A few weeks ago, my business partner Jon and I met with an impressive crew at an industrial distribution company. This group – a combination of C-Level, Sales and Marketing folks – had a really strong pulse on where to focus their business-growth efforts in the foreseeable future.
To brief us on their customer segments, they pulled up an ultra simple, yet very powerful four-quadrant graph that provided the inspiration for this article. Here’s what it looked like:
(NOTE: I later learned this model was based on the “Customer Stratification” concept developed by Dr. Barry Lawrence at Texas A&M. And although it was designed for industrial distribution, I firmly believe its applications extend into other industrial sector business models as well).
As their team began describing the characteristics of their customers in each of the four quadrants, I started thinking about the marketing implications for each.
Here’s where my marketer brain led me.
The top right
In the top right are your ideal customers. These are the ones who not only buy in high volume, but also buy the right (most profitable) products and/or services. From an operational standpoint, you’ll protect these customers. You’ll work hard to delight them and assure they’re taken care of – because replacing them is both difficult and costly.
From a marketing standpoint, two key implications stem from the top right.
The first relates to Positioning.
Simply stated, you want to construct your company’s Positioning around the characteristics of these top-right accounts so you’ll attract more that look like them.
When your Sales team describes who your company serves, they should paint a picture of businesses like these. When you document case studies, tell the success stories of these companies. And when you publish problem-solving, question-answering content in your company’s blog or Learning Center, focus on the problems and questions that you see at these types of accounts.
The second marketing implication stemming from the top right relates to Lead Generation.
Any time you can clearly articulate who your ideal customer is down to the finest details (and you also know there’s market share to be won in that segment), it screams account-based marketing to me.
So build a physical list of target accounts (and the buying process influencers at those businesses) that resemble your customers in the top right. Construct a joint campaign between your Sales and Marketing teams to reach them through multiple channels (email, direct mail, hyper-targeted digital advertising, etc) and multiple touch points. Then go get ‘em.
The top left
Here’s where you’ll find your biggest growth opportunities.
They’re already customers, so they already know you. And if they already like and trust you too, then they’re poised for growth. Regardless, these customers are buying the right stuff – just not enough of it. (Or at least not yet!)
Is your team committing sufficient time to the top left – focusing first on retention and then growth of these accounts? If if not, why?
In his recent book Never Lose a Customer Again, author Joey Coleman references a key finding from the 2017 edition of the annual CMO Survey (conducted by the Fuqua School of Business at Duke University, Deloitte LLP, and the American Marketing Association):
The average business spends 6.9 percent of total company revenue on marketing—and yet less than one fifth of that total spending is dedicated to customer retention activities.
So operationally, invest your time and energy into learning the ins and outs of your customers in the top left. Develop a deep understanding of their organizational challenges and goals. Build strong relationships inside of these companies with a variety of individuals. Expand your reach to different departments. Find ways to make yourself an indispensable partner that creates significant value in these customer relationships.
Marketing’s contribution to all of this should be Lead Nurturing. And my favorite recipe is exceptional content + email. Though neither is a replacement for a great product and exceptional service, they’re the perfect complements.
A customer-centric newsletter filled with legitimately-helpful resources (rather than promotional messaging about you) is a great place to start. Just as you’d expose prospects and leads to resourceful content that answers their questions and helps address their biggest problems, do the same for your existing customers in the top left.
Sometimes these customers see you as nothing more than the preferred vendor of what you currently sell them. So earn their full attention and strengthen their trust by demonstrating your expertise. Before you know it, those in the top left will have migrated into the top right.
The bottom right
In the bottom right are your wild cards.
When your margins are super thin, high volume can be a bad thing. These customers will quickly drain your resources as your Account Managers and Sales professionals burn through valuable time just to keep them on the roster. If this is your reality, you’ll need to decide quickly whether it’s feasible to migrate them North into the top right quadrant. If not, it may be best to cut them loose.
Now, I said these companies are wild cards because it’s also possible that the bottom right is feeding you while you sleep – via an e-commerce site or a customer portal where they can serve themselves. In these cases, thin margins at high volume may actually make the bottom right a growth area.
Regardless, if you’re committing significant resources to the top of the graph, it’ll be tough to give enough to the bottom right.
So if there is a marketing implication here, it’s Lead Nurturing.
What can you do through marketing automation – via email and content to develop these customers in the background, while your Sales Professionals and Account Managers commit their time and energy to the bigger opportunities up top?
The bottom left
Finally, in the bottom left, we can pay off this article’s title. When customers are low margin and low volume, they simple may need to go.
Operationally, this could mean making a courageous decision and proactively breaking up. Or it could translate to letting them walk away on their own as you evolve your offering and pricing.
The Marketing implication here is about Positioning.
Just as your Positioning needs to help you attract more customers like those in the top right, it should also detract those who’d fall into the bottom left.
When you eliminate low volume, low margin customers, you open up resources to focus on the top two quadrants. And that’s where growth happens.
So here’s your simplified marketing plan
There you have it. Now it’s your turn.
Sometimes it takes an exercise like this before the lightbulb goes on. So I encourage you and your team to give it a go.
And when you’re done, go fire a customer or two. I dare you.