Knowledge Is Power: How You Can Profit
From Customer Segmentation
Think getting new customers is the key to increasing your bottom-line
profit? It makes sense and it is a very logical assumption. This belief is
familiar to all technology companies, from voice board manufacturers to
computer telephony applications developers. There is, however, an alternative that costs you less money and
takes less time: getting to know your existing customers better.
Selling people what they want is easy. Selling people you already know
what they want is even easier. To sell more to your current clients, you
have to group them together based on their needs and their
characteristics. Called customer segmentation, these groupings allow you to access a
lucrative revenue stream. If you do it right, it will directly increase
your cash flow.
Customer segmentation is the process of collecting as much data as you
can on each client and then looking for patterns. The patterns reveal tell-tale characteristics of customers who buy additional products or
services after purchasing another related item. And, the better you know
your current clientele, the better you'll be able to attract and target
those new customers you sought in the first place.
Think. Who are your customers? Not just their names -- what are their
personal preferences and buying patterns? Most people don't relate to
their customers beyond their contact information and their immediate
product purchases. You might want to know other products and services that
they buy and from whom. What other companies do they trust and associate
with? Who are you customers' customers? If they are buying a CT server,
for example, they are highly likely to be in the market for software integration
services or maybe even voice portal capabilities.
Look for trends or challenges within specific industries where you can
assist your clients in addressing them. In the computer telephony industry
for example, Alliance Systems
did not grow to be a successful corporation because it simply sold
"hardware." It grew exponentially because it recognized its
customers' growing desire for industrial-grade CT servers, along with the
industry trends for a turnkey communication server solution.
At Daedalian Systems Group, Judy
Vye, director of business development, believes in customer segmentation.
This IT services provider assists companies with their
network computer systems to track customer and internal corporate
information. She states that they quickly recognized the higher "cost
of getting a customer vs. the cost of keeping a customer."
Daedalian consults other companies and it practices what it preaches.
They have identified key customer segments by customer employee size. Most
are in the mid-market from $5 million or larger in revenues and have
greater representation from the financial services and publishing
Vye discovered that when customers needed a software tool for
customer relationship management (CRM) and customer segmentation,
Daedalian often installed GoldMine
Front Office software. Following that, client companies "frequently had
additional IT needs in other areas where Daedalian could help."
After further analysis using customer segmentation, Vye discovered
that, "Although GoldMine was responsible for a relatively small
amount of their initial sales revenue -- the follow-up sales were
spectacular." The additional IT requirements of their customers were
enormous. In fact, Daedalian earned up to ten times the sales revenue from
their clients after the original CRM software purchase. Without customer
segmentation and financial tracking, they might have missed many
When asked why customer segmentation is important, Vye declared,
"Once you've established the relationship within a company, that's
the expensive part. Then even though you may be dealing with other people
or departments within the same company, you make more sales because you're
already a trusted supplier."
Customer segmentation benefits companies in more ways than one, as it also creates
increased productivity. "The sales curve is quicker," commented
Vye. "You don't have to prove yourself again and again. The sales
cycle becomes more efficient."
In addition, customer segmentation gives you feedback from the field to
develop new products and services at reduced investment levels. By asking
and being aware of your current customers' needs, you increase your success
rate for selling them in the future. Customers tell you what they are thinking
of buying. You build it or program it, and deliver it to them. No secrets
or tricks here -- just good, old-fashioned listening. This new product
formulation increases sales and gives you another "door-opener"
for new prospects in similar industry verticals.
Knowing as much as you can about your customers leads to many financial
and productivity benefits. Analyzing and developing your strategic plans
from real client information fosters many business advantages:
- You improve your relationship with clients, which leads to greater
- You decrease your marketing costs by better qualifying prospects, and
this enables you to only spend time and money on high-quality prospects.
- You decrease the cost of sales by reducing the time involved.
- You increase your frequency of sales through regular contact.
- Your referral rate is likely to increase when you stay close to your
- The information allows you to gather real-time market research and
do R&D at lower investment levels for new offerings.
- You increase the profitability you gain from each of your customers.
If you're looking for significant growth, you should start asking, How can
I gather customer information and provide company-wide
access to it? What specific information should I look for? What CRM
software systems or technology exists to do this?" There are
many answers. Regardless of what your specific responses are to those
questions, you can reap the profits from customer
segmentation today, just by focusing on the grouping process and recognizing its
Martin Wales is a business development specialist and the eFounder and Chief Catcher at Customer
He welcomes your e-mail at [email protected].
He is a technology-marketing specialist, speaker, and facilitator focused
on maximum results with minimal risk using your existing resources.