I’m a regular buyer from a popular high street brand. Every month, I spend probably £30-£50 with them using my store card. My husband has a store card too but he can go many months without buying anything.
The trouble is, he gets lots of discount vouchers to encourage him to buy more. Little do the high street brand know that I live in the same house with him. I don’t get vouchers, they think I don’t need them because I buy without being nudged. It kind of annoyed me so I buy less from them, and alas, discount vouchers addressed to me have started arriving!
As a marketing professional, I have a good idea what this brand has done. They’ve used customer segmentation techniques to divide their market to allow them to push more sales to potential high-value customers and inadvertently ignored already high-value customers. I don’t know if they’ve taken the right approach as I don’t have enough information about their customer base.
Using customer loyalty and lifetime value, here are four types of customers you will find in your growing business and some ideas on how to engage them:
Type 1 Customers: Supporter Sam
The Supporter champions your product. He is a current or previous customer who had good experiences working with your company or product. They are loyal and will tell their peers about you, recommending you whenever possible.
However, they often have a low lifetime value due to tight budgets or slow sales cycles. They might not buy regularly or might not renew their services with you at the end of a period. But if you have treated them well, they could be your biggest champions. For instance, these customers are a rich source of case studies and testimonials.
Keep these customers informed of new products and services. Invite them to customer update meetings, add them to your email list, your advisory board and support them as they use your products/services even if they might not buy more in the short term.
Type 2 Customers: Partner Patsy
Partners love your company and your product. They are also a high-value customer that provide your business with many opportunities for upselling.
These customers are likely to be medium-sized organisations that have grown with your business. They are unlikely to have a centralised structure so decisions are made quickly and locally. This is your dream customer because they not only buy but they also recommend you to their peers.
Give these customers a single focal point for their support needs e.g. a dedicated account manager or customer support executive. Officially ask for their input to your product roadmap. These customers will be demanding if they are spending a lot with you. So keep them in the loop on any changes to your business or service in advance. Remember that the main champion of your product/service within their business needs to keep advocating for you so give he or she as much help as possible to do that.
Type 3 Customers: Celebrity Charlie
Celebrity customers are a tricky group to manage. This is because they are high-value but they are not loyal customers. They sometimes buy on impulse or they buy because there were no other options.
However, they will not easily agree to give you testimonials. A case study is almost impossible to get from this customer, no matter how good your product or service is.
Ensure that you provide the best customer experience possible throughout the buying process but don’t spend too much overhead on keeping them unless you get an inkling that they are potentially Partner Patsys. Provide existing use cases and case studies to highlight your credibility with this customer. Many Celebrity Charlies end up being Partner Patsys if you can provide a great customer experience, support and a differentiated value proposition.
Type 4 Customers: Ex Eric a.k.a The Ex
We all know these types of customers. And they are great to have in the business for a time but they tend to cost more than they bring in.
They are usually low-value, meaning that they don’t spend much with you and their long-term financial outlook suggests that they will not be in a position to increase their spending. They are not loyal either, which makes them different from Supporter Sam. Ex Erics will usually ask for a significant discount and will be motivated more by price than value.
Keep Ex Eric happy by bringing him on board with a discounted offer. Then show him the value you can bring his business in terms of extra perks and support. Avoid spending on unnecessary expenses to acquire this client because customer lifetime value to customer acquisition costs will be very low, and hence unsustainable. For instance, don’t pay for sales people to fly to another country to meet this customer. Offer a video conference instead.
Any there any other types of customers that you can think of? Tell us in the comments.
All ilustrations by Yekemi Otaru
Feature photo credit: iStock/Getty Images
For a recent Forrester report on the B2B digital transformation, the team interviewed senior execs from global corporation giants GE, IBM and Cisco Systems. The report highlights key themes arising from the move to align sales teams with the new reality of the digital world.
Why B2B Digital Transformation?
B2B digital transformation is driven from the buyer’s side as companies seek to attract digital buyers. Previous articles suggest that the root cause of sales and marketing misalignment is a lack of understanding of the buyer. Some practitioners explain that closer alignment between sales and marketing could even shorten sales cycles.
Therefore, global leaders like GE, Cisco and IBM have taken steps to reevaluate sales and marketing strategies and to enable new ways of empowering direct sales teams. Part of the reevaluation is a digital transformation. According to the Forrester report, key areas of best practices are experimentation, collaboration and innovation. Similar practices apply to any change management programme including social media and technology adoption.
In this blog post, I will summarise the three case studies: GE, Cisco and IBM to draw out key insights.
Cisco: B2B Digital Transformation through Collaborative Innovation
Cisco aims to tie innovation to business outcomes and to de-fragment pockets of innovation throughout the business. The goals are:
- Meet customers where they are
- Reach new markets more efficiently
- Give sales teams more time for actual selling activities
Focusing on innovation and collaboration, Cisco executed its B2B digital transformation as follows:
- They built and piloted new tools, managing the innovation from incubation to scale. The new tools were based on increased efficiency and higher quality interactions with potential and existing buyers.
