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.

Problem

**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.

Objective

To help the sales team identify high-value leads. And to create an effective approach for each customer segment.

Solution

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?
  • Results

    Here is a representation of the customer data.
    Example of customer segmentation by YO! Marketing
    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.

    Recommendations

    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.

    Example of customer 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

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