Segmentation Versus Fragmentation
I was recently at the Gartner Supply Chain conference and was discussing market strategy with some analysts and colleagues. The topic of markets and market segmentation came up, and I realized that many marketers (and others) get confused or are too rigid in how they segment markets.
Market segmentation should be fundamental skill of every marketer, although there are many lenses at which one needs to view their customers. The first question to ask is “are you segmenting one market or are there multiple markets?” Even this has degrees of gray. I characterize a market as a group of people/companies that have the following traits in common:
1) Pains points to be solved. These need to be relevant and specific. They not “aspirations” such as “save costs or “improve customer service”
2) Processes that run their business: this could be the way the market, distribute, buy goods, etc. Obviously they also need to be relevant to your offering.
3) Roles that use your solution and gain benefit. Examples would include common titles, departments, etc.
4) Competitive landscape. If in each “segment” you have different competitors changes are you are in different markets.
5) Do the customers talk and collaborate with each other? Read common trade journals, go to common events, are there industry associations, etc.
Once the market is defined, there is a multitude of ways to segment it. Some are traditional such as company size, geography, vertical, some are more subtle:
1) Innovative versus laggards
2) IT focused versus business focused, who has power when buying technology
3) Home grown versus off the shelf
Segmentation is as much art as science, since one company’s market could be a segment to someone else. The most important element of segmentation is to relate the above factors to your solution and the problems it solves.
SixthSense – Impact on Marketing
Who said social marketing was the be all and end all?
Treasure Hunt – Marketing & Sales Diagnostic Map
I recently participated in a couple of value mapping sessions with the VP of Sales and our teams. What struck me is that in the blog world is a lot of commentary of alignment between sales and marketing on lead generation (or demand generation as purist would say.) However, the art of synchronizing the value proposition, and how is gets tailored for a specific customer is a lot more challenging. What are true values that customers buy into, and how does a sales person in a complex B2B sale navigate and figure out which value points to highlight and focus on? Of course there are many books on complex sales, value based selling, etc. The gap I see is where does marketing end versus the point where sales pick up?
Conceptually I like the concept of a marketing diagnostic map as shown here. This is a very generic map that can apply to any B2B technology solution. It needs to be customized as outlined below.
The map captures the value fit of a product for a particular market segment. The general idea is the value zone represents the major potential areas that sales needs to align with a customers pains to drive a deal. That is starting with the end in mind, how do we get there, who does what? Let’s start in the middle and at the beginning of the process
Core Qualifiers: These are fundamental attributes that define the market segments. For examples industry, company size, geography, buyer’s title, and department, etc. Perhaps this may include ERP type, etc. This is marketing’s job to define these broader based demand generation takes this as input to the who are we trying to reach.
Pain Zone: The pain zone, as the name implies identifies the potential pains you can solve for the market segment you are targeting. Examples, would include fragmented IT systems, poor visibility to spend, customer service issues, etc.
Value Zone: This represents that concrete value points that any prospect in the target market segment could potentially get from your solution.
Note I have been careful to say potential since I would suggest it is marketing’s job to ensure sales knows what the pains and value options are, also perhaps some navigation on sub-segments where pain/value might be greater. For example if the overall market is manufacturing, one specific pain/value might be more acute in high tech companies that run Oracle. Now it is sales job to navigate the map, and identify the customer specific value and associated pain.
One final key concept is in the value sectors. For pretty much any B2B solution the value falls into the three sectors identified: Customer Value, Operational Costs, and IT Costs. One could argue IT and Operational Costs should be grouped together, but in my experience within customers usually one or the other (business or IT) has the clout and is driving the bus.
Customer value comes in the form of creating value that increases the top line. This is achieved through new customers, new markets, or better customer service. Operational value delivers profits to the bottom line through business focused savings. I am sure by now you get the IT costs sector.
My experience is products/solutions are typically focused more heavily in one sector.
Now once sales is done they should be able to outline the value for a specific customer as shown here.
Now the most challenging part is to make this operational. I will leave this to another post for a few reasons: (1) there are lots of angles to take; (2) I have not figured it out; (3) I would love some suggestions.
Maturity Scorecard – Messaging/Positioning
Before doing any outbound marketing, it is critical to define the positioning & messaging (see earlier post on positioning, messaging branding.) In the case of a multi-solution company obviously the positioning must fit into the overall corporate positioning.
