In sales, clarity and focus determine profitability. One of the most powerful ways to accelerate sales closing is through client and prospect segmentation. Not all are created equal. Sales teams and reps that fail to prioritize cost themselves opportunities and increase their costs.
What you focus on is determined by the options you have. Example: You might have some accounts you love and appreciate but it would make no sense to market to attract more of them when you can spend the same time and money on another segment that is more likely to buy, buy more and buy again.
The Power of Segmentation: The A-E System
My suggestion is that you keep your segmentation thinking simple. I have always preferred an A-E ranking to allocate time, energy, and business development dollars efficiently.
- A Clients/Prospects: Higher-value, more frequent buyers with strong potential for repeat business and referrals.
- B Clients/Prospects: Rock solid customers that deliver higher than average revenue and profits. They buy consistently but less frequently than A’s and tend to refer less. Many have the potential to upgrade into A-level clients with additional effort.
- C Clients/Prospects: Average bread and butter type customers who are more transactional but still profitable.
- D Clients/Prospects: Below average value type clients who buy less frequently and tend to require more coddling but are still acceptable.
- E Clients/Prospects: Run away. These include no probability, low probability and never satisfied prospects that tend to generate less than acceptable revenue. The costs to acquire them make no economic sense given your other options. These accounts cost more to acquire than they are worth.
The Fear of Missing Out (FOMO) Trap
One of the biggest benefits of proper segmentation is helping you to overcome FOMO—the fear of missing out on potential business. Many companies/sales reps think of the smaller clients they love and think “We don’t want to miss out on them,” even when the cost of acquiring them makes no logical financial sense given their other options. FOMO hinders growth and profitability.
If you want to accelerate sales closing, you must make deliberate choices. You only have so much time and money and need to invest it where it will do you the most good.
Think of it this way, you are not “giving up” on acquiring C and D type clients. You are making a deliberate choice to postpone seeking them until you have worked through your higher value, higher probability and lower cost to acquire options.
How Segmentation Applies to Business Strategy
Once you have clarity and have designed your segments, you can leverage that clarity to optimize your sales and marketing strategies:
- More Targeted Marketing: Tailor sales scripts and messaging for relevancy and better response within each segment.
- Higher Retention: You can now make an informed choice to invest more time/money in retaining or acquiring higher-value clients than you do the rest. Small additional marginal investments in these groups have high ROI. The alternative is to treat higher-value prospects and clients like all the rest, which makes no sense.
- Client Acquisition: Identify characteristics of A and B clients to attract similar prospects.
- Improve Service Offerings: Improve your ability to structure service offerings with more appeal to higher-value customer segments.
- Sales Strategy: Align sales and marketing efforts with prospects who have the highest propensity to buy.
Stay away from the cliff of death
The ROI of pursuing different prospect segments is that the best clients deliver outsized results, while lower-tier clients require more effort and yield diminishing returns. The difference between these groups are not mere shades of gray – they represent the cliff of sales and marketing death. Beyond a certain point sales and marketing efforts yield negative or miniscule returns. You must not get close to the edge of your cliff of death.
A Common Example
Let me share an example from my client archives. I share this example as it is very common. This client was a franchise company that offered a common business service.
In a typical service area, there are 88,667 businesses that could potentially be clients. The A group consisted of 3,417 targets, just 3.8% of the total. The B group consisted of 6,118 records, 6.9% of the total. The C, D and E groups represented 89.3% of their theoretical prospect universe. 50% of their best, highest value most desired clients came from just 3% of their prospect universe.
The most successful of these franchises by far prioritized working the A group, then the B as they had time. The most successful never had to work the whole B group.
The less profitable and struggling franchises did not prioritize and allocated too much time to the C, D and E groups. They did not do proper segmentation and fell off the cliff.
Final Thought: Focus on the Bullseye, Not the Cliffs
Segmentation is about probabilities and making informed deliberate choices about where you allocate limited time and money. Focus on your bullseye, gradually expanding outward as resources allow—but always be aware of the cliff where ROI sharply declines.
With proper segmentation, sales and marketing efforts can attract more prospects, increase revenue, and close more deals with less effort.
