My name’s Joe Andrews, and I'm here to talk about using customer segmentation to help with your go-to-market strategy. A go-to-market strategy means different things to different people, but here I'm talking specifically about what market segments you go after, to help drive revenue and improve company performance.
My experience has been primarily in B2B, so I'm going to focus on that, but there are some elements here that you can apply to B2C as well.
A little bit about me
I consider myself a storyteller and I focus on those skills because I think that's so important in terms of being a part of the product marketing mix. I've spent almost 20 years doing product marketing at companies including Intuit, VMware, Zuora, and currently at InsideView.
InsideView, for those not familiar, is a B2B intelligence company that helps other companies be more focused and targeted in their go-to-market approach, which is a good topic for this article.
A quick disclaimer: I’ll try to refrain from this being an InsideView commercial, but I'm going to draw examples from our own experience, as well as those that we've learned from our own customers.
I have a lot of passion for data, and AI is the newest buzzword, but there is a very pragmatic way of bringing data in, both your own first-party data and third-party data, to help you understand your market and be better about making decisions. So, that's what I’m going to talk about today.
An overview
There are three topics that we're going to cover:
- The case for change: This focuses on how you focus on or decide on what you want to change? And often that involves getting support and alignment from others within the organization.
- How to sharpen your go-to-market focus
- We'll also talk about the metrics or what does success look like?
The case for change
Here, you need to consider whether what you’re doing today, i.e. the status quo, is working for you. If not, what are the things you want to improve upon?
Again, we're talking about specifically how you target and how you make decisions about the market segments to go after, and in the case of B2B companies, what accounts you go after. There's a big trend, and I'm sure a lot of you are familiar with account-based marketing. But when I started out in the marketing world, it was all about volume, the traditional funnel, you think of leads, these are people who raise their hand, but how do we know that they're a good fit for what you have to sell? That process used to be done further downstream.
Now, we're talking about flipping that and making it clear upfront, and proactively targeting the best opportunities for what we have to sell. So that's what I'm going to talk about, and I'm going to bring in some market trends to help you make that case for change.
What key go-to-market questions does your team need to answer?
This is how the story typically goes: There are stakeholders in the business who are asking different questions, product marketing is often the champion or the quarterback or arbiter of these questions in the organization, at least at the highest level of strategy.
Typically, you have the following:
- Heads of marketing who are asking, “who's my ideal customer or client profile?” And, “what market segments should I go after and target?”
- Heads of sales asking, are we maximizing win rates and deal size to hit our quota? Because there are a lot of variables that go into that.
- Heads of finance asking whether they’re getting the right customers, especially now with the prevalence of SaaS and subscription businesses. The right customers are going to be ones that you have for a long time and that are profitable to the business.
- CEOs, especially of emerging companies, are asking questions like, “how are we doing at customer acquisition cost, payback period, customer lifetime value?” etc.
These are all metrics that are important to the business, and business leaders are fundamentally asking these questions as a way to drive success and growth in the business. And so the question for us, fundamentally as product marketers, is to help the business decision: What are the key go-to-market questions for our teams, for our companies, that we need to answer?
The demand waterfall
Now, who reading is familiar with the demand waterfall? If you're not familiar with Sirius Decisions, I suggest you check them out, they have great resources for really every role in marketing, they're focused primarily on B2B, but this demand waterfall has been a framework that they've been publishing for many years for demand Gen teams and it follows the different stages of the marketing and sales process.
They recently added a layer called target demand, also known as TAM or Total Addressable Market, and for those of us who've been in product marketing for a while, we recognize TAM as typically an investment function or a finance function to justify what the dollar value is of the total market that we're going after.
But where TAM is now being used by product marketing and the rest of the organization is to look at how many units (units are defined by a customer opportunity or a prospect) are out there that match what we do today? And that's our realistic target to go after.
This is critical to understand as product marketers. At InsideView, we did a survey, and we asked the market, 'How accurate is your organization's measurement of Total Addressable Market?'.
More than half of companies said they do zero or ad hoc target measurement today, and less than half assess it annually or regularly. Our prescriptive advice is to start doing this more regularly, and that's one of our core tenants of how to be more effective at go-to-market planning. I'll talk about how to do that a little later in the article.
Red world/green world
Green world is what you imagine an ideal state to be for your company, for your market, and for your business. We like to say imagine a mature, fully aligned, go-to-market engine.
This is a world where your executives you're supporting have instant access to the market information to discover and understand new markets. Your sales and marketing teams, the execution engine that drives revenue, are fully informed and aligned to execute. Everyone in the organization has visibility into market performance to fine-tune and optimize and make decisions based on data.
How do we get there?
At InsideView we also did a go-to-market maturity study - which you can download from our website - which basically looked at the different stages of go to market maturity and the components that were in each stage.
