The Importance of Account Segmentation for Customer Success

July 28, 2019

Marley Wagner

Category: Customer Experience, Customer Success as a Service, Customer Success Resources, Customer Success Strategy

You wouldn’t shop for furniture at the grocery store. You wouldn’t ask your accountant for help with child care. Why? Because there is a method to breaking things apart into what makes sense. Customer segmentation isn’t all that different. It makes sense that we divide our customers and prospects into various groups based upon their specific needs or shared characteristics. People are all different, so catering to one client is not going to be effective for all other clients. These distinct separations help B2B businesses to connect customer needs with characteristics.

If you’re not sure where to start, remember that there are massive resources within your company: any sales, marketing, or support team worth their salt has done significant legwork on building out buyer personas, customer profiles, and addressable pain points. Before you reinvent the wheel, give these other departments a shout for some information sharing.

Segmentation drives how you engage with customers, who is working with them, how you create customer journey maps, and how your customers are being marketed to — appropriately segmenting them is critical to fostering Customer Success and more broad business success.

Approaches to Segmenting Your Customers

There’s no one-size-fits-all approach to segmenting your customers. One initial segmentation technique that seems obvious but is often overlooked is to determine what’s contained within the definition of “customer” in the first place. Is your customer an entire company, or is he or she a single decision-maker within that company? Are you working with a department within a company? What if you’re working with multiple departments within a company — does that make your customer the company itself, or do you have multiple customers under that company umbrella? Once you’ve defined who your customer is, you can take segmentation a step further.

It often makes sense to begin with value-based segmentation and extrapolate from there. The key thing to keep in mind is that segmentation is fluid — customers’ needs change, their retainer levels could shift, and more. Hence, all three approaches detailed below serve a purpose in appropriately segmenting your customers.

  1. Value-Based – uses a customer’s economic value to group others with the same value level. The challenge in using this approach independently is that it completely discounts individuality — only grouping people by their monetary value may work for your very largest enterprise clients, but adding an understanding and prioritization of pain points is essential. Also keep in mind that a company may be a lower recurring revenue client today, but could be on the brink of huge growth or could be a strategic partner tomorrow.
  2. A Priori – uses publicly available information such as company size to separate. The challenge with a priori segmentation is that many companies that have the same size businesses do not necessarily have the same needs. A national hotel chain is not looking for the same things as a national non-profit organization. While a priori can give you a very high-level way of understanding your customer and may be a helpful layer when piecing together your segmentation strategy, when used alone it lacks the nuance that needs-based or value-based segmentation can provide.
  3. Needs-Based – uses various, validated drivers (needs) expressed by customers concerning a specific service or product. This involves market research and helps a company to split its customers into groups based upon what they are in need of rather than simple characteristics.

As you can see, it’s much more complex than simply segmenting by recurring revenue, business size, or expressed need. But once you’ve defined your customer and thought through some approaches, it’s time to dig in and start sorting into buckets.

Look at your customers by vertical, product line, product suite, and similar. What’s their retainer level? What are their needs within that vertical? How do they rank compared to other customers within that vertical or using that same product suite? Stack that against their financials — are they a large company? Medium? Growing?

Once you have a rough sketch of how the company compares to others or has its needs serviced, it might make sense to organize further based on region, recurring revenue, product, or vertical. Keep in mind that your approach to segmentation will determine how your company markets to individuals within that vertical, region, or other classification. Segmentation drives your strategies for growth, your customer journey mapping, your investment (both financially and time-based) in each customer, and so much more. Tailoring your approaches to each customer’s needs helps them succeed, which in turn helps your business grow.

Building on Segmentation

Segmentation can help with organizational alignment and things like Tech Touch strategies or email workflows, but its value extends far beyond that alone. Once you’ve determined your customer segments, you’ll be able to determine your approach to people within those segments. Who on your team, for example, is responsible for upselling or cross-selling? Does this particular account require a strategic account manager or dedicated Customer Success manager? And if so, what’s an appropriate number of customers for that dedicated CSM to handle? Depending on your ratios, that number could be anywhere from 10 to 100. Or can this account be part of a pooled CS model, where a CSM may work with 1000 customers or more?

If you’re leveraging a Tech Touch strategy, segmentation can also help you determine the ideal mix of high-touch and Tech Touch for each account, based on their segment. Even hiring and organizational structure can shift based on your segmentation model and the needs of the customers within each of your designated segments.

You may notice that the helpfulness of certain KPIs can shift dramatically when segmentation is re-evaluated. For example, your metric for churn may shift from a dollar-based approach to volume-based. If a certain customer experiences higher churn because it provides a time-bound or needs-based service, it’s likely not going to be effective to approach that customer with strategies for reducing churn at all costs. Rather, that company would benefit from a more nuanced approach to balancing churn with revenue growth.

And, again, segmentation is built to be flexible. Customers will change segments — maybe they upgrade or downgrade, perhaps they build out a new service that needs additional support, or maybe two different departments you’re working with merge. Once a customer shifts segments, they way they’re marketed to and their interactions with your company will naturally shift as well. Change management is essential, and segmentation can make the transition much more fluid.
When you segment customers appropriately, you’re better able to provide content and assistance that’s relevant — not just noise. For example, companies that are able to target their customers who are struggling with onboarding are then able to leverage Customer Success strategies like education and proactive assistance. Onboarding is extremely important to building a strong foundation for your new customer relationship. The more comfortable a customer is with the tools that you are offering, the more often they will utilize it. Those who utilize your product or service are less likely to terminate (yes, we’re talking about churn again).

By segmenting your customers in a smart, thoughtful manner, you will be better able to gain insight and make predictions about value realization and renewal likelihood. While many companies neglect their mid- and low-tier customers in favor of nurturing only top-tier customers, segmenting by need can help your business uncover those un-polished diamonds in your bottom 80%.

Segmenting also allows for greater personalization. A customer who needs help maintaining their CRM does not need content about warehouse efficiencies. According to the 2019 Trends in Personalization Survey Report, 98 percent of marketers report that personalization helps to advance their customer relationships, while 70 percent say it has a “strong” or “extremely strong” impact. More than half (58 percent) experience a measurable increase of more than 10 percent. However, only 16 percent are “very” or “extremely” satisfied with the level of personalization they provide. Without customization, the customer experience remains quite impersonal.

Content vs. Context

Imagine a large business receiving content directed to a small business, or sending content for a customer with great onboarding needs to long-time customers. In the same vein, sending content geared towards customers who have been around for years to those who are struggling with something like onboarding can make for a poor customer experiences for new customers. The context in which content is sent can be the difference between making customers feel like a number versus making them feel valued.