~10% Build Customer Segmentation Model •Defend & expand relationship •Receive the most resources •Develop, strengthen relationship •Receive limited resources •Selectively defend or replace •Receive minimal resources Silver Non-Key Account Selectively Defend or Replace Gold Key Account Develop into Tier 1 Strengthen Relationship Gold Key Account Develop into Tier 1 Strengthen Relationship Platinum Key Account Develop, Defend Expand Relationship Value to Supplier ValuetoCustomer Low Low High High © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 13. Define Service Focus by Segment 13 Determine level of focus & effort for each segment Coverage by Segment Platinum Gold Silver Field Sales / Technical Sales Yes Yes Maybe Regional Account Managers Yes Yes Maybe Global Account Manager Yes Maybe No Account Profile Yes Maybe No Account Strategies Yes Maybe No Opportunity Action Plans Yes Maybe No Call Plans Yes Maybe No Account Team Meetings Yes No No Executive Sponsor Yes No No Customer Review of KPIs Maybe No No Dedicated Operations Personnel Maybe No No © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 14. Assign Resources to Key Accounts 14 Customer Criteria1 Criteria2 Criteria3 Criteria4 Criteria5 Composite Rank Segment Account Manager Customer 1 95 90 95 85 95 92 1 Platinum Joe Hunter Customer 2 95 85 90 90 90 90 2 Platinum Sara Closer Customer 3 90 85 85 90 85 87 3 Platinum Tom Challenger Customer 4 85 90 85 85 80 85 4 Gold Sara Closer Customer 5 90 85 80 85 75 83 5 Gold Tom Challenger Customer 6 85 80 80 85 80 82 6 Gold Joe Hunter Customer 7 80 80 75 70 75 76 7 Silver © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 15. Communicate Segmentation Plan 15 • First communicate to sales team: Why you need the sales team to focus on the highest value customers The benefits of customer segmentation & identifying key accounts Ideal customer criteria & profile Customer segmentation model & summary Account assignments Service focus by segment • Then communicate to rest of internal company stakeholders © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.
- 16. What We Do 16 Sales Performance Tiger Consulting enhances sales performance by performing a comprehensive gap analysis and implementing best practices in the following areas: • Sales Operations • Customer Engagement • Opportunity Management • Sales Talent Management Strategic Marketing Tiger Consulting develops and implements strategic marketing plans to maximize company performance and growth in the following areas: • Strategic Planning • Pricing and Financial Performance • Product and Service Portfolio Strategy • Branding Strategy Schedule a consultation. Tiger Consulting 713-249-4604 www.tiger-llc.com mhaubert@tiger-llc.com Do you need to segment your customer base and focus your sales team on the right customers? We have grown key account revenue by 240% and overall company revenue by 85% in 2 years through strategic account management and sales and marketing transformation. © 2017 Tiger Sales and Marketing, LLC dba Tiger Consulting. All rights reserved.