Your goal is to grow faster than the market and your competitors. Make that a reality by aligning the right sales resources against the highest opportunity accounts. Use the following to better understand how to assess the potential for an existing customer or prospect.

It’s Sunday, April 14th. It’s no ordinary Sunday. Today is the final round of the Masters, and Tiger Woods is in contention. The fans have showed up in the thousands at Augusta National to witness history. After a converting a beautiful chip and run on the 17th, Tiger remains atop the leaderboard.

 

The fans have gathered on 18, where a 9 iron has put Tiger 15ft from glory. Jim Nantz states, “With this putt, Tiger Woods can win the Masters”. Tiger paces the green. Fifteen feet from securing his 15th major championship. It didn’t seem possible just a few years ago. The silence is deafening. And then, the crowd erupts.

 

Before donning the green jacket, Tiger will answer how today unfolded.  He will attribute his success to one of three things: hitting fairways off the tee, hitting the greens and sinking putts.

 

Similarly, the formula for growing a successful company is three-fold: retain your customers, grow your customers and acquire new customers. It sounds simple, much the way that hitting your fairways, greens and making putts does; but as anybody who has tried golf can tell you, simple does not equate to easy. Like pro golfers, the best sales leaders can make it look easy, but the reality is even the best can struggle at times…

 

…but it can be made easier with the use of a little-known secret called purchase segmentation.

 

Download the Purchase Segmentation Tool to better understand purchase segmentation and identify opportunistic areas, determine alignment to market across 10 segmentation areas, and assess whether or not purchase segmentation is right for your organization right now.

 

What is Purchase Segmentation?

 

Purchase segmentation is a “bottoms up” approach to market segmentation.  Market segmentation tells you the size of the market and where bets should be placed (i.e. geographies or products); purchase segmentation stack ranks each account in the market based on total potential and/or opportunity.

 

Market segmentation alone does not provide you the focus you need for a Go-to-Market strategy. It does not:

 

  • Identify which accounts Marketing should focus on
  • Indicate which Partners have the most upside based on how customers want to buy
  • Inform sales which products to pitch next

     

What Are the Benefits to Purchase Segmentation?

 

Purchase segmentation helps sales leaders and organizations identify new market opportunities—fueling the way for accelerated and above-market growth.

 

  • Use account segments to define sales strategy and align with corporate objectives, while improving sales performance and rep productivity
  • Improved territory alignment and balance and quota assignments that reflect intelligent market opportunity and sales potential and/or opportunity
  • Appropriately align resources based on account score and potential. This includes key metrics like account assignment ratio to sales representative capacity

     

Refer to Drive Double-Digit Revenue Growth by Interlocking Compensation Design & Territory Alignment to understand the impact of misaligned sales territories.

 

What Is the Typical Purchase Segmentation Approach?

 

Organizations use propensity to buy (PtB) factors to prioritize which customers and prospects are most likely to buy your products and services. This is an essential first step into calculating the potential of each account. PtB models use demographic and firmographic data to score accounts. This information is often collected from solutions such as Hoovers and/or Capital IQ. It includes information on public companies and private companies, as well as industry-specific data, such as: information on recent purchases, sales and sale mix and even technology trends—which can identify the complimentary product or service for existing customers and prospects.

 

 

Calculating Potential Spend:

 

Once accounts have been scored, decide between the three approaches below to calculate account potential. The recommended approach will be informed throughout the discovery process and range in level of complexity.

 

  • Advanced Techniques – such as linear of Decision Tree analysis
  • Frontier Potential—which uses the 80th percentile actual spends of customers in a cluster
  • Product Analysis—which analyzes spend by Product and Product Whitespace

     

     

    Proper Alignment of Sales Resources:

     

    In most organizations, sales leaders need to focus a finite number of resources on the best opportunities. How do leaders determine where to allocate their resources? Leverage the purchase scoring and account potential output to further segment customers and prospects (see illustration below).

     

    • Prioritize those accounts with high propensity to buy and high potential
    • Monitor those accounts with low propensity to buy and high potential
    • Nurture those accounts with high propensity to buy and low potential
    • De-Prioritize those accounts with low propensity to buy and low potential

       

    It is recommended that you develop a RAD model by revenue band and sales sub-region. This will help maintain focus in existing key customers, while driving value in high-opportunity accounts—this approach will also account for regional and geographic differences.

     

 

Applying Purchase Segmentation to the GTM Model:

 

Earlier, I highlighted how purchase segmentation can help fuel above-market growth. It is also a key input into various strategic go-to-market initiatives.

 

  • Account Prioritization & Coaching—defined ideal customer profile enables purposeful account management and sales tactics
  • Lead Generation & Prospecting—account scoring provides the ability to prioritize accounts and optimize selling efforts; this is used to inform lead generation activities
  • Product & Marketing Research—enriched customer and prospect data provides a wealth of new information; this can be used to inform product and marketing decisions
  • Account Based Marketing—identify which accounts to target with tailored marketing content to expand relationship in strategic accounts
  • Organization & Territory Design—drive equitable territory assignments and allow best sellers to work on highest opportunity accounts
  • Compensation & Quota Planning—set accurate goals that enable reps to make their number and align with compensation

     

 

Refer to “How A-Player CMOs Implement Account Based Marketing” to better understand how to leverage the outputs from purchase segmentation and apply to your GTM strategy.

 

Conclusion

 

Each year, sales leaders are challenged with achieving challenging and aggressive growth targets. And though the formula for growth is simple, growth by itself is not easy. Proven methods like purchase segmentation help organizations expand their existing customers and acquire new customers.

 

Download the Purchase Segmentation Tool to better understand purchase segmentation and identify opportunistic areas, determine alignment to market across 10 segmentation areas, and assess whether or not purchase segmentation is right for your organization right now.

 

 

Additional Resources

 

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ABOUT THE AUTHOR

John Marcsisin

Enables sales and marketing leaders to make the number through rigorous data driven analysis and implementation of emerging best practices.

John has nearly six years of consulting experience focused on sales force effectiveness, incentive plan design, executive compensation and broad-based rewards aimed at helping clients achieve short and long-term business objectives.

 

John’s experience includes working with organizations in varying levels of change, including: start up, wholesale transformation, and merger & acquisition. He is tasked with developing sales force effectiveness strategies and processes that attract/focus/motivate/retain top talent.  Specific areas of focus include: sales coverage model, performance benchmarking, sales compensation design, account segmentation and financial analysis/modeling.

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