I was recently challenged an interesting way to think about B2B customer segmentation to drive profitability and growth.  Many people are familiar with the Growth Market Matrix (Cash Cow, Dogs, Stars and ???) that Bruce Henderson developed at BCG.   I decided to take this thought process a step further and apply the principles to customer segmentation in the B2B world.  It’s worked quite nicely with a few clients to determine where to focus energies that will lead to growth and profitability.

The premise behind the growth matrix is that every business can be placed in to a quadrant to effectively manage a portfolio of businesses.  Similarly, for B2B strategies, B2B customers can be placed in to similar quadrants to determine the level of sales, marketing and development investment with the top accounts to deliver growth and profitability.  Here’s my take at the customer segmentation side.

Invest in the Stars For B2B companies, identifying customers that have huge market growth potentials where you have a dominant share of business with them today are perfect accounts for growth and profitability.  As these companies add resources, make acquisitions and organically grow their businesses, opportunities will abound to grow your revenues with customers like this.  These accounts have more of your products/solutions to purchase, offer other parts of their organization to penetrate, and provide many opportunities to build relationships and prove your value.   What is even better is that the marquee “star” accounts will have incredible growth stories that you can leverage to help you sell the next set of “star” accounts.  These are the places to spend your time, invest in the relationships and over deliver with every opportunity you have to ultimately drive revenue growth and profitability.

Protect the Cash Cow These are the customers that are in mature markets and have revenue growth leveling off and buy most everything you have today.  They’ve been with you for a long-time and are typically highly profitable since you mutually understand value delivered and have created efficiencies working together – but they will be cost conscious and continually expect you to deliver more with each new order or renewal.  The opportunity is to focus on account retention by delivering new ideas that drive efficiencies in the way you work together.  Often marquee customers are included in this group that provide an organization with clout and credibility and are advocates to help an organization acquire more customers.  With the cash cow accounts, focus on the top revenue accounts and make sure you don’t lose them.

Walk the Dogs This is an area I find most companies waste valuable resources and have the biggest challenge in determining what to do.  They are the accounts that are small, have limited capacity to grow, milk you for every dime, complain about everything you do for them, aren’t very profitable, and suck the life out of your resources.  Realizing these customers aren’t going to improve or align with your plans for growth and profitability is the first step in deciding what to do with these accounts.   I encourage companies to think about divesting of these customers, or at a minimum, place them in maintenance mode and consider them to be a “wind-down” business.

Acquire the Sweet Spot Question Marks The questionable accounts are those that don’t know much about your company and/or purchase very little from you today.  Smaller accounts can be a waste of time and resources, but those that are of the right size and in markets where you have a strong value proposition represent the greatest opportunities for acquisition growth.  My recommendation is to use a dual approach to these accounts.  A top down approach with your executive team to connect with the highest level decision maker possible, and a bottoms-up approach with your sales team to increase your growth prospects with these accounts.

Leverage this strategy to drive growth with your top accounts!

As a follow-up to the poll I ran on the LinkedIn group for CAB.org, this blog addresses the 2^nd biggest challenge for Customer Advisory Board (CAB) Program Managers – agenda design. I'd like to share a few best practices we've developed to help bring together an agenda that ensures value for all attendees.

 When designing an agenda, we break down session content into four buckets:

1. Identify what you want to learn from your members. Your Executive team should determine the most important issues/areas to gain member feedback. Frame the discussion around the 2-3 key questions you’d like the members to answer.  This allows for a natural dialog among the group. 
2. Determine what you need to inform members about. Provide a strategy update on your company including areas you are considering pursuing, etc., and allow time for Q&A. These business level discussions give members an opportunity to fulfill their role of “advisor.”
3. Understand what members would like to learn.  Survey members a few months prior to the meeting on topics they would like to see on the agenda. Consider having 3 or 4 members participate on a panel discussion on one of those topics.
4. Make time for peer-to-peer learning/networking. Incorporate time for members to learn from one another, and include a fun team-building activity or experience that everyone can enjoy.

Designing an agenda with a mix of these four areas makes for engaging dialog that will be mutually beneficial to the members and the host team.

The Institute for the Study of Business Markets (ISBM) is a center of excellence in the Smeal College of Business at Penn State that is dedicated to expanding academic research and teaching in B2B Marketing and Sales, and improving the practice of B2B Marketing and Sales in Industry. ISBM is networked with researchers, educators and practitioners in business-to-business marketing in companies and universities throughout the world.  

Please join the ISBM and National Bestselling Author Sean Geehan for a special webinar event:

Dominating the B2B World: Sustainable, Predictable and Profitable Growth on March 22, 2012 at 1pm EST

In this webinar, Sean Geehan Author of the B2B Executive Playbook will illustrates the three key differences in the B2B world along with what to do about them. B2B companies aren’t like B2C companies. They don’t acquire and retain customers with Super Bowl ads, Twitter accounts, or cute, little green geckos. To achieve sustainable, predictable, and profitable growth, you MUST follow a different playbook.  

1. Do the match-up analysis. Take time prior to the meeting, perhaps en-route to the meeting destination so it’s good and fresh, to review the profile and photo of each member. Knowing each member's responsibilities, background, and interests will help you connect with them on a more personal basis and help you introduce them to their fellow Council members. Additionally, during the Prep Session, assign an executive to serve as “host” to 1-2 Advisory Council members, especially if they are new to the group.
2. Know the stats. Review company profiles, financials, recent news and press releases, and have an understanding of the volume and types of business they do with you. This information will help you better understand their perspectives on key issues discussed during the meeting.
3. Identify the 1-2 things to win. Since these are your top customers, chances of good that you have deals pending. Know what they are, what it will take to win them, and any other opportunities that may be coming your way.
4. Calculate the risks. Likewise, know if there are any unresolved customer-service issues that may come up in conversation. You don’t want to be caught off-guard and ill-prepared to address them if they do.
5. Understand the game-changers.  Know who the other key leaders are and how your Advisory Board Members may influence them. 

Every year at this time, you hear all of the hoopla around one of Pennsylvania's most recognized residents - Punxsutawney Phil. I always end up laughing as my mind then shifts to Bill Murray's classic performance in the movie Ground hog's Day. We all know the premise: a guy gets to "re-do" the same day over and over and over again, but discovering little nuances and trying new things along the way, in order to get to the outcome he really desires (to get the girl).

In business, wouldn't it be great if we had that ability? Not to 'get the girl', but to be able to see every possible angle before we execute. Every strategy, every sales call, every marketing campaign, all fully vetted through numerous attempts of trial and error. Well, of course we can't really do that. Not exactly anyway. But, we do have some terrific  'guidance' tools at our disposal: personal experience and the collective experience of our customers.

When setting strategy, designing a marketing program or campaign, or virtually anything else, our own personal experience can be a directional guide - allowing us to move generally in the right direction. By leveraging the collective experience of others - our peers and most importantly, our customers, we can fine-tune our direction, exacting a path to success. The experience of the collective is akin to the trial and error in Ground hog's Day, only we didn't have to experience it ourselves. Customers will (in one form or another) tell us everything we need to know. We just need to provide a forum to enable us to listen.

Sometimes in business it feels like many companies are caught in the same loop - making similar mistakes over and over again. Progress and growth have slowed, and there can be a sense of frustration. Organizations that actively engage and listen to their customers (or collective) are breaking out of these never-ending loops and are thriving. What path is your company on? Start your journey by answering this question: "Are you actively listening or are you living in your own Ground hog's Day???"