In meetings with small business I ask the owners how they currently segment their client base. I am often told they that they know who their best clients are, but they don’t really have anything concrete in place in terms of a segmentation model. When questioned further about what they use to determine who a top, or “A”, client is I am told that they determine this simply by the amount of revenue generated, follow the basic 80/20 rule. 80% of your business comes from the top 20% of your clients.
If you choose to follow this method of segmenting you are missing out on key factors that will help you define your marketing strategies more effectively and therefore waste less of your marketing dollars. The more effective way to properly develop your segmentation model is to create a weighted formula. Decide your key areas you will evaluate and put a percentage weighted importance on each one. Create a formula that than generates a final number. Your final number will have the client fall into a predetermined classification of, say for example, A, B or C.
A = Ideal Client
B = Good Client
C = Has Potential / Developing Client
D = Terminate Client (if possible)
Every business is different and you need to choose what are the critical factors that may help you shape you strategy, but some of the basic ones that I often encourage owners to consider in their equation is.
1) How influential is the client? In their community, social circle, and social space?
2) How many clients have they referred to you?
3) Are they an innovator? Are they typically the first to try a new product or service?
4) How much maintenance do they require? Do they require hand holding through the pre-purchase phase, purchase decision and post-purchase phase?
5) What is their potential to be a top client?
6) How much revenue do they generate?
Determine the level of importance that each of these has on determining where your client should be segmented. Run a few tests using your clients. Does the formula results equal where you felt the client should be segmented? If not adjust the weights of categories until you are satisfied with the segments the clients are falling into. Then ensure that you are consistent in implementing this with every client in your contact list. By using this formula you will get a stronger representation who truly is an “A” client. Perhaps they are not the ones that generate the most revenue for you, but they consistently refer others to you and are an influential person in the community.
The key to keeping this effective is to do proper testing to ensure your formula is weighted properly, diligent in using the method, review annual and to develop your marketing strategy according to the results.
If you have any questions regarding this method don’t hesitate to contact me and I would be happy to answer them!