Sales Tips & Techniques Blog

Top 3 Ways to Segment your Customers

Everyone is already familiar with the idea that different customers must be treated differently, and historically the differentiator of choice has been Account Size. Large customers often provided greater opportunity and total profit potential, and, as a consequence, they justified greater selling effort and greater allocation of resources.
This principle worked reasonably well for first 30 years as a way of allocating sales resources, however, the correlation between account size and profitability has continually become far less clear as business models and buying styles have evolved. Size is no longer a proxy for being highly profitable. So what’s the alternative?
If you believe that sales forces must create customer value, then it’s logical to ask why we continue to segment the sales effort primarily by size. Admittedly, small accounts can never justify high levels of resources, but the converse isn’t necessarily true. While some large accounts may want and value the extra benefits that a high level of selling resources can create, other may simply want a lower price. Allocating resources to these large, price driven customers can destroy value rather than create it. So how can we account for this?

The simple answer is segment your customers around their perception of value, rather than their physical size. Huthwaite’s ongoing research has identified three Customer Value Types, first published by Neil Rackham in his book ‘Rethinking the Sales Force’. By focusing on where the sales force is able to create value with the customers an organisation can effectively deploy its most talented resources, and sales people can more accurately manage their time and energy to as to maximise their impact.

The image above shows the three Customer Value Types, based on the customers’ perception of value, and matched to the relevant Selling Mode. Intrinsic, extrinsic, and strategic value customers each require a different amount of sales investment in terms of time, effort and cost. But there’s a lot more to it than that. Each requires a different sales strategy and a fundamentally different set of selling skills.

Click on each of them for further information on their characteristics and strategies to segment your customers successfully. Or use the links below:

• Intrinsic Value Customers >> Transactional Sales
• Extrinsic Value Customers >> Consultative Sales
• Strategic Value Customers >> Enterprise Sales