Driving growth via customer centricity: developing market segmentation

by | 19 Jan 2020 | Business transformation

Organisations have the opportunity to grow by becoming more customer-centric says Karen Thomas-Bland, founder at Seven, a business transformation consultancy based in London. This often involves aligning their operating model around the customer to drive an effective market strategy. A key step in designing a customer-centric operating model is to analyse customers buying behaviour via market segmentation.

This article examines the approach to developing market segmentation for a global consulting and systems integration organisation and the lessons learned.

Background and objective

Since inception the organisation had built a large bank of indirect and direct customers, with a geographic footprint in over 20 countries worldwide. As the organisation continued to grow in size, leadership recognised the need to adopt a more systematic and global ‘go-to-market’ approach starting with a market segmentation, which formed part of an overall approach to improve sales effectiveness. Customer segmentation was needed to help identify, develop and manage business opportunities around the world in the most effective way.

Business case

In 2010 and 2011, approximately 240 customer accounts drove 80% of global sales but the organisation was present each year in over 1200 customer accounts. Countries adopted their own approach to selecting which accounts they wanted to focus on and there was no consistent segment and targeting strategy.

A significant opportunity existed to improve growth and maximise efficiency by focusing on a smaller set of managed accounts and pruning the long tail of accounts, which were not as profitable and had limited future potential.

By improving concentration and ‘doing more with less’, the organisation was positioning itself to be able to:

  • Shift towards highest potential accounts.
  • Build deeper relationships with top customers, at the right level in the customer organisation.
  • Extend service footprint by cross-selling and upselling.
  • Focus sales resources effectively to maximise returns.
  • Ultimately, take a greater share of client wallet.

Approach taken

The approach to segmentation was undertaken in four key stages:

  • Creating a database of historical customer performance.
  • Integration of ‘future potential’ into customer data set.
  • Categorisation into segments and optimisation of data.
  • Embedding into go-to-market strategy.

Stage 1: creating a database of historical customer performance

A database was built to capture the components outlined in the grey panel below. The aim of this dataset was to understand the current customer base’s buying trends and behaviour to date and to identify new, potential prospects.

Financial performance
Sales, revenue, pipeline, backlog and profit data over the least three financial years.

Market channel
Direct vs indirect.

Geographic presence
Geographies present in which are buying centres (able to make purchase decisions on company behalf).

Industry or industries they operate in.

Service lines sold.

Customer satisfaction and win/loss
Customer satisfaction with work delivered to date and percentage or number of deals won.

Where the customer has signalled they are willing to be a referee.

Customer data
Company HQ location(s), market footprint, company annual revenue and estimated IT spend.

Stage 2: integration of ‘future potential’

Measures of future potential were integrated into the historical performance data. Account future potential was identified via workshops with each market around the globe. Early involvement and engagement of the field ensured early adoption of the segmentation approach. Components of future potential are defined in the grey panel below.

Buying centre
Buying centre/scale and infrastructure in country to support sales.

Account potential
Programme of work for customer to buy and clear differentiated value proposition.

Client potential
Maturity to support a joint relationship and signals of transformation.

Client business and opportunities
Intimate understanding of client business and experience matches client pain points and opportunities.

Client satisfaction
Track record of successful delivery and referenceable work.

Executive client relationships
Breadth of relationships and a commitment to work together.

Competitive intensity
Sole sourcing deals are typical, limited competitor penetration, or clear plan to win.

Ease of doing business, brand permission to expand from start point.

Coverage and competence
Having the right talent to develop the account.

Stage 3: categorisation into segments and optimising data

Historical and future performance metrics were then integrated into five account segments, four for current customers and one for new prospect ‘white space’ customers. Each segment was clearly defined and had a set of common characteristics applicable across emerging and mature markets. Segments were distinct from each other to support driving greater differentiation in how customer segments are sold and marketed too.

The segmentation data set was put into a business intelligent environment to enable real time information captured on account performance to drive decision making. Going forward the organisation will use predictive analytics to understand/respond to customer buying behavior to identify greatest growth opportunities and develop customised sales, marketing and communications programs differentiated by segment to enhance the overall customer experience.

Stage 4: embedding into go-to-market strategy

Market segmentation is central for forming the very foundation of the organisations go-to-market strategy. The approach is now the cornerstone of business planning in all areas of the organisation and is being used to determine which markets have the greatest expansion opportunities with the current customer base, which markets can accelerate footprint in and develop net new clients, organically or through acquisition, and which markets have the greatest volatility, where need to be game-changing.

Per segment, customer experience roadmaps were created which account and segment-based sales and marketing strategies were built around, including how to transition between segments. The benefit of this approach was to focus sales and marketing spend on where greatest return could be gained.

Lessons learned

  • Define upfront how the segmentation is going to be used and embed it early into the organisational and operational strategy.
  • Utilise top down ‘data driven’ and bottom up ‘potential assessment’ to drive segment definitions and clearly differentiate between segments.
  • Utilise future potential assessments by those closest to the customer and use this approach to start the change management process to get buy-in.
  • Use the segmentation to identify net new customers who meet the target buyer profile to launch a white space attack strategy.

The segmentation so far is uniting everyone behind a single approach and a common language for growing the organisation and understanding how to realise the best results for customers. It is also guiding discussions with partners as they are integrated in our effort to give the best possible service to our biggest accounts. Finally, it is allowing the development of industry competencies and account groupings that will help outperform the competition and drive market leadership.

Based in London and with over 24 years’ global experience, Karen Thomas-Bland is often cited as one of the top business transformation consultants and coaches in the world. She is a trusted advisor to boards, executive teams and investors, creating sustainable, long-term value for FTSE/Fortune businesses and PE funds. She writes for many publications including The Times, FT, Association of MBAs and Management Today.