Daily News Thursday, July 19, 2007

How you “Divide and Conquer” the B2B Market (Part 2)

By: Emma Warrillow, Emma Warrillow & Associates Inc.

Segmenting your B2B customer base can be very impactful - and can generate significant return on your marketing and servicing investments. This article looks at how some companies have done it ….in practice.

In our last article, we addressed some of the challenges faced in applying customer segmentation to the business-to-business market. In particular, we looked at three primary challenges; first, the collection of good data is complicated by the reliance on sales people, long purchase cycles and the limited availability of overlay. Secondly, customers are typically a collection of individuals (buyers, users, senior executives) and policies making behavior difficult to understand or predict. Finally, the implementation of segmented strategies can be challenged by the necessity to deliver through the field sales force.

In fact, we dwelled on the challenges so much that we may have put some of you off! Rest assured, segmentation can be very effective in the business market. B2B marketers do, however, need to be realistic about the complexity of the segmentation that they can implement. They need to consider the state and availability of data on customers and their behavior, and their ability to implement.

In this article we look at two companies who have tackled these challenges head on and successfully applied segmentation in their businesses.

Monster Canada

Monster Canada (www.monster.ca) is a career management portal whose clients include the HR professionals and other hiring managers in Canadian businesses of varying size. Monster has been using segmentation as a tool to better understand and target both their customers and prospects. Jean-Paul Isson, Director of Business Intelligence & CRM says that the segmentation work they are doing “helps customers achieve their desired results …getting qualified people to apply”. “This has a huge impact on customer intimacy,” he continues citing improved retention, up-sell and cross-sell as some of the tangible benefits.

Monster has tackled the data challenge by looking for data in innovative places. “Everything starts with the data”, asserts Isson. “Once you have the data, you have to put some intelligence into it.” Monster has augmented their internal databases with information from third parties including information on the entire business universe and macro-economic data (such as GDP, unemployment and turnover rates) from Statistics Canada. “To be able to achieve success you have to be able to marry external and internal data to get the full picture,” he notes.

Monster has used third party data to segment the Canadian business universe into three prospect segments based on their propensity to buy and potential value. This has allowed the sales force to spend time where they expect to get the best return. In addition, Isson’s team calibrated the reps portfolios to give everyone the same chance to reach high value prospects. This approach has allowed Monster Canada to understand sales performance and increase sales productivity by 40%. In addition, this type of success has helped fuel acceptance of business intelligence by the sales force leading to buy-in for further initiatives.

Monster also uses segmentation to drive interactions with existing customers and better serve them. They use RFM analysis, and predictive models, to segment their customer base and to understand those with cross-sell and up-sell potential. RFM is a fairly simple technique grouping customers based on their purchase recency, frequency, and monetary value; profiling the resulting segments has provided Monster with considerable insight into who the customers really are – beyond just their purchase history.

These segments help Monster to use resources more effectively to proactively retain high value customers (retention is up 15%) and up-sell higher margin products.

The segments aren’t just used in sales; according to Isson, they “are learning how to better serve high value customers and synchronize our efforts with customer service.” They also leverage what they have learned to adjust their advertising efforts. For example, banner advertising has been adjusted to reflect where high value segments are coming from online.

Monster claims marketing efficiency has improved by 40 percent since adopting their business-intelligence based segmentation strategy.

Royal Bank of Canada

Sometimes even simple firmographic dimensions can yield significant results. In their book Angel Customers and Demon Customers, authors Larry Selden and Geoffrey Colvin state that, “A customer segment is a group of customers with sufficiently homogeneous needs that the segment members can be won with a common value proposition and common marketing.”

According to the authors, Royal Bank of Canada had great success with their business segmentation based heavily firmographics such as employee size and industry classification.

One segment that they have identified is High Growth Manufacturers. Royal Bank has developed a specific value proposition for this segment which includes specially trained experts to deal with their unique businesses and product offerings tailored to their needs. These offerings include such things as seminars/conferences, access to First ResearchTM industry insight to assist their sales force, and tailor solutions to assist them in managing their growth.

And it seems to be working for them; according to a 2004 presentation to the American Bankers Association, product penetration has increased from 4 to 6 and the bank has 350 new High Growth Manufacturing clients since the implementation of this strategy.

And so….

Our advice to business-to-business marketers is three-fold:

• Start simply – often basic segmentation can yield great results. Start with what you know but look to continually grow your understanding of the customer base (through interactions and external data) to allow your segmentation to become more complex.

• Prove yourself – build buy-in from the sales force through small successes. Their buy-in will allow you to slowly augment your data and implement more impactful strategies.

• Develop value propositions – use your segment understanding to develop distinct value propositions. Leverage what is different about the segment.

One final example: We recently received an offer from Dell for their new Vostro line of PCs. This product line is targeted at their small business segment and appears to be based in their understanding of this segment of their customer base – and how they differ from consumers and larger businesses. The proposition includes dedicated technicians who understand small business, no trial-ware to disrupt the business day, and customization to fit the needs of the individual business (meaning you only pay for what you want). While the segmentation is simple, the value proposition is well-tailored.

Emma Warrillow runs Emma Warrillow & Associates Inc. (www.emmawarrillow.com) and helps companies articulate their analytic strategies and make the most of their customer data. She can be reached at emma@emmawarrillow.com

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