Lessons on Customer Segmentation & Lobster Rolls

August 30, 2017

Marley Wagner

Category: Customer Segmentation Strategy, Customer Success as a Service, Customer Success Strategy, Virtual Customer Success Management

I traveled to Boston earlier this month for Customer SuccessCon East, along with our CEO Michael Harnum. It was a great opportunity to learn from some CS veterans, make new connections, and enjoy a killer lobster roll. There was a lot of buzz about a myriad of topics from CS operations to proving the value of your CS team to company leadership. One that resonated with me the most, however, was around segmentation. How should we be segmenting our customers?

It’s coming up a lot in conversations I’m having with CS leaders as well – they’re unsure that they’re getting segmentation right. If you’re asking yourself these questions, you’re not alone, and hopefully, some of my takeaways can help you make sense of the segmentation chaos.

Traditionally, tech companies have segmented their customers by contract value. That’s an easy way to do it, right? The customers that pay the most get put in the top customer segment and are smothered with attention. On the other hand, the customers that pay us very little receive little to no outreach. Makes sense, right? Wrong. Segmenting customers by how much they pay us is an outdated approach.

Within the last few years, we have seen Customer Success mature into a sophisticated business function. So, we must elevate the way we are thinking about segmentation as well. We have to dig deeper and understand our customer’s journey better than ever before.

A good place to start is with the customer journey. Talk to some of your best customers across all segments. Talk to your CSMs. Understand what an ideal journey looks like for different groups of customers, from start to finish. As you go through these exercises, your segments should begin to take shape.

Other factors to consider…

  • Contract Value: Yup, we can’t forget about this one entirely. It’s an important factor to keep in mind, but there’s so much more.
  • Industry: Do you have customers in certain industries that function differently, behave differently, renew differently than others? Segment accordingly.
  • Line of Business: Do you have multiple product lines with inherently different lifecycles and different challenges along the way? Segment accordingly.
  • Growth Potential: If there is potential for growth within a group of customers, segment accordingly. But it doesn’t stop there! Dig deeper. How long is it going to take to realize that growth? Six months? One year? 2+ years? Segment accordingly.
  • Geography: Do you have customers across multiple time zones, or different countries, with CSMs traveling to meet them? Segment accordingly.

Whether you’re just getting started with segmentation, or are re-thinking your existing structure, I’d challenge you to think beyond contract value and dig deeper.

Learn more – Get some great tips on customer segmentation from Sixteen Ventures here.