Why Detailed Account Segmentation is 10x More Valuable than TAM

Total Available Market (TAM) is a term used to reference the revenue opportunity for a particular product, service, or sector. Today, CMO’s rely heavily on the Total Addressable Market (TAM) metric to inform their strategy.

While TAM is helpful in informing high-level strategy, it is often difficult to action upon. For example, the International Data Corporation predicts “The worldwide Internet of Things Ecosystem and Trends market continues to see broad interest and momentum, with an expected market size of $1.4 trillion in 2021.”

Impressive stat? Yes.

High-level value? Yes.

Distinctly actionable content? No.

To drive optimal conversions and qualified leads, the Marketing strategy must be based in deeper analysis. At SBI, we use Account Segmentation to enable CMO’s and Marketing organizations to hit their number. To learn more about Account Segmentation in a bit more depth, check out these two articles:

1. How to Go After the Accounts that Will Spend the Most
2. How to Put Account Segmentation to Work for Sales Ops

For true practitioners, download the Marketing Segmentation Tool. This tool can be used to educate your marketing team. It will also align your group to the sales, finance, or analytics team, ensuring a cohesive strategy across your company.

Not all accounts are created equally, nor is their spending consistent every year. If you cannot rank accounts best to worst on revenue potential and propensity to buy, you’re just shooting content into the universe, without target.

Properly executed Account Segmentation allows you to target high value customers and prospects. Other departments will also be impacted. Sales will focus selling time on high propensity-to-buy accounts, maximizing ROI. Product Development will more accurately determine who to target with products and services. Sales Operations will optimize territory design, compensation plans, and quotas.

How to Better Educate Your Marketing Team

There is a five-step segmentation process that you can use to educate your marketing team. Once they grasp the process, they will begin to comprehend its importance.

1. Review current customer and prospect data – collect data on current customers (spend, size, industry, employee count, products purchased, etc.).

    

2. Conduct expert panel and market research – select successful marketing and sales people to help prioritize the factors most important to a customer likely to buy, and they amount they will spend.

    

3. Complete data analysis and modeling – collect additional information, including: suspect list, opportunity list, and third-party data. Collaborate with database owners to eliminate unreliable information. Match existing customer and prospect database with firmographic information to fill the gaps.

    

4. Determine propensity-to-buy factors and define the Ideal Customer Profile – rank the top 4 factors most important in identifying a potential customer. Convene expert panel to assign weights to the top factors according to relative importance. Calculate potential spend for each customer segment.

    

5. Calculate potential and score prospects across factors – quantify the sell-to-market. Then determine potential per segment and prioritize target markets. Implement business rule for marketing coverage.

    

At the end of this five-step process, you will have valuable, actionable input to your Marketing strategy. A TAM metric, while valuable at a high level, is un-actionable. However, through detailed Account Segmentation, a Marketing organization can surpass conversion and qualified lead goals, while also driving ROI improvements across the company.

For more help  with Account Segmentation and enabling your Marketing team to prioritize opportunity, download our Account Segmentation Tool.

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