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Commentary: The Power of Segmentation

Don't Be Everyone's Third Favorite Supplier

Don't Be Everyone's Third Favorite Supplier

October 11, 2012

“The worst thing you can be is everybody’s third favorite supplier,” says Steve Deist of Indian River Consulting in Part 1 of the recent MDM webcast, Sales Incentive Design Best Practices, available now through MDM on DVD. Being at least some people’s favorite supplier, rather than trying to please everybody, can put companies into a better position to maintain a good set of customers and a predictable revenue stream, Deist says.

Offering added value to a target group by focusing efforts there is also key to maintaining healthy margins. “Targeting is the essence of margin maintenance, and if you’ve got shrinking or declining gross margins, that’s usually a symptom of poorly thought-out targeting,” Deist says. If you have declining margins, you probably aren’t competing with your strengths.

To target the right customers they should first be segmented according to their buying needs – individual or shared. Deist encourages distributors “to look at the world through your customer’s eyes” to determine what they really want to buy – “not what you’re selling, not what  your sales reps tell you customers are asking for, but what they fundamentally want from an economic and organizational standpoint.”

Deist says segmenting customers may at times be frustrating because companies may need to adjust how they’ve segmented customers as their needs become more apparent. But if you don’t get the segmentation piece right, Deist says, “it’s very difficult to develop an effective strategy.”

Only after a company has properly segmented customers and determined which segments to target can it effectively position itself to win more business. Unless companies can tailor products and services to specific segments’ needs, sales reps won’t have a competitive advantage, which Deist says is like bringing a knife to a knife fight.

The key to determining the gaps between what target customers want and what a company sells, Deist says, is to ask “How can we have a gun for the knife fight?”

Listen to the full program on-demand or get the DVD of Parts 1 and 2 of Sales Incentive Design Best Practices.

© 2017 Gale Media, Inc.

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