Top 3 reasons for B2B Commercial Directors to make an industry segmentation of their customers

05.09.2018

For B2B companies, there is a big potential to increase your profitability by understanding how much value you can create for your customers. Let’s take a look at how this can be done in practice and how you can turn your product oriented sales reps into value based sales professionals.

1. Capture the whole market as your customers in the same industry will have similar needs for your products

By systematically comparing your sales to the different customers in the same industry you will find that some of them are using your products in more applications than others. This means that you have a potential to grow your sales with the customers that are not yet using your products in all their potential applications.

In order to grow with these customers you need to understand why they are not using your products. Do they use similar products from the competition or do they utilise another technology? If they buy from a competitor you need to work on your service, quality or price. If they, on the other hand, use another technology you need to convince them about your solution. In these cases you need to make sure that your sales managers are aware of the value that your solution is creating compared to the alternative solution and is capable of pricing your product accordingly. 

 

2.  Increase your revenues as your products offer different value to your customers in different industries

Your products will offer different value in different applications. This means that some of your customers will be ready to pay more for them than others. 

The same high strength steel plate can be used in a bridge and in a trailer. It will in both cases allow for a cost reduction in the production phase. In the case of the trailer it will also generate an opportunity for increasing the revenues as the transporter will be able to carry more goods thanks to the lower weight of his trailer. As the revenues are generated during the whole service life of the trailer these benefits will be far greater than the cost savings in production.  

As the value of the steel plate is far greater for the trailer owner he will be willing to pay more for it than the bridge builder. 

If you segment your customers on the products they are buying you will miss the opportunity of pricing your products according to the value they are generating for your customers. A customer segmentation by industry on the other hand allows you create a relevant offering for the customers and differentiate the price between your customers in different industry segments.  

3. Turn your sales reps into value based sales professionals with targets to grow in the most attractive segments

Most Business-to-Business companies have a big potential to improve their sales by developing the sales argumentation of their sales reps. These are often developing their own stories based on their experience and as there is usually little structured exchange between them they are not able to learn from each other.

By building a simple application map with all the relevant applications for an industry together with quantified cost and revenue benefits for each application your sales reps will be able to switch the dialogue with the customers to their products and discuss how your products can make them more efficient.

The sales reps will go through the application map with their customers to assess their share of wallet and how many of the potential parts the customer is actually buying. They keep track of these data and after some time the organisation will be able to build their battlefield map.

The battlefield map is a chart with your market share, growth potential and a profitability indication by segment for all your geographical markets.

The Battlefield map allows you to direct your sales to the most attractive segments and markets and optimise your profitability. You can read more about Battlefield maps here.

Many companies make big investments in new machinery and product development only to find that the sales of the new products increases much slower that promised in the investment case. This happens when the company does not realise that you have to make some investments in the sales organisation as well. Usually you do not need more sales people but the people that you have need simple tools they need to be followed-up by their management on the sales of the new products.

In 3S we have models for creating both Application maps and Battlefield charts that will help you to create a sales strategy out of your company strategy and ensure that local sales managers are able to manager their sales reps efficiently more importantly to take the strategy from power points to revenues.

 

Lasse Johansson

Lasse Johansson is working as a Senior Sales Consultant and has a background as General Manager and Commercial Director in big, multi-national stock listed companies in the process industry. He has extensive experience from working with a wide range of customer segments such as Automotive, Mining, Construction equipment, Pulp and paper, Oil and gas, Liquid packaging and Consumer goods packaging.