Customer Segmentation – Where to Start?

Customer segmentation is a basic tool that, if done correctly, allows you to effectively manage your sales processes. When running B2B sales it is especially important to define, what types of clients are you looking for? Establishing key parameters will help you identify the value of any given customer and properly distribute your sales team efforts, in order to achieve the best results.

What is customer segmentation?

Customer segmentation is a practice of diagnosing who your ideal customers are, and how to differentiate them from all of the others. If you look closely at your business and current customer base, you will quickly discover, that your clients are not exactly identical.

What makes a perfect customer (for you and your business) is a set of particular characteristics. For example, you can analyse whether a deal with this particular client means a one-off project or a long-term cooperation. Does this customer have a potential for purchasing more of your products or services or just the one?  Will the cooperation with this customer result in valuable recommendations or an opportunity to cooperate with his or her business partners? And what is the purchasing history of this customer? How many deals have been closed and how many negotiations are currently open?

When you start working with the CRM system, segmentation is one of the first and most important steps to take. Done correctly, it will help you understand what types of customers do you cater for. In order to do this right, consider for a moment who are your customers and, even more importantly – who they are not.

When describing them, try to break it down into a particular set of parameters. For example, if you operate locally, companies located in the same area will have more value to you. If you provide services that require decisions on the highest levels, make sure you are dealing with the headquarters or at least with the branch of the organization that operates autonomously and can make purchasing decisions. If you provide training, what might matter to you is a number of employees in the customer’s company.

Simply speaking, segmentation answers the question of how important any given customer is to you. When you look at the criteria mentioned above, it’s clear to see, that the value of the customer does not necessarily equal to the value of the sale, but of course, it’s the element not to be forgotten about.

How does Livespace support the process of segmentation?

Once you identify the key criteria, by which you want to divide the customers, it is very easy to transfer them into the CRM system. The process is done in two simple steps.

Step one is to establish parameters you will use to divide the customers into segments. When using the CRM system, you have an option to select some of the most frequently used parameters. However, each business is different. That’s why we made sure it is really easy to add additional parameters. When selecting parameters, you decide what is the value of any given one, and how many points will be assigned to a customer who fulfils the selected criteria.

Step two is to define the categories you want to divide your customers into, for example, Average, Good, Super, VIP.

Next, you decide how many points are needed for the customer to be assigned to each category. If you are not sure what are the correct values, you may leave the default settings. You can always come back to segmentation configuration and modify the selected criteria.

By configuring the segmentation module, your sales department, when entering a new company into the system, will have the opportunity to answer additional questions about the customer – those which were deemed important from the perspective of the segmentation process. Based on the set parameters (both defined by the salespeople, as well as those resulting from the sales history of the given customer), the system will automatically assign customers you work with to a category, helping you see where your VIP clients are.

Why do you need customer segmentation?

Segmentation done right will help you decide, which potential or existing customer you should dedicate more time to. Quite often, similar effort (defined as time and resources) is needed to acquire customers with great perspectives for the future cooperation, as it is with the ones who will complete one order and never return.

Effective management of the sales department means making sure your team is focused on their prospective clients, which first need to be found and isolated from the customer base. When working with existing customers, segmentation will help you identify the customers who, generate most profit and differentiate them from those who may seem important, but in reality, consume a lot of your time and energy for a relatively small profit.

Furthermore – knowing, which customers are most important, you can make sure you dedicate your best people to their service or acquisition.

Would you like to know more about customer segmentation and an innovative CRM system?

Visit  www.livespace.io and check us out during a free trial period.