Why Should You Consider Enhancing Your Segmentation Strategy?
In analyzing the business of hundreds of distribution companies, we’ve found that most distributors rely on very simple segmentation. Some companies even operate without any segmentation, flying blind hoping to come out at a reasonable price based solely on their own instincts and their ability to muscle the purchasing agents at client companies. This rarely leads to satisfactory profit margins. Properly implemented segmentation strategies affect more than how you price products to your customers, it also influences how you interact with them on a broader scale.
With properly established segments, you can collect far more valuable data on how you interact with client companies, where you might be losing profit, and where you stand to gain. For example, with a reliable data set based on tighter customer segmentation, you might spot a place where sales agents are underperforming. Maybe you have a new sales rep in a strategic account who is pitted against a master negotiator in the client’s purchasing department. Maybe you have a market trend that needs addressed in a particular territory but were unaware of it because you were not comparing apples to apples in your current segments. Subtle issues that would otherwise disappear into the noise can rise to the surface very quickly when you compare the right set of data in the right customer and product groupings.
Graphic credit: Matthew Hodgson