Is Your Buyer Segmentation All Wrong?

Posted on July 11, 2016

I’m going to begin this post with a single assumption: you want to outperform your competitors in terms of sales revenue.

If you are a marketer, this means developing a marketing and segmentation strategy for delivering more, better, and/or higher value leads to your Sales organization than your competitors. But wait a moment, you’re likely segmenting your markets and prospects just like your competitors — so how are you going to gain an advantage? Perhaps it’s time to rethink traditional segmentation approaches.

Traditional segmentation often uses attributes such as demographics and firmographics to group prospects and customers for sales targeting. The recent introduction of predictive analytics tools now enables these traditional attributes to be combined with social and intent indicators to search for prospects that fit a desired profile. But if these same techniques and tools are available to all of your competitors — where’s the competitive advantage?

The Demographic & Firmographic Trap

Applying traditional segmentation attributes such as revenue size, geography, vertical industry, installed technology platforms, etc. can lead you to the same conclusions as your competitors — thus, the same market approach. Perhaps an even bigger concern is the blind spots in terms of how companies are grouped for targeting and engagement.

For instance, a $20MM software company might struggle with the same channel partner engagement issues that a $1B industrial components company does and your company might offer a novel approach for increasing partner engagement to increase revenue. If you were to segment these two prospective companies by vertical industry and/or revenue strata you’d place them in two separate segments despite sharing the same business challenge for which your company provides unique insight (and solutions). The result is an artificial separation in how the two companies are viewed despite having the same core business challenge. Sure, you would contextually personalize messaging and campaign tactics differently for software versus industrial components — but the core value propositions and B2B buyer dynamics are similar.

What if you looked across vertical industries and began to group companies by shared business challenges that your company can address? What if you then developed a unique set of insights to share with each segment to differentiate your company and lead buyers back to your solutions in a way that enabled you to outsell your competitors? Could this provide a unique way to engage more leads and improve sales results?

Challenger Selling and its Implications to Segmentation

For those familiar with The Challenger Sale model, it focuses on the idea that sales reps (thus companies) that outperform their peers in long, complex selling environments provide customers with surprising insights about how they can save or make money. What makes Challenger sales reps unique is their ability to shed new light on existing business problems so that buyers think about their business in a different way. In so doing, the sales person differentiates themselves from competitors and increases their chances of closing the sale (Challengers are 289% more productive).

So instead of starting with demographic and firmographic attributes as a baseline for segmentation, you might think about pivoting to the unique insights your company can offer buyers regarding their business challenges and how your company can help them make money or save money. This could include sales processes, operations processes, customer experience, or other financial impact areas. The key is to categorize the different unique insights you can deliver that align with your solutions to those business challenges. Next, think about the companies that could benefit from these insights. They might share similar business models, growth maturity curve, customer dynamics, or otherwise. At this point you are ready to think about applying predictive analytics to identify/match additional prospects that fit your targets.

Where to Start

Let’s consider subscriber businesses. The key to subscriber business models is balancing new revenue with churn. Churn is typically defined as customers that terminate or fail to renew their subscription. As an example, if sales revenue grows by 7% but churn is 3% then net revenue growth is only 4%. Churn in many industries can be a killer to profitability (high support and win-back costs) as well as negative impact to revenue growth. Many industries share this business model including software, media, professional services, insurance and communications to name a few.

Let’s suppose that your company has a unique POV on how to tackle churn. Perhaps your company believes that pre-emptive identification of “at risk” customers is critical along with proactive customer experience remediation that restores customer confidence and results in an average churn reduction of 25%. Acting like a sales Challenger, your company not only shares this unique POV but outlines what best practices look like to achieve this end state for customers.

So where do these insights come from and how are they kept current? Marketing organizations must be committed to generating these insights via needs-based segmentation, customer analysis, personalized narratives, and modular tools that stay current with the customer’s business environment.

Welcome to the “new normal” of demand generation and sales enablement.

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