It assessed that more than half the market is in this early stage of market maturity. So the goal is, how do we get up to a more targeted approach? Furthermore, we aligned in the survey the go-to-market maturity with revenue performance. Far and away the companies that exceed revenue goals are a lot more likely to be aligned, which means they're coordinated and in sync in terms of the strategy and planning and targeting, and they're also a lot more likely to be further ahead in their go-to-market maturity model.
So pay attention to this, it's something if you're interested in reading up on more about, we have some great information from many of your peers.
The steps to sharpen your go-to-market focus
We call this 'The Taming of the Alphabet', there are a lot of three-letter acronyms out there, which I'm sure many of you are tired of, but they're useful to describe processes.
ICP is an ideal customer or client profile, TAM is a total addressable market, and ABM is account-based marketing which is what you do at the end of that process to prescriptively target the best opportunities.
Ideal customer profile is the first step, get a definition to understand who are your best customers? Because you want to look at the total addressable market, which is essentially the entire universe of all of your best prospects. And then how do you go find more like them? ABM, as I said, is a popular marketing technique today.
If you're not, as a product marketer, directly involved with demand generation teams that are driving account-based marketing, you can also think of this as once you've defined your ideal customer profile and your TAM, you can also think of it as the launching off point to do things like pricing and packaging strategies, or product launch, or messaging and positioning, all of the core PMM ingredients that come from better segmentation.
Ideal customer profile (ICP)
ICP does not need to be company-specific, it can be a business unit, product line, or market-specific. In many companies, especially larger, more mature companies, they have multiple ICPs. So, conceptually, determining your ICP is very simple. The challenge gets into the actual process of accessing the data.
So it's a three-step process, first decide on key performance indicators that determine what 'best' means. ACV (annual contract value) - how much is a customer worth to you that first year? Customer lifetime value, customer acquisition cost, these are all things that differ for every company.
For InsideView, we were very much focused on ACV and time to acquire a customer, so how easy it was at first. We found out that some of who we thought were our best customers were emerging tech companies who had just gotten a new round of funding, but they churned on the back end, so we were not able to renew and retain them.
So, we shifted our focus to be more about lifetime value. That's step one - determine the key performance indicators, and that's different for everyone.
Step two is to assess the attributes that you can identify and predict an ICP match. There are variations on this, but in general, there are four approaches to attribute assessment:
- Firmographic - that's in B2B things like revenue, number of employees, industry, geography.
- Demographic - these are the people. In B2C it's very important, but for B2B you also need to understand the personas that you're selling to.
- Psychographic - how your prospects are thinking about certain things, are they early adopters, laggards, etc.
- Behavioral - what signals can you identify in the market that they're actually doing?
And then step three is to actually analyze your customers by those attributes to come up with your ICP. Now, these are what InsideView used, as I said we evolved from looking at the customers we were winning the most to the customers we were retaining and up-selling over time.
So, we looked at firmographic - industry, geolocation, number of sales reps because that's primarily our value prop, to feed intelligence into the selling process. And then growth rate, how companies that are very focused on growth have a need to really optimize their go-to-market performance.
Some of the behavioral and psychographic ones, we looked at the use of competitors’ products, we looked at, are they a serial buyer? Did we have a great customer who then went to another company? Can we sell into them?
We also looked at relationships - it's always good to get in the door to a conversation through a warm introduction. So, who do we know that can introduce us? What's their state of marketing technology adoption? And then up-sell and cross-sell potential because as I said, we're very much focused on retention. And then the last one, buyer intent surge.
Buyer intent data
For anyone not familiar with buyer intent data it's a new category of data. There are several vendors like Tech Target and Bom Bora, who aggregate all of the buying signals from publisher networks on the web. So if you at your company are browsing for a topic, they will recognize your company's IP address.
To give you an example, let's say I work for IBM, and there's a certain baseline of people at IBM who are searching for a given topic at any month - that's considered the baseline. If that surges over time, let's say over one month all of a sudden it spikes up and everyone's looking for a ‘business analytics solution’, that must mean that they're shopping for a business analytics solution.
So, those buyer intent signals are very useful once you find your ideal customer profile of prioritizing and figuring out which ones are most likely to buy now.
This was InsideView's initial ICP map.
We ended up with four segments, based on our performance indicators that were most important which were renewal rates - that's at the end of the year, how many customers actually renewed for InsideView? And then retention - which is up-sell, cross-sell the ability to grow the account value over time. We had:
- The decliners, which are the ones going down in both categories and we obviously didn't want those - this ended up being our aforementioned emerging tech companies who we thought were our best customers.
- Idlers
- Re-evaluators, but ultimately we wanted to focus on
- The expanders - where we were increasing our performance on both of those axes.
And this gave us a view to be able to make decisions that said, 'we want to target these segments'.
We were able, within the period of a couple of quarters to figure out that five industries and they were financial services, business consulting services, commercial real estate, were the ones that were the best prospects for us. So that's how we did our ICP.
Building your TAM
The second step is we wanted to take that ICP profile, we had a set of customers already, and we wanted to map that against third party data of the entire universe to figure out:
- What was our whitespace?
