Gartner Blog Network


Strategy, Selling, and Segmentation

by Hank Barnes  |  November 4, 2014  |  2 Comments

I am reading a fantastic book right now.  It is called Aligning Strategy and Sales by Frank Cespedes, published by Harvard Business Review Press.  For those that have been following our Future of IT Sales special report, the book is a must read.  It supports our key over-riding premise—sales approaches must be linked to the overall business strategy, aligning with market selection and product planning in a balanced approach.

While I’ve not finished the book yet, there is one insight that I wanted to share.  It focuses on segmentation, a topic that I often discuss with clients as we work on positioning.   The question of who is your ideal customer is an important one.    Unfortunately, it is an answer than many don’t want to provide.   Instead, we will choose broad targets, trying to caste a wide swatch in hopes of widening the prospect pool.  Cespedes explores this in more detail and offers reasons that this is usually extremely problematic.  It most often rears its ugly head with growth is slowing.  Businesses then need to decide where to turn.

When we work with clients on positioning, we always ask them to focus on three areas:

  • Who is their target customer, based on fit?  What attributes make a company a great prospect for your product or service?
  • What are the critical business needs?  What business pains are so powerful that they know they have to do something?
  • What are their related desires? What things do they want to make the buying, implementation, or adoption process easier?

These three elements can help to refine both your target market selection (for marketing purposes) and also your sales qualification effort.

But after reading Cespedes’ book, I realize it is not enough.   There is one other key element–an additional filter–that needs to be applied:

  • What targets make the most strategic sense for our business?

Segmentation

This question can be answered by evaluating historical sales results (ideally) or applying a different lens to your analysis.  Questions like:

  • How hard/easy is it to sell to these targets?
  • Is our sales cycle likely to be longer or shorter?
  • How likely are these targets to remain a long term customer (particularly important for subscription services)?
  • Which of these targets offer the most upsell opportunities?

And many more.

Yes, you want to be customer focused–but you also want to do that in the context of a solid business strategy.  One case study in the book talks about a payroll services company that switched their focus from highly “transient” small businesses (like restaurants) –who had been one of their biggest segments–to small consulting companies after determining that these businesses had more stability and opportunity for longer term relationships.

They then changed their sales approach–putting a heavy emphasis on partnering with CPAs (key influencers for these consulting firms).  They also continued to accept the other business (from restaurants, etc), but did so through a lower cost, inside sales approach.  Their close rate on those deals decreased, but so had their costs.  Conversely, they had large productivity increases on their sales to consulting firms, increasing revenue, close rates, and profitability.  They also adapted their product offerings to appeal to these segments.

This illustrates a much more connected approach to business–aligning sales approaches with marketing targets and product planning–an approach that paid big dividends.

The next time you are evaluating your targets,  be very cognizant of both the attributes that make buyers a good target–for themselves and for you.  Narrow your focus and adopt a sales approach based on two things—how you can make it easier for the customer to buy the way they want to  AND how you can drive the most success and profit by choosing targets and approaches that make the most strategic sense for your business.

The combination is critical.

 

 

Additional Resources

View Free, Relevant Gartner Research

Gartner's research helps you cut through the complexity and deliver the knowledge you need to make the right decisions quickly, and with confidence.

Read Free Gartner Research

Category: future-of-sales  go-to-market  

Tags: ideal-customer-profile  sales  sales-approach  sales-strategy  segmentation  strategy  target  

Hank Barnes
VP Distinguished Analyst
6+ years at Gartner
30+ years IT Industry

Hank Barnes explores the dynamics, challenges, and frustrations enterprises face when buying technology products and services. Using that customer-centric lens, he advises those responsible for marketing technology products and services, general managers responsible for product portfolios, and startup CEOs on next practices to drive success for their customers and their business. Read Full Bio


Thoughts on Strategy, Selling, and Segmentation


  1. CEO says:

    Read the “Challenger Sale” you must take control of the conversation CEB did a fantastic job depicting what each organization needs to have in order to excel and become profitable.

    • Hank Barnes says:

      The Challenger presents a lot of important concepts that modern sellers must embrace, providing insights, helping buyers embrace new ideas, etc. But before you can do that, you need to link your overall sales approach to your growth strategy. You could “challenge” and win business in segments that will not be profitable and will de-focus your business. Strategic segmentation comes before Challenger.

      I highly recommend Cespedes book. It complements, rather than conflicts, with the ideas in the Challenger sale and presents some vary important ideas about aligning sales with strategy.



Leave a Reply

Your email address will not be published. Required fields are marked *

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.