Customer Segmentation Can Boost Sales
Question: I’ve heard you mention several times the importance of prioritizing customers and targeting the best ones. Can you shed some more light on this?
Answer: This is a key issue with me, as I believe customer segmentation is one of the ways to make the biggest, most rapid change in a salesperson’s results. Too much good, quality sales time and talent is squandered on customers that aren’t worth the investment. If you can help your salespeople adjust their priorities so that they are spending more time on the high-potential clients, i.e., the ones who will spend the most money, and less time on others, they’ll see an almost immediate improvement in results.
I have developed (over years of trial and error) a simple but incredibly powerful system for prioritizing and targeting accounts. While I don’t have space here to describe the whole system, I can suggest several things you can do to institute this practice in your sales team.
Begin with the concept of “potential.” Remember, potential has nothing to do with what the account did last year. It is all about what each account could do this year. Have your salespeople ask and answer a simple question of every account: “If this account bought everything they could from us over the next 12 months, how much would that be?”
It is amazing how that simple question can focus a salesperson, a sales team, and an entire company on those accounts with higher potential. Then, follow this process:
1. Set up some company-wide definitions. Everyone should understand what an “A” account is. Likewise for “B” and “C” accounts. In addition, there ought to be some standards for how you define each of these. For example, you might say an “A” account is one who could buy $1,000,000 of your stuff each year. OK, how do you determine that an account could buy $1,000,000? Does the salesperson guess? Or do you use some more sophisticated means of coming to that number? You need to answer these kinds of questions.
2. Once you’ve created the criteria and definitions, train the entire group in the use of those concepts. Require that by a certain date, they have analyzed and rated all of their customers. You may even develop some forms, electronic or hard copy, which everyone uses.
3. Legislate that everyone should spend the biggest portion of their time with the “A” accounts. My rule is 50 percent of your time with the “A” accounts, and 50 percent of your time with everyone else.
4. Finally, manage the implementation. Every time you ride with a salesperson, discuss it and look for evidence that indicates the salesperson is following through on using the system. Make it an issue in sales meetings and in evaluations.
This is such a powerful practice that I believe it to be the most important. In other words, nothing you can do with a salesperson will have more predictable, measurable and dramatic impact on his/her performance than this.
The system is described in detail in my "10 Secrets of Time Management for Salespeople" book. It’s also taught in great detail in the Sales Resource Center.
Dave Kahle is one of the world’s leading sales educators. He’s written nine books, presented in 47 states and eight countries, and has helped enrich tens of thousands of sales people and transform hundreds of sales organizations. Sign up for his free weekly Ezine. More than 1,000 sales managers have been trained in his Kahle Way Sales Management System.
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