4 Ways Better Market Segmentation Leads To Higher Sales

2 © 2014 PROS, Inc. All Rights Reserved. | step.pros.com 4 Ways Better Market Segmentation Leads To Higher Sales Closing more sales isn’t just about more reps, better products or lower prices. Sales needs to make sure they’re focusing their efforts on the right customers and markets. But all too often, companies have relied on rules of thumb and rudimentary statistics to shape and execute their sales strategies. As a result, too many sales negotiations are rooted in one-size-fits-all approaches or primitive segmentations that haven’t been revisited for months or even years and that overlook the dynamic nature of today’s markets. It is not uncommon for companies to create “segments”—if one could even call them that—consisting of only the barest of distinctions, such as “customers who have purchased in the past 12 months” or “prospects with more than $5 million in annual sales.” These segments might contain 20-30 percent of all sales prospects. At the same time, companies have become expert at capturing exponentially increasing piles of granular data. Applying it, however, has been another matter entirely. But lurking in that data is the ability to actually transform how businesses sell to their customers. And data science, atop a growing pile of Big Data, changes the rules. Now we can create better market segmentation and achieve better results. Imagine, instead, the ability to sift through exponentially greater data to populate 1,000 different segments that each contains a fraction of one percent of the target customer base. These segments can use dozens of different attributes and characteristics and combine them with dozens or hundreds of distinct offers, opportunities, promotions and prices. It can be as specific as: “customers who have purchased any of our five newest SKUs within the past six months, who have also called our help line, submitted a rebate claim, displayed a positive reading in social-media sentiment measures, are in the healthcare industry, and have revenues between $10-20 million.” 3 © 2014 PROS, Inc. All Rights Reserved. | step.pros.com 4 Ways Better Market Segmentation Leads To Higher Sales Suddenly, we have a much clearer picture of the market and we can personalize sales messaging and negotiations, tailoring them to the needs and preferences of tiny subsets of buyers. It’s time to bring data science to sales and, in so doing, prove or disprove the unchallenged assumptions and worn- out hunches that have governed our sales strategies for too long. So what can you get from abandoning legacy market segmentations and targeting sales strategies based on the specific needs of a well-defined segment of the market? 1. Personalized Offers Improve Win Rates: All too often, you employ the same tactics for every client and every market. The blanket mentality, one-size-fits-all approach that every customer’s pain point is the same doesn’t make sense. That’s because, for example, if a product is priced at $5 for one client and you win that sale, you may not win additional sales if you continue to charge $5 for that product with every other customer. But even if you continue to win sales, you may be winning at a price that is sacrificing a lot of value. For example, that same $5 sale may be worth $10 to another customer. You act intuitively when selling instead of approaching sales armed with quality data. You typically sell based on the assumption that what worked for customer A is going to work for customer B. But the problem is that customer A often has different needs than customer B. Although each customer may be asking for the same product or the same service, the value each customer derives from the product or service may actually be quite different. So making the same offering — even if it’s the same product — to customers A and B doesn’t make sense. The problem is that they may be producing sales, but you’re likely not matching what the customer wants with what you are offering. The result is win rates that are lower than you could achieve. The key is to determine a more accurate offer (i.e product and price) for each individual customer, so you know that you’re sending a personalized offer that’s likely to get you the best results, improving the likelihood of closing the sale. 4 © 2014 PROS, Inc. All Rights Reserved. | step.pros.com 4 Ways Better Market Segmentation Leads To Higher Sales 2. Targeted Pricing Drives Better Margins: The number of variables that go into pricing accounts is too complex for most organizations to manage effectively. A given group of customers or specific market is going to care about the pricing details for a handful of products. For example, for a medical distributor, cardiologists always want to know they’re getting the best price on EKG machines; general practitioners always want to know they’re getting the best price on latex gloves. These may be simplified examples but with millions of customer and product combinations, you’re not going to be able to know how every customer values every one of your products. You might be able to squeeze another $500,000 in sales from your largest customer, but you may prefer to achieve the same result by changing your prices by just a few pennies on the majority of your accounts. Or you could do both. At the end of the day, the impact on your business could be the same. You need the ability to optimize all your accounts instead of just focusing on a handful of large ones. This improves your margins across the board and secures your continuing revenue growth. 3. Better Offers Lead To Better Customer Loyalty: With the Harvard Business Review reporting that companies lose half of their customers every five years, customer retention is a critical component of any sales effort. Instead of just closing a sale, you have to ensure that customers feel they are gaining value from your product or service over an extended period of time. Building these long-term relationships helps you capitalize on cross-selling opportunities and look for ways to develop products internally that satisfy customers’ needs. By understanding market segmentation, you can quickly identify opportunities to sell a “hot” product into the right market segment based on other customer’s purchasing patterns. 5 © 2014 PROS, Inc. All Rights Reserved. | step.pros.com 4 Ways Better Market Segmentation Leads To Higher Sales Best-in-class organizations organize customer data and recognize these cross-selling opportunities. Ultimately, you should strive to be more than a trusted adviser; you want to be seen as a problem-solver that helps customers become even more successful. 4. Segment Metrics And Track Performance Where It Matters To be truly successful, you need hard data to see what’s working in your sales strategy. While so much of sales is intuitive, analytics helps remove “gut feelings” and introduces metrics that give you concrete information to work with. You need to get the data measure and improve win rates. Pricing optimization software allows you to segment your customers by factors such as what customers are buying, what offers are winning and what pricing structures make the most sense. For example, by segmenting customers you’re able to see which are responding to platinum-level service agreements versus silver or bronze levels. By integrating sales and marketing effectiveness software with marketing automation, you’re able to begin tracking leads from generation to outcome. Marketing automation looks at the details of visitors to a website, for instance, tracking how many times someone visited, what 6 © 2014 PROS, Inc. All Rights Reserved. | step.pros.com 4 Ways Better Market Segmentation Leads To Higher Sales company that visitor is with, whether they signed up for a free trial or attended a seminar, and more. Armed with this information, you’ll be able to see what’s working with clients and what isn’t, allowing for better targeted sales efforts and higher win rates. Now is the time to analyze and segment your customers. The time you spend is going to pay off with shorter sales cycles, faster movement through the sales pipeline – and most importantly – higher margins and higher close rates. Personalization and customization due to better market segmentation go hand-in-hand to drive unprecedented gains in sales. Instead of one or two attributes to define four or five segments, we can use 10-12 attributes to create tens of thousands of segments. By subsequently applying data science, we can match optimized and personalized offers to the segments that are most likely to purchase sooner. What is your plan to address the next generation of market segmentation to drive sales growth for your company? Think others may be interested? Share this eBook: