|
Customer Segmentation Strategies
IMR, Sept. 28, 1998
One distributor who has found customer segmentation to be an invaluable way to focus on the most profitable customers and grow his business is Bill Giblin, president of Blue Heron Business Systems, located near Baltimore. He has worked in other firms that did not use segmentation strategies. "You were thrown to the wolves and did the best that you could," says Giblin. When he set up his own firm three years ago, he was determined to implement a customer segmentation strategy for his sales force to follow.
According to Giblin, the first step is researching directories of businesses in a local business library. Giblin's segmentation strategy is based on type of business (manufacturers or service-oriented businesses) and sales volume, which he subdivides into three levels: "key" or "A" accounts, midrange "B" accounts and "C" accounts. Key accounts are further segmented by type of product bought, such as forms, ad specialty products or commercial printing services. The goal is to cross-sell accounts that are heavily in one type of business by using a team approach to selling. Each of the four sales reps' goals is to target a number of key accounts per year. A new sales rep will receive intensive sales training, including the segmentation strategy, in the first weeks of employment. Training continues for a year.
"You really need to have a focused plan on what you're doing and how you're going to do it," says Giblin. "When that's put in place and everybody understands what it is, there's less confusion about the goals." Giblin thinks customer segmentation will help his sales almost double in the next fiscal year. "It's gotten us work that might have passed us by," he says.
Another approach is used by Centro Information Systems, a distributorship in Bend, Ore. Centro has a "Business Partner" program, which has three basic criteria. The account must:
- be a compatible business relationship
- pay bills within 30 days
- purchase a minimum amount each year
If an account meets these criteria, it is designated a Centro Business Partner. President Darrel Hansen, CDC, and a former DMIA president, says these accounts are then entitled to certain "perks," including same-day delivery without rush charges, a quarterly newsletter and a half-day meeting annually with other Business Partners and Centro staff. The meeting features a guest speaker, a question-and-answer session and lunch. "It's a whole package that goes together under the umbrella of what we call our Business Partner program," says Hansen.
The program has been in place for six years. Each year, about 25 out of 500 active accounts qualify as Business Partners. Yet, these Business Partner clients typically account for two-thirds of the firm's business. "It's all part of building a closer relationship with the customer," Hansen says. "Anything we can do to enhance that relationship is worth doing. This program puts us in a much closer, long-term relationship," says Hansen. "If it didn't work, we wouldn't do it."