Driving Demand with an Enterprise-Wide, End-User Segmentation Strategy

By James Dorn, President

Manufacturing companies exist because of their customers. Yet companies that sell their products through distributors can all too easily forget about their end-users. After all, from the manufacturer’s perspective, distributors are their customers.

In many respects, distributors make manufacturers’ lives easier. But unless manufacturers do the work of uncovering their core customer segments, they will always be at the mercy of distributors to drive demand and add value to their end-users.

It’s not that most manufacturing marketing strategies don’t consider customer segmentation at all. It’s just that these efforts are often limited to the marketing or product teams. And they are rarely developed deeply enough to expand market share and drive brand loyalty. What manufacturers need instead is an enterprise-wide segmentation strategy. One that gives everyone in the company a clear picture of who they’re targeting and why.

The Value of Customer Segmentation

When you establish an enterprise-wide end-user segmentation scheme, you stand to yield multiple benefits for your manufacturing company. In doing so, you can:

  • Gain a solid understanding of your top-selling segments with the greatest growth potential
  • Ensure your entire team speaks the same language about your ideal end-users
  • Enable cross-functional teams to work together in concert to deliver incremental value to your most important customers
  • Cultivate deeper relevance, mindshare, and loyalty among your end-users
  • Focus your firm’s resources on the products, services, and innovations that most clearly resonate with your core audiences
  • Penetrate your top vertical markets more deeply

It boils down to this: When your organization gets on board with pooling its resources to target the same set of core audiences, you stand to significantly grow your share of market within those segments.

Two-Step Distribution and the Challenge of Identifying Your Top Customer Segments

For most manufacturing companies, the biggest obstacle to creating an enterprise-wide customer segmentation scheme is their lack of visibility into who is purchasing their products. The truth is that many manufacturing companies don’t really know who their top customer segments are in the first place.

Manufacturing firms’ lack of clarity about end-users flows from their relationship with distributors. While manufacturers are busy nurturing their distributor relationships, they often let distributors worry about end-users. For their part, distributors often keep their own customer segmentation data close to their chests.

The result? Even those manufacturers that want to gain a better understanding of their top industrial segments may have a difficult time doing so. They may not ever use quantifiable data to accurately inventory, prioritize and proactively penetrate the markets with the highest opportunity for growth.

Getting Started with Enterprise-Wide Customer Segmentation

The first step in getting started with customer segmentation in your manufacturing go-to-market strategy is to identify a handful of core vertical markets on which to focus. If most or all of your sales are funneled through distributors, you may have to do a little digging. For example, you might pair the point-of-sale data your distributors share with you with other historic data, such as warranty and drop-ship data, to quantify your revenue by segment. During the identification phase, your main goal is to figure out which verticals represent the largest pieces of your firm’s pie.

It’s important to note that while your manufacturing company may sell into a dozen or more verticals, you should plan to roll them up and limit your efforts to no more than five or six core segments. Your organization will be much more effective if you keep your focus narrow.

Identifying your core segments is only the start of your journey to deliver more value to end-users. With your segments identified, it’s time to dive deeper into each segment to develop a more detailed profile. Use the following attributes to build your profile.

  • Firmographics. Firmographics refer to the size and shape of the companies that you ultimately sell into. Using firmographic data, your goal is to build out a profile that gives you a more concrete sense of the businesses that buy your products. For example, within the auto industry, you may find that your average buyer is a manufacturing facility over 10,000 square feet in size with over 100 employees.
  • Environment Type. Environment type refers to the types of shops or facility areas in which your products are used. For example, this could be broken out into categories such as maintenance, fabrication, and mobile job-site.
  • Applications. Applications are a broad description of the type of work that takes place within each environment type. For example, within fabrication you might have production, welding, and assembly.
  • Jobs to be done. Finally, jobs to be done are the individual tasks required within the environment type. For example, this might include things like fastening, cutting, shaping and sanding.

Taken together, these attributes form a much more detailed picture of who your core customers are, what their work is, and how your products fit into their world. This information can then be leveraged to improve the way you do everything from product design and marketing to value-added services. For example, with detailed customer segmentation information, you can craft a more effective go-to-market strategy. You may learn that it makes better sense to sell direct to customers within a specific segment, because they have a lot of specification needs and are likely to need high-touch technical support.

Your manufacturing company exists to service the needs of your end customers. Distribution, now more than ever, is becoming only a means of delivering your product to them. By adopting an enterprise-wide customer segmentation scheme, your organization will more readily view your business through the lens of the people you really serve: your customers.

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