- They established collaboration and shared goals between sales and marketing. For instance, they paired marketing’s sentiment data with sales data. These create insights that tie to opportunities for the organisation.
GE: B2B Digital Transformation through Centralised Innovation
GE is a complex, matrix organisation with several products being sold across different divisions. Therefore, the emphasis for the industrial giant are:
- Centralise new technologies
- Form new collaboration partnerships across the divisions
- Reduce sales cycles by 50%
Some of the positive benefits of executing the initiative were that:
- Centralising enables scaling of technology. For instance, it allows the reuse and recycling of successful tools and processes. It also provides a 360 degree view of interactions at all levels across the organisation, hence increasing collaboration on opportunities.
- Collaboration enables sales to respond to customers 50% faster. For instance, GE built an app to reduce time that sales teams spend addressing forecast questions. Salespeople can input information on the fly through voice text solutions. Overall, GE’s sales teams are spending more time on customer-facing selling activities.
IBM: B2B Digital Transformation through Data-Driven Sales Innovation
IBM saw significant incremental sales revenue from putting data scientists in sales teams rather than at corporate level. The success from leveraging data science can be attributed to:
- Making data scientists part of the sales team. The organisation developed deeper understanding of buyers due to a more scientific approach. For instance, salespeople could differentiate between a motivated buyer and a latent buyer. Also, the teams could more accurately assign sales cycles and measure the impact of new tools and tactics.
- Identify pockets of innovation in the sales team then empower salespeople who already have digital affinity to test new approaches. This drives a culture of innovation starting with early adopters.
- Seek out tools that increase efficiency in the sales team, enable more personalised engagement and provide rich buyer/seller/relationship analytics.
- Have at least one data scientist that aligns with sales.
To read the full report, contact Mary Shea, PhD or visit Forrester.com
Feature Photo by Joshua Earle on Unsplash
Customer segmentation models are a great way to develop an efficient sales approach in a B2B context. It is valuable when you have a small sales team responsible for a wide customer base. Strategic marketing techniques could be an insightful lens when you need every effort to count. Here’s an example of a customer segmentation model. I have changed the name of the client and their customers as well as the data to retain anonymity.
**Robots Inc. has a small sales team operating globally in the B2B marketplace. They try to go after every lead within existing customers. But conversion rates are low; the team is overstretched.
To help the sales team identify high-value leads. And to create an effective approach for each customer segment.
I created customer groups based on data that reflected:
Strength of the relationship between Robots Inc and the customer. Are they passive, loyal or detractors?
Past revenue from the customer over the past 12 months. How much business have they done with Robots Inc. in the recent past?
Potential revenue from the customer over the next 5 years. What is the likely spend on robots and associated services with any vendor in the longer term?
Here is a representation of the customer data.
I identified four main customer segments within Robots Inc’s existing customer database. Let’s discuss the graph to explain how I achieved customer segmentation.
The Y-axis represents the potential future value of each business customer. And the X-axis is the perceived loyalty of the customer to the Robots Inc. brand. Bubble size represents how much business the customer has done with Robots Inc over the last 12 months.
To achieve a four-way segmentation, I worked with sales, commercial and product teams to develop a better understanding of each customer and what we consider to be high vs low customer value. For instance, let’s assume £40,000 over five years is the the cut-off between high and low customer value. A negative number on X-axis represents customers that are passive, or detractors. A positive number is a promoter and a more loyal customer.
Each of the four segments requires a different approach for customer acquisition, retention and support. The top right customers are your stars. They are loyal and are high value. Some of them may not have spent a lot with you in the past but you want to keep them close and happy going forward. Let’s call them “Partners”, for example, Electronics Ltd.
Top left customers are not loyal but they are high value. You want them to do more business with you. Look out for customers who are not happy (negative loyalty) but have spent significantly with you in the past. You might be on the verge of losing them. Consider what customer support they have been getting. Perhaps it’s time to improve that relationship. Let’s call them “Celebrities”, for example, Vintage Conglomerates and Plastics-X Ltd. Here’s a summary of the segments.
Using this, Robots Inc adopted a set of sales and marketing approaches for each segment. For instance, “Celebrities” require a strong acquisition strategy if they are not doing a lot of business with you already. This might include content marketing, case studies, testimonials, attending relevant trade shows and speaking engagements for visible thought leadership. Robots Inc might keep “Partners” close, providing ongoing support, account management and inclusion in product development. “Supporters” could be powerful in providing referrals and case studies from past projects even thought their future value is low. This low value could be for economic reasons e.g. low oil price so be careful that you don’t discard them over it.
“The Exes” are usually transactional. You might want to conserve your efforts with them. For instance, don’t send an employee from France to Australia to visit this customer if you can avoid it.
New Customer Segmentation
New customers are automatically on the left side of the graph. This is a starting point as your sales team begin to better distinguish “Celebrities” from “The Exes”. Over time, new customers should ideally move to the right.
If you think that this kind of analysis could be valuable insight for your business, don’t hesitate to contact us.
**Robots Inc. is a fictional company. Any similarities with an existing company is purely coincidental. Different kinds of variables could be applied depending on data availability, business goals and the required complexity of the model