In addition to using customer segmentation to measure customers’ profitability and potential, distributors are using it to educate themselves about their companies and target new business.

A breakdown of customers by industry sector can give distributors a snapshot of their business and reveal whether or not their capabilities match their chosen customer segments.

“This type of segmentation means you’re matching your customer segment to what you’re good at and what you’ve chosen to do,” says Lawrence. “You’re probably going to find that when you move to another segment your customer stratification is going to tell you that something’s not right. But that doesn’t mean you can’t change your capabilities to match the new segment, if that’s where you feel you must be for growth.”

Chris Nolan, president of H.T. Berry Co. in Canton, Massachusetts, started using customer segmentation several years ago to analyze his customer base and target new markets.

“We looked at it as an opportunity to strengthen our company,” he says. “We wanted to see where we were strong in terms of the segments we were penetrating well and having success in, and we wanted to see the segments we weren’t reaching but knew we wanted to focus on.”

Segmenting customers by industry sector was challenging for Nolan.

“Our industry is difficult to dissect,” he says. “We had to dig into our customer base and label them in terms of a category. That was challenging because some companies fit into more than one category.”

Ultimately, Nolan’s software enabled him to break down his customer base into the following markets: education, government, hospitality and lodging, commercial real estate and private companies.

For Nolan, the customer segmentation process was an eye-opener.

“The analytics and the data we arrived at really educated us about our business,” he says. “We found we didn’t have a strong education presence in our customer base. Defining that allowed us to say, ‘We need to be strong there. What do we need to do to invest in our company in terms of marketing and targeting for new business?’”

Nolan’s salesforce embraced the segmentation process and used it to their advantage. Through training and marketing, H.T. Berry increased sales in two segments: education and lodging. Today, the company’s percentage of sales has doubled in these sectors — a testament to the advantages of using customer segmentation.

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