I recently completed the positioning for a new product and the process was quite collaborative. It included
- VP of Sales
- Product manager
- Pre-sales engineer
- Product marketing
- Marketing communications
Creating the positioning was the primary objective, but the larger group is critical in institutionalizing the result. Subtle choice of words can make a huge difference (Tipping Point) and having everyone involved ensures a better result and consistent messaging.
Marketing Campaign Scoring
Marketing budget spent, campaign launched, VP of Marketing declares, “We had a successful marketing campaign”, VP of Sales responds, “Where did it show up in the pipeline?” How do you avoid this and ensure sales and marketing are aligned?
First and foremost you must realize that not everything will be successful, so when you have a dud, declare it, shut it down, and do not repeat. The real failure is not recognizing this and continuing to spend resources, and losing credibility.
There are many other good articles on lead scoring, setting objectives, visibility, process so I will not address that here. Assuming you do the basics (or are they best practices?), how do you assess the overall quality of a campaign? I see two main factors as helping define success: (1) number of leads, (2) quality of leads. The number of leads is obviously easy to measure whether the campaign is a web-cast, tradeshow, or an ongoing campaign such as SEO, paid search. As deals close it is easy to declare victory, however that is typically weeks or months after the lead was generated. I cannot count how many times people try to justify spending with, “If just close one deal it will be worth it.” If you use lead ranking or scoring it is easy to assess the quality of any individual lead as it changes. It is the aggregate quality of the campaign which is hard.
The campaign quality is a result of how many leads become qualified, and obviously changes over time on how these leads are nurtured. The two main contributors are lead rank/score and status. Use the following basic definitions:
Lead Ranking
A Lead – Title is Director or above, pain identified, timeframe defined.
B Lead – Title is below director, pain identified, no timeframe
C Lead – Pain is not identified, no timeframe.
Lead Status
Open – Have not talked to prospect
Nurture – Have contacted prospect based on information collected, potential pain, opportunity to expand contacts, etc.
Qualified – Pain identified, Timeframe define, prospect agrees solving pain is justified.
Disqualified – No pain, project.
To assess a campaign the campaign score would be calculated as:
Number of A leads + Number of Qualified Leads
2 * Total Number of Leads
Ideally, a campaign would generate all A leads that qualify which would result in a score of 100. A tradeshow might generate 100 leads, 30 A leads and 10 are qualified within a week. The score would then be 20 (30+10/2×100). As the leads are nurtured (new contacts identified, pain ascertained, etc.) the score should go up. Alternatively, if after 4 weeks the qualified leads get disqualified the score would go down. If you use lead scoring you can tier the scores for this same model.
How would this model work for you? Are there better alternatives?
Hot Dogs and Software
Making hot dogs and building software have a lot in common:
1) You really do not want to see the back end process, the finished product looks a lot better.
2) Marketing is important to maximize the value
3) What you see is not always what you get
4) The way you dress it up can make all the difference
Marketing Metrics
I recently joined a local group of marketing VPs. One of the members posted the following question:
- What is a reasonable expectation for the cost of a lead?
Of course this lead to multiple questions about the market being addressed, price point of the solution, etc. The discussion narrowed down to what I call classical enterprise sales: 6-12 months sales cycle, 6 figure type deals.
OK – how do we define a lead? An inquiry, sales ready, fully qualified? Are all the attendees from a trade show a lead? Pretty basic stuff, but given the “art” of marketing amazing as a profession such definitions are not clear.
One participant indicated they counted anybody who had made an inquiry as a lead, and their cost was $80. Another responded saying, “I do not track that anymore because it encourages marketing to create unqualified leads”…hummm My experience is when marketing declares victory on all the leads they have created, they are usually the only ones cheering. Perhaps a good way to plan your exit….Not until they flow through the pipeline do the accolades come.
The only way to do that is have multiple metrics, and understand why you are measuring each one. Most important is to be consistent: across sales and marketing and over time.
