Needs Based Segmentation

These past few weeks we have spent a considerable amount of time with customers and vendors discussing segmentation, more specifically needs-based segmentation, and how this can create more profitable business relationships. At the turn of the century (feels funny writing that, by the way), I was working as a partner in a firm called “The Peppers and Rogers Group”. Don Peppers and Martha Rogers had written a series of papers and books that became the cornerstone of what then was called “One to One Marketing”. The company focused on the concept that it is more profitable to grow the customers you have than to continuously hunt for new customers.  We thought it of value to introduce some of their concepts, but tailored to the B2B Technology Resellers, Service Providers, Systems Integrators and other Westcon Partners that read this blog.

One of the key aspects is the concept of needs based segmentation. Whether your customers are B2C customers or in the case of Westcon and our customer base – B2B customers – there is a continuous requirement to understand, track and manage your business based on customer needs. Truly understanding customer needs can lead you past what they are telling you, and put you in the position to solve your customer’s problems before they occur. This creates loyalty, profits, and a torrent of innovation.

Technology distributors, resellers and other members of the industry are using these concepts today. Maybe I can articulate this with an example – One of your customers has a need for a piece of technology. Let’s oversimplify and say it’s a router. It is all very good to satisfy that need. Deliver the router at the right time, right price, etc. What is important, over and above the transaction, is to understand the drivers behind the need for a router. These needs can be strategic (the customer is actually deploying a global MPLS network) or tactical (one of their routers is end-of-life and they need a new one) or personal (the customer’s purchasing manager is trying to show her boss how she can do the transaction more efficiently than her predecessor).

The trick with needs-based-segmentation is to truly understand the underlying drivers that came together, looking like a transaction for a router.  The idea is to create a series of conversations (phone, email, surveys) that help you understand more of the key strategic, tactical and/or personal decisions that drove the router purchase, and more importantly, drove the router purchase through you.  The more information you have regarding the drivers to the decision, the closer you are to understanding the customer’s needs.  Satisfying your customer’s needs will lead to a deeper more profitable relationship.  There is a tremendous amount of research available that shows how satisfying customer needs increases profitability – it is usually collected as “loyalty”.  Any good sales person lives by the above.

Understanding and satisfying needs are one thing.  Being able to aggregate, analyze and act upon common needs across your customer base is the challenge.  The simplest, and fastest, approach is to brainstorm internally on what these needs are first, using your best sales team to build a framework of needs.  Then using the framework as a proxy, begin to categorize potential deals from your CRM system.  This is definitely the short cut approach.  The more analytical approach would be to create a series of survey’s that ask a few simple questions (Don and Martha called it “drip irrigation”) to identify what are the common, underlying motives (needs) that drove some recent transactions.  In addition, break the survey into newer vs. long-standing customers to understand why they are with you, with the idea being to uncover the needs that your organization has been satisfying already for these firms.

There is a lot more to this.  Once you understand and have collated customers around needs based groups, begin to work out the messaging such that your customer clearly understands how your organization can meet that customer’s needs.  Understanding customer needs will help drive messaging.  Properly attaching customers to proper needs groups will help you determine the content and media you should be using for your interactions with that customer.  It may look to that customer as if you have prepared a special communications stream specifically for that customer, when in fact, you did create the messaging to address the needs of the segment that customer belongs to.  This keeps your messaging costs down.  In addition, understanding the value of the customer, and what needs segment(s) they belong to, will in the end help drive how much more (or less) you should be spending on your interactions with each customer.  Basically, understanding and managing to customer needs will help drive messaging and become a key input towards managing profitability.

There is a number of smaller steps involved here, and we will touch upon all the key steps from a B2B perspective, but given the activity this week at Westcon on this topic, I thought it was a good time to mention it here.  As a distributor, Westcon has been helping customers to work through these issues.  As the financial crisis subsides, customers will begin executing more transactions as their willingness to invest grows.  We are committed to adding value through the belief that understanding needs will be one way to make sure that you are not just another partner who gives the lowest prices.  It will be more about the strategic partnership that you create with your customer, thereafter focusing more on meeting their needs strategically, tactically and at a personal level.

Advertisements

One response to “Needs Based Segmentation

  1. Bill, good memories.

    I will add that now more than ever mining that information with effective analytics is the only way to act on it. Companies capture more information than they think, the problem is that they don’t know where it is; they don’t know what it means; or by the time they decide to use it, it is no longer relevant.

    Regards,

    Carlos

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s