With Joe Andrews
Customer segmentation can be a great tool to refine your Go-to-Market strategy, but it’s often underused.
But with four simple steps, you can unlock your GTM potential:
- Determine your ICP (Ideal Customer Profile)
- Build out your TAM (Total Addressable Market)
- Ensure you’re targeting the right personas
- Measure success and iterate
Once you've defined your ideal customer profile, and your TAM, you can think of this as the launching off point for pricing and packaging strategies, product launch or messaging and positioning, all core ingredients for GTM success.
So let’s take a more detailed look:
#1 Determine your ICP (Ideal Customer Profile)
ICP doesn’t need to be company specific, it can be business unit, product line or market specific. Many companies, especially larger and more mature companies, have multiple ICPs.
Conceptually, determining your ICP is very simple. The Challenge is the actual process in accessing the data, which is a three step process:
- Decide on key performance indicators that determine ‘best customer’ (ACV, LVT,CAC).
- Assess the attributes that can identify and predict an ICP match:
- Firmographic (revenue, number of employees, industry, geography)
- Demographic (people, understanding the personas you're selling to)
- Psychographic (how your prospects are thinking about certain things)
- Behavioral (what signals can you identify in the market that they're actually doing?)
3. Analyze your customers by those attributes to come up with your ICP.
We evolved from looking at the customers we were winning the most of, to the customers we were retaining and upselling over time. In any SaaS business, it costs a lot to acquire customers, and the more you can do to make sure that you're renewing them, retaining and growing the value over time, the better.
We looked at firmographic, industry, geolocation, and number of sales reps; our primary value prop was to feed intelligence into the selling process.
We also looked at growth rate and how companies that are very focused on growth have a need to optimize their Go-to-Market performance.
Then, we looked at some of the behavioral and psychographic attributes like use of competitors’ products and relationships. It's always good to get in the door to a conversation through a warm introduction and then upsell and cross sell potential.
And lastly, we looked at buyer intent surge. Those buyer intent signals are very useful once you find your ICP to prioritize and figure out which ones are most likely to buy.
We ended up with four segments based on our most important performance indicators, which are renewal rate and retention: the decliners (going down in both categories), the idlers, and re-evaluators, but ultimately we want to focus on the expanders (increasing performance on both axes). This gave us a view to be able to make decisions to target these segments.
As a result, within the period of a couple of quarters, we figured out which industries were the best prospects for us.
#2 Build out your TAM (Total Addressable Market)
In the second step, we want to map our ICP against the third party data of the entire universe to figure out what our whitespace is (markets we hadn't touched yet). Turns out, they were the best prospects for us.
At first, this was a manual and very complex process. For us, it took three months and we had to ship a lot of data over to our engineering team. At the end of it, we were able to define the industries and apply the other attributes that are the right segments for us to go after, but it took a while.
Data silos and manual processes are very hard to deal with. In a segmentation project, typically you're involved with a data analysis team. Depending on where it started, you might be working with a corporate strategy team.
I’ve had experiences where our TAM would sit on a spreadsheet and never make its way down to the revenue teams - sales and marketing - who were actually driving revenue execution. So there's a lot of disconnect there in terms of the processes and the organizational silos.
Secondly, the form factor of having data in spreadsheets has a profound business impact. A lot of it is focused on revenue growth and this is what product marketers should be championing (revenue, growth, time to market).
In fact, sometimes time to market isn’t limited by your engineering team, but by you identifying the right segments to go after. There's also a lot of opportunity to improve cost and efficiency with the use of your data to drive segmentations.
#3 Ensure you’re targeting the right personas
In our use cases, we found that over two thirds of our ideal targets had three different departments engaged. The number of influencers in a group buying process now in b2b has gone up to over 10 people.
As b2b marketers, we have to be aware that we are pursuing multiple personas and understanding the interdependency between your decision maker, your influencers, your champions, etc. When you're developing your targeting strategy, it's important to identify those targets upfront, as best as you can.
To reiterate, don't forget about the personas!
#4 Measure success and iterate
If you've determined your ideal customer profile, mapped it against your total addressable market, have a plan of who the best segments are and the best accounts to go after, how do you ensure that you're successful with this new Go-to-Market and segmentation approach?
There are two primary goals:
- Engagement goals: leading
- Financial goals: lagging
When you're shifting to more of an account based focus, you're shifting from leads and MQLs (marketing qualified leads), you're really narrowing the audience and you're also focusing more on engagement.
Then, as you get further down the funnel, the financial goals are more focused on increasing win rates, our average selling price or broadening relationships with the accounts.
These are a few examples but I urge you to have conversations with your executive teams and other stakeholders around what are the right metrics for your organization.
Summary
- Determine your ICP, this is most critical.
- Build out your TAM and clone your ICP against it; find the best fit opportunities that you can help your company target and do it on a regular basis. The market dynamics are changing, the competitive dynamics are changing and your product is changing. Don't set it and forget it!
- Ensure you're targeting the right personas.
- Determine the right success metrics, actively measure them and iterate. Don't measure things for the sake of measuring, measure the things that actually improve the business. And again… don't set it and forget it!
How to improve your Go-to-Market strategy
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