2X2 Framework for ‘Actionable’​ Customer Segmentation
Rupesh Rao February 9, 2020 . 4 min read

In my previous article under ‘Practices’ I had touched upon how to focus on not just top X% of your clients but also those accounts that are small today but have the potential to grow in the near future. In this article we will cover ‘why’ and ‘how’ of it.

B2B software companies have been relying on the classic ‘Enterprise/Mid-Market/SMB’ segmentation for years and this worked well for the long term (multi-year) on-premise license deals. However, for the SaaS model this segmentation approach doesn’t give insights that might be helpful for the next annual renewal and identifying key expansion opportunities early on as the client’s business evolves.

For example - how do we identify and segment those ‘fast growing’ SMB clients that are going to hit the Mid-Market tier in let’s say next 6-9 months or a Mid-Market client reaching Enterprise level in next 12-15 months? And how do we nurture them in a timely manner during this growth phase by delivering additional value aligned with their KPIs and create a win-win proposition?

As another scenario - how do we proactively address the situation where we know that a current ‘Enterprise’ client may reduce spending with us next year simply because their relevant business unit is in decline phase because of internal re-org and other external factors.

It might also be a case of clients not getting enough value from the product - a classic case of mismatched expectations during pre-sales, poor onboarding or product roadmap not aligned to their evolving needs. As a side note - I had written another article on ‘customer-centric onboarding’ to prevent this situation.

From my experience, it’s more helpful to have ‘actionable’ segmentation based on not just clients’ current status but also their future potential - by assessing how much is their spend as a share of their current and future wallet (budget) potential.

Here is the 2X2 framework - showing the four segments with easy to remember action based names (Grow, Manage, Re-Evaluate and Protect) and it also helps to track where the majority of focus should be for the CS team (using 80:20 principle).

Here are some best practices for each of these segments.

Grow (80% Focus)
  • These are your high growth strategic clients and typically have been onboarded within the last 12 months.
  • Ensure the initial POC/Pilot is successful and closely nurture the relationship to drive engagement.
  • Collaborate with the sales team to drive expansion into multiple regions and business units.
  • Invest the majority of your time and resources for these clients, drive structured account plans, regular face to face MBRs and QBRs, regular internal SWOT analysis, ensure high CSAT/NPS and pre-empt any competitive threats.

  • These are the key clients that contribute a reasonable part of your current revenue and typically have been with the company for over an year.
  • These clients have reached 80% or more of their revenue potential.
  • Protect these accounts by ensuring a high NPS score with them and kill off any competitive threats.

  • You should not have clients in this state for long and clients could be in this transient state for various reasons - including low CSAT/NPS, not a strong alignment between client’s future business goals and your company’s value proposition, external factors in the client org etc.
  • In case of low CSAT, re-build the relationship to ensure they continue to see the value from this engagement.
  • Re-evaluate these clients to ensure that your value proposition is still aligned with their business strategy going forward and if not, move them to ‘Manage’ segment.

  • These are typically the long tail SMB clients with very limited budgets.
  • Follow the low/tech touch engagement with these clients using online meetings for the most part, using automation tools and processes to drive the NPS and on-going renewals.
  • In some cases, where some of these clients might be very demanding that doesn’t justify the effort vs revenue, then it is better to let these clients churn gracefully to avoid any impact on other high value clients.

A few important notes:

  • Unlike the legacy segmentation, which is easy to do with just sorting all the clients on revenue/company size filter, getting good value from this segmentation requires reasonable level of ‘Account Due Diligence’ work (captured in ‘Account Plan’ document, specially for ‘Grow’ accounts) including company background, corporate strategy, business goals for next 1-2 years, summary of their business lines, company SWOT analysis, financial performance in the last 2 years and forecast for next 1 year (if available), key (relevant) highlights from press releases and new initiatives in the last 6 months, competitive landscape etc.
  • The inputs for this due diligence will come from multiple sources like - company’s website, quarterly & annual reports (in case of public company), usual internet search, LinkedIn, industry events and ongoing QBRs with clients.
  • Given the dynamic nature of this segmentation, it’s a good practice to review and revise segmentation of clients every 6-9 months to guide your account strategy for the next couple of quarters.

So with this in-depth understanding of client’s business, their industry trends and domain knowledge - the CSM will be able to demonstrate not only ‘thought leadership’ (that strategic clients expect from a good partner) but also offer only those solutions that will directly impact client’s business KPIs - rather than just pushing the tool and following up on adoption without understanding the big picture of why and how this product adoption will help clients.

Interestingly, sometimes it also brings a ‘moment of truth’ for CSM to reflect on in case of adoption issues - if our solution was really that important for their business (as we thought during onboarding) then why is adoption not taking off or dropping now? Is our solution still solving big pain points/objectives based on what I now know about their business ?

Hope this helps to look at your clients with an ‘actionable’ lens and elevate your client engagement level from a ‘tool’ to a trusted business partnership!

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