Business Development

 

Segmentation Part 1: Why It Works

Segmentation is a practice that many successful companies incorporate with regard to their clients as well as to their referral sources. It directs the division of tasks and activity in a manner that drives efficiency, effectiveness and profitability by focusing on the company’s best relationships. By doing so these companies no longer waste time, resources or energy on those clients or referral sources that are essentially costing them money with no real upside. This is the first in a series of short articles on the implementation and benefits of incorporating segmentation into your business.

So why do you waste your time on those clients that consistently send you late and/or bad information, are unpleasant/demanding and don’t pay timely or referral sources that don’t respect you, that always have rush requests and that spreadsheet your firm as part of their due diligence process? Take the time to reevaluate your clients and referral sources, identify those that are good, profitable relationships and those that you should no longer work for or with. The segmentation process rates and ranks clients/referral sources based upon positive characteristics associated to them and then places them into a category determined by the number of characteristics met. The typical segmentation categories are defined as A, B, C and D with A being your best.

Segmentation provides clarity to all staff members as to the importance of the specific relationship and the type of service or activity model that is afforded to them. The incorporation of documented models associated with a category creates efficiency in execution which leads to greater profitability. In addition consistency in the customer experience will increase retention as well as new business opportunity, because a satisfied client will lead to a satisfied referral source.

Stay tuned for next week’s edition on how to begin the process for segmenting both your clients as well as your referral sources

TEN STEP GUIDE

SEGMENTATION – WHY IT WORKS

Segmentation is a practice that drives activity and service focusing on your most successful relationships and keeps effort at a minimum for those that are less profitable.

So what are the ten things you should consider in the decision to incorporate segmentation of relationships and the development of service and activity models that are customized by segment?

1. COST

  • What is it costing you for time wasted on unproductive or unprofitable relationships? Consider the extra time required by unprofitable relationships and plan design illustrations developed for proposals that go no where.

2. INCREASED NEW BUSINESS OPPORTUNITY

  • By focusing activity and support on your best referral sources your firm will increase new business opportunity, by expending effort only where it really counts

3. EFFICIENCY

  • Documented service and activity models make it easier for staff to execute tasks as they know exactly what is expected/required for a particular relationship

4. RETENTION

  • You want to keep your best clients, so make sure you pour on the love by developing a service model that exceeds their expectations

5. CONSISTENCY

  • You will know that your clients are receiving the service they deserve on a regular basis
  • Your referral sources will know what to expect and your staff won’t be wasting their time with those individuals that are less productive

6. CONNECTION

  • Your firm will develop better, deeper connections with your best relationships because you spend more time with them instead of being distracted by those that waste your time

7. PARTNERSHIP

  • This is similar to connection but is really about your referral sources; by focusing on them, spending more time with them, your firm will have the ability to develop relationships that are partnerships in which all parties respect, work with and rely on one another

8. CLOSE RATIO – increase it

  • By focusing your sales efforts on your top referral source relationships you will increase the overall close ratio on proposals generated

9. INCREASED PROFITABILITY

  • Your firm should experience increased profitability as efforts are focused and expended on your most successful relationships

10. TRACKING

  • Your contact management systems will need to accommodate the segmentation category assignments so everyone at your firm will know immediately what level a relationship is and the services and activity that is to be employed or not

A series on Segmentation By: Laura S. Moskwa

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