4 Tips for Segmentation Analysis
Segmentation analysis can be one of the most important things you do for your business. It can inform sales, marketing and success strategy. It can inform product roadmap decisions. And it can bust you through to new revenue levels, instead of leaving you stuck on a plateau. Here are 4 tips for getting it done.
1. Start at the end
When you’re taking on a project like segmentation analysis, you should have a goal you’re trying to accomplish. Maybe you want to tier your accounts to help prioritize sales. Maybe you want to know how much potential is in your customer base. Maybe you want to see which accounts are the best users of your product, to inform roadmap decisions. Whatever the case -- start at the end and work your way back.
My colleague, John Byrne, usually recommends to clients “Start by thinking about the story you want to tell. Then we can figure out the ingredients (data) you need to tell that story.” It works really well. If you know the story you want to tell, you can work your way back to the metrics, analytics and calculations required to support the story. Be sure to get input from any stakeholders ahead of time, so you don’t leave out a critical piece of the analysis.
An example of a story is “we want to be able to see which combination of industry and company size produces the largest customers in the first 12 months from our initial outreach.” It’s generic enough so that you aren’t forcing a conclusion up front, but specific enough that you’ll know what you need to figure out.
2. Choose the right metrics
This is kind of like measure twice, cut once. It also overlaps with starting at the end. In segmentation analysis, it’s important to segment your accounts using the right metrics. For instance, many companies think they want to optimize for net new business when doing segmentation. But then digging deeper, it turns out their sales motion works in two phases, where they land with an entry deal, and then expand with an upsell.
When that’s the case, you need a metric that incorporates both land and expand. You might do something like track land efficiency, propensity to expand, and expansion efficiency. And then create a supermetric that combines those things together.
3. Done is better than perfect
You know what’s the worst way to do a segmentation analysis? To not do it at all. But that’s where many companies end up, because they think their data is not good enough. True, firmographic data like industry, company size, and revenue is hard to get perfect. But you don’t need it to be perfect to draw useful conclusions.
Rekener helps a lot of companies through data issues by doing account cleanup and deduplication, and also by providing another layer of data on top of their data. We use third party data applied at the account level so that you at least have a consistent data feed telling you about the firmographics of your accounts. It is not 100% perfect -- but it is certainly better than not doing this key analysis in the first place.
Typically if there are differences in how segments perform, those differences will be pretty stark. So you don’t need to have total accuracy on your firmographic data to see these. The bigger point is getting the metrics right, as described above.
4. Use it or lose it
Segmentation analysis can be a big effort. So make sure you actually put it into action. Don’t be afraid to put this analysis in front of key people inside your company. The better everyone in the company knows this data, the more aligned they can be. Aligning around the right customers in the right segments can move your company forward significantly.
Very often, companies get set in their ways and keep going after the segments that they had success with in the past. But very often, as businesses mature, they start to see better performance in segments that were not productive in the past. This can be due to product evolution or market changes.
The point is, all key go-to-market stakeholders need to have a good understanding of what the best segments are for your business. Without that information, they might be blindly doing the same old thing, and not realizing that they are leaving money on the table.
You should be doing segmentation analysis often. It helps make sure you are continuing to operate the most healthy and efficient business possible. You should make sure you’re able to track metrics that map to your customer acquisition and monetization motion. And you should not be afraid to get the results of your segmentation in front of as many people as possible.
If you need help putting a segmentation together for your business, let us know -- we’ve provided both software and services to many companies that have this challenge, and it’s made a big impact on their go-to-market effectiveness.
- Blog post about Account Scoring
- Case study on how Black Duck Software attained a 360 view of customers
- Overview of how Rekener does Segmentation Analysis
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Greg is COO and Co-Founder at Rekener. Greg’s career has been focused on using data to grow recurring revenue businesses. Before joining Rekener, he served as VP of Operations at ZeroTurnaround, where he built its strategy and operations practice, ran its customer success and renewals function, helped to grow and coach its high-velocity sales organization, and optimize its marketing efforts. Prior to that, he ran the BizOps and marketing functions for the AVOKE call center analytics business, a SaaS company within BBN Technologies. He got his start using data to improve sales and marketing efforts while at AppNeta.
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