Here is basic model I use
| Lead Stage | Target Cost | Definition |
| Target | Free | These are all the potential leads for an event. e.g at a tradeshow, on a mailing list,, etc |
| Suspect | $50-$100 | These are suspects that have made in inquiry (downloaded whitepaper, stopped by the booth) |
| Qualified lead | $750-$1500 | Sales ready – a high percentage should hit the forecast |
In addition we rank suspects in order to help with priority and focus. We had a debate on the ranking, but the definition itself is less important, in fact the most important piece is to be consistent. Consistency is critical as the first step is benchmarking where you are. Based on your definitions of Qualified Lead $1500 might be excellent if you have a high conversion rate, versus the $750 leads that never make it to the pipeline.
The conversation rate is another key element you need to measure. This starts with targets and should flow all the way through forecast, and ideally close. For example, if there are 500 people at a show, that certainly limits the number of suspects you can get. I cannot tell you how many times I have heard, the show is worth it if we get one deal from it. Agreed, but could you get more deals by spending the money elsewhere? Who knows? If you do not know, you will be constantly getting suggestions of where to spend your budget.
Finally, the last metric to measure cycle time. How long does it take to flow through the process to hit the forecast, then to close. Obviously, this is important since ramping up marketing will not result in closed business for a number of weeks or months. Knowing what that is kinda important. My experience is this a best practice and few organizations do this. Amazingly, many do not do this effectively on the sales side either.
Of course in today’s day and age you need to shift the lead flow from “outbound” to “inbound”. Separate story…
Let me know your experience, metrics, and best practices.
The End of the Beginning
Everyone has heard the expressions “begin with the end in mind” or “this is the beginning of the end.” However, two recent interactions struck me with a trend/behavior that is very common in the world of high tech sales: thinking the sales win is the end. Lot’s of effort and coordination go into closing a large deal, when it happens all who contributed (and sometimes many who didn’t) celebrate with high fives (or something more modern for the younger crowd). However, from a customer’s perspective this is just the beginning of the relationship, and in reality much of the hard work still lies ahead.
So what does this have to do with marketing? A few things: (1) it is always easier and more cost effective to market/sell to a customer, (2) Marketing (and often sales) too often ignore the value of customer information, or its close cousin prospect information they have locked in their CRM tool.
As I mentioned above two recent interactions reminded me of this situation. I recently interviewed someone for a customer care position. When I asked her about some recent experience she told about how she was the first hire for a customer care group in her last company, and they asked her to proactively reach out to their 300 customers, because no one else had the time. Huh? How does that happen? Sales was selling, marketing was marketing, support was supporting, nobody was listening?
Within the same week I had breakfast with a colleague, whose firm Leading Results, does marketing consulting for small high technology companies. I was describing how my thought process on the value of our lead generation programs was shifting from “finding new prospects” to ensuring “new prospects could find us”. My logic being that in looking at the sales pipeline, many deals has a lead source of “Knew of”, “Referral”, “Customer”. Dan also mentioned that many of his customers’ get their business from word of mouth and existing customers, but most of them do not focus on customers when marketing. So the obvious questions are:
- What are you doing to market to your customers?
- How are you leveraging data you have to build relationships that increase sales?
Please highlight successes or opportunities from your world.
Marketing 2.0 – What is Really New?
Social networking tools have completely changed B2B marketing strategy!!
I must get 8-10 e-mails, calls, and posts a week on how social networking is completely changing marketing, and with each one an expert offers their services on how they “can help me.” Even the term “Marketing 2.0” screams of a new approach and a paradigm shift.
When it comes to marketing strategy, this is pretty much hype. Solid fundamental marketing has not changed and includes
- Identifying a problem to be solved
- Creating solution with a strong value proposition for your target market
- Developing your positioning relative to competitive solutions
- Crafting the right messaging to your prospects and customers
This has not changed for years, and I do not see it changing any time soon. If you send the wrong message to the right audience, or the right message to the wrong audience you have wasted your efforts, and probably lost credibility with the prospect. In fact with the ease of communicating to prospects with social networking tools, the need for crisp, hard hitting messaging is even more critical in order to cut through all the other clutter.
So what impact do social networking tools have on this? Clearly they can be a huge asset in driving the tactics in support of the above. Specifically, social networking tools can
- Help identify common problems to be solved
- Catalog current options (competition) for solving a problem
- Provide a focused target audience for the messaging
Platforms like LinkedIn, Twitter, etc. can be excellent tools, but they need to be used as part of your marketing strategy, not take over.
