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Creating Better Opportunities through Segmentation

Jonathan Bein, Ph.D, Managing Partner — Distribution Strategy Group

•profit analytics •market segmentation •profit strategy •segmentation

Creating Better Opportunities Through Segmentation

In discussion with Randy MacLean, Dr. Jonathan Bein, President of Real Results Marketing, lays out some of the finer details of driving profitability and the changes that maximize a company's net before compensation (NBC).

Bein's strategy identifies the different segments of a client's customer base and the different markets and opportunities a client can access. Segmentation creates opportunities to move into new territories and markets.

Segmentation is about categorization and targeting. Initially, the size and location of a company might have been the first criteria when considering segmentation. However, as Bein points out, now there is much more information available. Bein is able to identify the best, most profitable, highest converting segments of a company's customer base by examining different markers.

What works for one company might not work for the next, whether the next company is a competitor or in another market entirely. As Randy points out, success is a combination of doing many things well. By focusing your attention on a segment of your clients – even if it has good and bad accounts in it, whether these are existing accounts or potential accounts – you increase the likelihood of conversion, of selling more, penetrating more, and you have a higher likelihood of being profitable.

You don't need to make big changes to your customer base to make big changes in your profitability.

A company might expect 15-30% churn over the course of a year. Segmentation can help that company identify new accounts that share the markers of its most profitable accounts. By targeting new accounts with those markers, that company can, in two or three years, effectively transform their customer base.

Small, precise changes – such as knowing what segments of your market to target – can have a magnified effect on your bottom line. Target the accounts that are the most likely to bring in above average profitability.

Audio file: jbein2-01.mp3