- Who were the ones who we hadn't touched yet, but were the best prospects for us?
At first, this was a very manual process, even at InsideView that provides third-party firmographic data for every company out there, this was a very manual process for us. It took us three months, we had to ship a lot of data over to our engineering team, and it was a very complex process.
At the end of it, we were able to define the industries, and applying the other attributes, the right segments for us to go after. But it took a while.
The reason it took a while is data silos in manual processes are very hard to deal with. If you've ever worked on a segmentation project you'll know that typically you're involved with a data analysis team and depending on where it started, you might be working with a corporate strategy team.
When I was at VMware, every year we did this corporate planning process driven by corporate strategy, we got a lot of IDC external market data, and we would create this segmentation and TAM in our own little world, but it would sit on a spreadsheet, it would never make its way down to the revenue teams and 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.
And secondly, just that form factor of having data in spreadsheets. We talk to customers a lot who say, "I'm just sick of V lookups, and pivot tables". And the business impact is profound, a lot of it is really focused on revenue growth, and this is really what product marketers should be championing - revenue growth and time to market when you're launching a new offering, how quickly you can get it out?
Sometimes it isn't limited by your engineering team, it's limited by you identifying the right segments to go after, and then cost and efficiency. So there's a lot of opportunity to improve this with the use of your data to drive segmentation.
InsideView Apex
This led us - again not a commercial - to develop our own product we call InsideView Apex (we have a great two-minute video on it if you want to check it out). It takes the characteristics of your best customers, your ICP, and it very quickly overlays that against the entire market.
It shows you this opportunity of who to go after, and lets you further slice and dice and narrow it down and come up with the best segments that you can then turn over to demand Gen teams and others in marketing to go after. It also predicts lookalike customers based on this, using the AI engine - it takes attributes and uses machine learning to predict who are the best targets that you want to go after that look like your best customers?
Ensure people coverage
The next step is to ensure you have people coverage, in B2B we often focus on accounts, especially nowadays. In InsideView's case, we found that over two-thirds of our ideal targets that we were going out to had three different departments engaged.
For those of you who've seen CEB data, they say the average number of influencers in a group buying process now in B2B has gone up to over 10 people. We had 34 average number of people engaged in an account from a buyer.
Now, these were large enterprise companies, complex buyers, but as B2B marketers, we have to be aware that there are multiple personas that we are pursuing and understanding the interdependency between your decision-maker, your influencers, your champions, etc. And when you're developing your targeting strategy, it's important to go out and identify those targets upfront, as best as you can.
Don't forget about the personas
These are InsideView's personas.
We target executive teams that are focused on the go-to-market planning and segmentation, we target the revenue team, sales, and marketing leaders, who are benefiting from their intelligence day-to-day, and we also target operations teams.
Has anyone reading heard the term revenue ops? It's a fairly new term, but it's focused on the convergence of sales and marketing operations to ensure that your customer data is high quality, cleansed, that the insights that you have to make better decisions and execute are available to you.
What success looks like
So, what does success look like? If you've determined your ideal customer profile, you've mapped it against your total addressable market, you have a plan of who are the best segments, who are the best accounts to go after, and even who are the best people? How do you ensure that you're successful with this new go-to-market and segmentation approach?
There are really two primary goals.
When you're shifting to more of an account-based focus, you're shifting from leads and MQLs and you're really narrowing the audience and you're also focusing more on engagement:
- Did we identify the right names to go after, accounts, people, and are we engaging with them?
- Are we having conversations? It's not just about email clicks and form fills, it's about is our sales team having conversations?
As you get further down the funnel, the financial goals are more focused on things like:
- Are we increasing win rates? This is a direct strategy to help you improve win rates.
- Are we increasing our average selling price?
- Are we going deeper and broadening relationships with the accounts?
There are a number of other metrics too. For InsideView, for example, we were also looking at deal acceleration - can we drive larger complex deals faster? We were also looking for multi-product and multi-year deals because that was a key that was correlated to retention.
Again, these are going to be different for everyone but I urge you to have conversations with your executive teams and other stakeholders around what are the right metrics for your organization? And ideally, what are the ones that you want to measure the success of your business today around but can't? And how do you get there?
To summarise
There are four steps to sharpen your go-to-market focus.
- Determine your ICP, this is most critical, and again, ICP can be plural here, it often is.
- Build out your total addressable market, clone that ICP against the world and find the best fit opportunities that you can help your company go target, and do it on a regular basis - don't set it and forget it.
I think that's a key for product marketing, you have to be rapidly iterating because the market dynamics are changing, the competitive dynamics are changing, your product is changing. So it's important to do these things on a regular basis.
- Once you've built out your total addressable market and focused on the key accounts to target, ensure you have the right people - you're targeting the right personas. And finally,
- Determine the right success metrics. Go out and actively measure them and iterate - don't measure things for the sake of measuring, what is sometimes called vanity metrics, measure the things that actually improve the business, and don't set it and forget it.
And with that, I'm done, thank you very much.
