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Driving Smarter Customer Segmentation

customer segmentation

Effective personalization is the lifeblood of growing businesses. In fact, 83% of B2B buyers say personalization is key to decision-making. Further, 33% of customers who abandoned a business relationship last year did so because of poor personalization. Robust revenue pipelines hinge on delivering exactly the right message, content or resource to the right person, at the right time.

But for personalization to be achievable, it has to be underpinned by a comprehensive understanding of the customer journey experience and their needs. For businesses with a large and active customer community, the challenge can be herculean. It is why many businesses rely on segmentation practices, categorizing customers into digestible market segments, as a means of simplifying their engagement and personalization strategies. Segmentation has also shown to be a powerful growth driver, as a TSIA study found that strong customer segmentation strategies can lead to increases in both average customer retention rates and average customer expansion rates.

While segmentation isn’t necessarily standardized, as each industry is unique, the most common approach is a three-tiered account system, comprising of Enterprise, Mid-Market and Small Business. In this system, the Enterprise represent the smallest, yet highest value customers within the brand network. This handful of customers might make up anywhere from 40-60% of total revenue, and are often covered by the largest set of customer success representatives with multiple touch points and check-ins. Small business, meanwhile, represents the largest pool of customers with the smallest total revenue, often managed via self-service options and digital tools. Finally, there’s the Mid-Market, that is caught somewhere in between, driven by a network of channel partners via a blend of both high- and low-tech engagement.

But how can businesses leverage their segmentation strategies further to expand revenue opportunities? How can they rethink their approach and yield greater value?

Optimizing segmentation strategies often begins by reassessing the relationship between pre- and post-segmentation profiles. For example, many sales engines have deeply personalized and customized segments for the early phase in the sales relationship, but once the purchase is made and ownership switches to customer success, it doesn’t get the same treatment. Identify opportunities to replicate segmentation for a continuous, high-value relationship. Customers expect consistent, engaging experiences from the very first touch point well through purchase, adoption and potentially growth – so ensure that segmentation is supporting this.

Further, conduct an audit of how your internal customer success resources are allocated across each segment. Many businesses place a high premium on the top-tier Enterprise segment – understandable considering their contribution to the bottom line. That said, Mid-Market customers represent the greatest upsell and cross-sell opportunities over a longer period of time. For businesses, particularly during times of economic tumult, focusing on Mid-Market segmentation can cushion potential revenue loss. In fact, with the right foundation, there is tremendous opportunity for these customers to grow alongside the business.

ServiceSource Team

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ServiceSource Team