I was recently sent a survey from Aberdeen Research on ‘sales effectiveness’, and was interested to note the first question. It was interesting for 2 reasons. The first is that you can tell a lot about a survey from the questions that are asked of course. After reading the (often thought provoking) questions, one does get a sense of where the survey is leading. The second reason is that I have worked with clients who think they have this notion covered, but really they have not put enough thought into it. The survey question asked, and the notion I want to discuss, is that of “customer segmentation”.
It is by no means a new idea. The first question asked by Aberdeen’s survey is ‘to what degree does your company segment its customers?’ This implies that segmentation is a cornerstone of sales effectiveness, and indeed many of the best businesses in the world have adopted market segmentation for many years. But even this notion has developed in recent years and been teased into another layer of thought. According to an article by Jill Griffin for Cisco Systems, traditional segmentation focuses on identifying customer groups based on demographics and attributes such as attitude and psychological profiles. Value-based segmentation, on the other hand, looks at groups of customers in terms of the revenue they generate and the costs of establishing and maintaining relationships with them.
So if customer or market segmentation has been around for years, and is even further developed into value based segmentation, how is it that some companies do not adopt this approach? I think the answer lies in poor leadership. That poverty of leadership often shows up as an over reliance on ‘customer service’ as a way to generate sales. This notion is that if you service a customer well (i.e. your firm does their best to deliver what they said they would for the price quoted), then that customer will surely be satisfied and will refer you to other similar customers.
While this notion may seem like a sensible approach, it does not really win you new sales. It may not even be enough to keep this customer. If your business sells B2B, then it needs to know what kinds of customers you are serving and what value they are to you. There is an argument that a good business fires its bottom 10% of customers every year. This may or may not be a wise choice. But it does open the management conversation to asking who are your best customers, what do they really need from you, why are they buying from you and not your competition. If your management team has not spent time thinking about these questions and developed even a rudimentary strategy for handling segments, then you may hear them talk about customer service more often than you should. Sales effectiveness starts with thinking about your best customers, and develops into a segmentation strategy from there.