Seven Questions Your Business-to-Business Firm Should Answer Today
In the course of client work, we’ve served business-to-business clients from a range of industries, including electronic connectors, office furniture, cable network providers, direct mail printers, automotive, and many others. An important learning is that while there is no one ‘best approach’ to B2B segmentation, many approaches don’t dig deep enough to allow advantaged insight.
Starting with the B2B Basics
In most business-to-business segmentation, most businesses make a first cut at the most basic level: how much of your firm’s revenues and profits does each B2B customer segment (or large individual account) represent today, historically and going forward?
From this approach, the mega clients are separated from the smaller fry and strategies are developed. While this approach represents a starting point, it’s helpful to move beyond this and to consider several additional criteria.
7 Questions for Digging Deeper
1. Is your business better suited for plans tailored to specific customers and accounts, or can you create a common strategy that pursues segments of B2B customers with similar characteristics?
- A word of warning-- it is often hard for salespeople to think beyond the individual account level, as all customers are different, requiring you to dig deeper than this truism.
2. What is the total revenue and profit pool that the customer segment/account represents? This it the total business available, not just the portion that your firm currently captures.
- From this, you can calculate your share and the potential upside- can you become more important to their business?
- Does this customer segment/account have a limit to the total amount of business they will give to one supplier, setting a maximum upside?
- Is the segment defined appropriately?
3. Are there relevant prospective customers that you are not currently working with but are attractive? How should they be prioritized and segmente
4. Who are the decision makers and what role do they each play? What is their purchase decision process?
5. What needs does your business fill for this customer segment/account and how well are you performing?
- For instance, manufacturing businesses will look at (in addition to the cost), the quality of goods delivered, on time delivery, contribution and effectiveness in upfront design, cost to deliver/geographic proximity required, service requirements and more.
- Many B2B businesses issue scorecards to their suppliers to document performance, and this serves as critical data along with management conversations and top-to-top meetings.
- If there is no scorecard, can you define one? This can put competition at a disadvantage if your performance is the standard.
6. How important is the product or service you deliver to the customer’s total business? Is their market segment growing or shrinking, and what are their anticipated growth strategies?
7. Are you involved with meeting their future needs and partnering on solutions?
- Who is the relevant competition for this customer/account and how well are they performing compared to your firm?
Ultimately, after digging deep to understand your B2B customers, accounts and prospects, you’ll need to develop an actionable segmentation. In order to be actionable, the segmentation must be able to be understood, tracked and agreed to by your firm, including the salespeople. Moving forward, I’ll profile specific case examples and welcome comments and thoughts from you.