Account Segmentation How-To Guide

In our previous blog, we overviewed Account Segmentation, discussed the benefits, and shared why we often work with organizations on segmenting accounts based on Growth Opportunity and Current Value. In this blog, we provide our standard tool for segmenting accounts and share a brief “how-to guide” for using the tool. For access to the tool, click here. 

Account Segmentation Outcomes

Account Segmentations of this nature result in a matrix where accounts fall into one of four categories:

• High Growth Opportunity, High Current Value
• High Growth Opportunity, Low Current Value
• Low Growth Opportunity, High Current Value
• Low Growth Opportunity, Low Current Value

To determine which category to place an account into, we devised a process that allows for the objective scoring of accounts. For example, in the graph from the “Results” page of the tool (right), accounts scoring above a 25/50 fall into the high category of Growth Opportunity or Current Value.

Creating an Account Segmentation such as this requires 5 steps:

1. Define the Drivers
2. Build the Framework
3. Hold Workshops
4. Socialize Results
5. Update the Segmentation

Defining the Drivers

Each organization varies in the way that they define “Growth Opportunity” and “Current Value.” Naturally, some of the pieces of the definition remain the same (high profit accounts tend to fall into the high current value section), but many pieces differ. Using your unique situation, begin this process by selecting the factors that define these two terms for your organization (what makes an account valuable to you?). Some examples of factors that drive Growth Opportunity and Current Value include:

Current Value

• Profitability, Revenue, Costs of the account
• Reliability/Consistency of the account
• Industry Influence/Brand Name Recognition of the account in the market
• Alignment to Strategic Goals (e.g., is this part of a new segment or market you are trying to enter)

Growth Opportunity

• Potential Additional Revenue that could be received from an account
• Likelihood of Achieving that Revenue from an account
• Account Growth Trajectory – is the account growing their business and how that impacts their opportunity to your organization

Naturally, each one of these terms requires some explanation. We call the above items that define Growth Opportunity and Current Value “Drivers” and the various items that define those drivers “Contributing Factors.” Once you gain alignment on the Drivers, going one step further and identifying contributing factors of those drivers often helps clarify how to score the drivers.

Building the Framework

With the drivers defined, begin outlining the structure for scoring accounts based on those drivers. Consider three key scoring related questions:

• How many points should Growth Opportunity and Current Value be scored out of?
• How many points should each Driver be scored out of?
• What should each Driver score represent?

Some organizations prefer a scientific approach with each calculation carefully considered, others prefer more flexibility. Regardless of your organization’s preferences, keep the ramifications of the framework in mind as you build it. For example, scoring Current Value out of 50 points and scoring a Driver of Current Value out of 40 points results in a Current Value score that largely consists of one driver (40 out of 50 potential points on one driver, 10 out of 50 potential points on all other drivers combined). This style of weighting leads to the desired outcomes when used intentionally, however, some organizations fall into the trap of equally weighting each driver or over-weighting one driver, skewing the end results.

Testing accounts that we all agree should fall into one category helps to catch this mistake. Consider a highly valuable account with significant growth opportunity and use the devised scoring framework to ensure it falls into the High Current Value, High Growth Opportunity category. Test other accounts as well. Naturally, this method takes away from some of the objectivity of the framework, but it saves significant time in the development phase.

One final consideration when building the scoring framework; work to make the scores for individual drivers as objective as possible. As discussed above, many areas exist where the framework loses its objective nature; take the opportunity to inject objectivity into the driver scoring. For example, if your organization scores “Current Revenue” out of 10 points as a driver of Current Value, stagger the potential scores evenly (1 point – $0-$500K; 2 points – $500K-$1M…; 10 points – $5M+) and attempt to achieve a rough bell curve with each score containing a similar number of accounts. Being able to justify the rationale of the scoring system when introducing this to others will help achieve buy-in that the process is objective.

Holding the Workshops

Once created, use the framework to guide a series of discussions with key team members to score accounts. While some organizations choose to complete this exercise “behind closed doors” with select leaders, we recommend involving team members who work with or hold strong opinions related to accounts to achieve the alignment and standardization desired with this exercise. Similarly, involving team members creates buy-in for the output throughout the organization rather than forcing decisions upon team members.

Prior to holding these discussions, pre-score categories when possible. For example, rather than discussing an account’s revenue with the entire group, this can be populated beforehand to save time.

Socializing Results

Upon completion of the scoring workshops, review the account scores and create an easily viewed graphic to display where accounts landed. Ensure that all teams accept the categories of the accounts and the relative scoring (actual final scores don’t matter as much as how accounts compare to one another). Prepare teams to operate with the new prioritization in mind. This often poses a challenge when Low-Value, High-opportunity accounts receive priority over large, historically important accounts with little to no growth opportunity. Communicating the value of all accounts and the importance of accounts that land in the High Current Value, Low Growth Opportunity segment throughout the business supports in overcoming this challenge.

Updating the Segmentation

Accounts move throughout different categories over time. For example, an account that falls in the Low Current Value, High Growth Opportunity category today may move to the High Current Value, Low Growth Opportunity after a year or two of focused growth. Similarly, new offers move accounts from Low Growth Opportunity to High Growth Opportunity in some situations. Because of these changes, we recommend re-evaluating the account base every 6 months to identify movement and re-prioritize the business.

Conclusion

For an example of an Account Segmentation framework, click here for a copy. This tool combined with the above process creates a standardized, aligned, and well-understood account base for your organization to manage and grow. If you are looking for a case study of a client we worked with to implement this approach as part of its overall Commercial transformation efforts – check it out here.