At the highest level, B2B organizations grow in two different ways; through expansion of their existing account base or through acquiring new customers. In this blog, we focus on the former, sharing a methodology for identifying growth opportunities within an organization’s current account-base.
What is Account Segmentation and Why is it Important?
Not to be confused with Market Segmentation, Account Segmentation is the process of grouping existing accounts into categories based on similar attributes. The entire business often organizes accounts in different ways (e.g., by market, by product purchased, etc.) to meet the needs of individual functions. Our view of Account Segmentation is not to replace that, but instead, to apply some organization-wide objectivity around 2 key elements that help the organization prioritize scarce resources (including top talent) and pinpoint where growth opportunities exist. These two categories are:
- Current Value – what an account is worth to your organization today. This would typically go beyond revenue generated and would include value of that brand relationship, level of effort to manage the relationship, and many other things that are often felt but rarely quantified.
- Growth Opportunity – what an account could be worth in the future. This is the area to capture the elements that rationalize why it is worth it for the organization to “over-invest” in a smaller account, because of the potential payoff that could come later. This would factor in not just the ability for an account to spend more with your organization but their propensity to do so.
Regardless of the specific characteristics used to assess Growth or Value, Account Segmentations drive the following outcomes:
- Alignment – Many businesses treat some accounts differently than others based on inconsistent criteria and evaluators (e.g. one team deems an account critical while another team labels the account as unimportant). Organization-wide Account Segmentations provide a forcing function for discussing, aggregating, and documenting results of an accounts’ overall importance to the business.
- Standardization – Although each account’s needs vary, scoring and measuring these accounts allows organizations to identify common activities, levels of investment, and talent requirements across different accounts. For example – high-value, but low-opportunity accounts are very important, but should be treated differently than low-value, high-opportunity accounts.
- Current State Analysis – Account Segmentation provides a picture of what the business should focus on, including key customers and markets. This view can then be regularly updated to reflect both the current state and your ability to impact an account’s Value or Opportunity.
Using Account Segmentation to Identify Growth Opportunities
The above characteristics make Account Segmentation an effective tool for identifying growth opportunities (easier to overlook than Value, since the revenue number is often the biggest driver of Value). With effective Account Segmentation, organizations align on where growth opportunity exists, determine how best to work with those accounts to realize the opportunity, and understand what can truly be done to drive growth for those accounts and the organization.
However, organizations rarely approach growth opportunities in a vacuum. Typically, organizations must heavily weigh an account’s current value, sometimes even more so than an account’s future potential for growth, when allocating scarce resources. Consider the following question to identify where your organization falls on the spectrum: Which is more important, a medium-revenue, low-maintenance, high-margin account with low growth opportunity or a low revenue account with the potential to grow to become your largest account?
Using Account Segmentation to Manage an Account Base
This question plagues most organizations we interact with. With limited resources available, organizations struggle to prioritize past the most obvious accounts. Account Segmentations that consider Growth Opportunity and Current Value not only allow organizations to align on the most important accounts, it also brings the necessary team members together to identify the highest priority growth opportunities and begin discussing the activities needed to capture that growth.
Grouping accounts into categories: High-Value, Low-Opportunity; High-Value, High-Opportunity; Low Value, High Opportunity; and Low-Value, Low Opportunity; can provide you with a framework to apply rules with how you deal with those types of accounts and which ones get priority from which functions (e.g., Account Management resources get deployed to High Opportunity accounts, but top Customer Success/Support resources get applied to High-Value accounts). This also gives you a simple category to refer to them internally so that everyone shares the same objectives for an Account (e.g., Defend & Protect, Invest for Growth).
Conclusion
Account Segmentations based on Growth Opportunity and Current Value provide organizations with the framework needed to effectively manage their account base and determine how to interact with it for maximum results. Team members align on which accounts receive the highest priority, how to work with them, and the actions needed to achieve growth. In our next blog, we will provide our Account Segmentation tool and share a brief how-to guide explaining how to use it.