Your crappy leads aren’t Marketing’s fault…unless they are in charge of segmentation (and yes, your CRM data STILL sucks)

Everyone has market segments.?Market segments are how we chop up our TAM into digestible pieces so we can apply apply different tactics and resources to converting TAM to SAM to SOM to $.?Some are big and important (your board financials boldly call out Enterprise/Midmarket, Americas/EMEA/APAC, and CPG/Life Sciences) and generally represent ways that you segment quota capacity or make big CAC investment decisions.?Others are smaller and represent lead segmentation and organizational or operational considerations (I’m looking at you West, East, Central).?Others represent behavior differences or variance go to market approach.?We might call out a segment that uses a specific technology, has a certain business model or organizes in a certain way where your product is advantaged over alternative solutions or where specific go to market behavior (e.g. messaging) results in better CAC Payback Period.?Others represent sales basically saying that this segmentation business can’t be trusted and we have to be sure we can protect the important accounts from all this nonsense (named accounts, strategic accounts, or whatever cute program name you have for the accounts that make all the money or that your CRO is willing to throw the kitchen sink at).

Segments are how we try to distinguish our TAM from our SAM

Segmentation is essentially how organizations decide what accounts are accounts the organization should sell to and act as organizing vessels for specialized skills, training, or messaging that you are going to invest in.?It serves a critical purpose.?Most financial plan segmentation represents the realities of quota specialization like time zones, languages, or specialized domain knowledge.?This is typically the criteria that moves TAM to SAM.?If all of our sales reps are in San Francisco, we will have a really hard time dominating the German market, nine time zones away.?Likewise, if Japan expects to do business in Japanese, our reps require that skill to service that market (and they don’t all have it).?If we have to have a different process and comp model for smaller companies in order to ensure our CAC Payback Period and LTV:CAC is in a good place, we need to segment out those accounts so they can be routed to the right reps.

Finer grain segmentation finds the SOM in our SAM

Inside that segment bounded SAM, there are characteristics that make accounts beer goggle good (an Ideal Customer Profile).?Maybe it is smaller companies because we lack good compliance, SSO, and other enterprise features.?Maybe it is companies that use a specific technology where we have a great integration or partnership.?It might be a specific use case or business problem that we do really well out of the four or five use cases that our category provides.?Sometimes it is more subtle, like where technology decisions are made (if IT makes the call, we are strong because of our security and our great API).?These are the microsegmentation characteristics that separate the SOM from SAM.

The challenge kicks in on two dimensions

First, the more detailed the segment, the higher the win rate, the better the messaging, the easier it is to provide enablement and coaching.?That makes it easier on sales reps (and everyone else customer facing), because they can rely on collateral, templates, scripts and talk tracks that are very specific and comprehensive vs testing their skills at thinking on their feet and tap dancing.?When you are talking to a prospect who lives and breaths homeopathic therapeutics for cat skin conditions, the expertise you can project on your own as a sales rep only goes so far (e.g. showing the video of your cute cat Fluffy pushing the glass of red wine off the counter because you aren’t paying attention to him).?The problem is that at scale, the more specific the market segment, the harder it is to find the accounts that belong in the segment.?And this, boys and girls, is what makes leads suck.?Basic firmagraphics…no problem.?Revenue, geography, employee count are all pretty easy to define and find.?Technographics??Well…can it be scraped by looking at their website or emails??Use Wordpress??Easy.?Use Concur for expense management??Not so easy.

Second, the more segment overlap there is for individual accounts, the harder it is to allocate accounts and (generally) the higher the CAC.?I have a US segment and an EMEA segment??A midmarket segment and an enterprise segment??A few vertical segments??The more segments that require different quota capacity, the more inefficient it is to allocate accounts.?Likewise, the more segments an account belongs to, the higher the cognitive load on the the sales reps (and the general buyer journey) to figure out the best messaging, collateral, sales play, email template, etc.?The former creates lead scarcity (You are the midmarket life sciences rep in EMEA…how reliable is the lead flow for you?).?The later leads to poor quality in the key activities (think emails, discovery calls, demos, etc) that SHOULD BE crazy effective because you did such a precise job of segmentation.

Both these challenges lead to some real word issues that you can see in Hayes Davis ’s handily CRM overlay to TAM/SAM/SOM.

A “Yeah, that’s what I meant” accounts

These are the accounts you really meant to have in the segment in the first place.?They represent the precise characteristics that you have build training and enablement, great website funnels, demand gen efforts, and other CAC components to get into the hands of your sales team.?But therein lies the problem.?For most organizations, getting those accounts into Salesforce through sourcing or data buys is inexact, so it is hard to know the good accounts from the bad.?Likewise, lots of accounts get incorrectly tagged due to operational and quality control issues.?E.g. the marketing intern who added Bed Bath and Beyond as a hotel chain because googling is hard.?

Ironically, the value of your most valuable accounts is inversely proportional to the the ration of A/(A+B+C+D).?(OK…I did that to sound fancy…really it is another rep psychology thing…the more “hot leads” they receive that go nowhere, the less valuable your segmentation becomes.)

B “Every Product Marketer should have to prospect” Accounts

Segmentation is hard.?Product marketing (or whoever is doing segmentation) does a ton of work to tease out the nuance between why you lost account Foo, but lost account Bar.?The more precise the definition, the more efficient we are and the more bookings we get for the same CAC.?The problem is that there is a huge disconnect between the textured nuance of product marketing’s macro analysis and deep dive into specific well understood accounts that have been in the pipeline and a BDR’s knowledge of a new account when they get an inbound to the website.?Most great segmentation is terrible because it is just too hard for reps to figure out whether an account is in a specific segment until they are deep into a sales cycle (typically after discovery).?By that point they have either lost the opportunity to apply all that great messaging or have burned a ton of good will with 20 qualifying questions that aren’t related necessarily to figuring out if there is a qualified deal but instead whether the account is in a specific segment or not.?If your segmentation isn’t easy enough for a 23 year old BDR to apply to an account after looking at their website for less than a minute, your segmentation is too complex.?Your segmentation isn’t going to get applied or it is going to get applied incorrectly.?Likewise, if your segmentation is so broad that it doesn’t materially impact win-rate, your segmentation isn’t useful and it will be generally ignored which will result in you wasting time trying to “fix messaging” that isn’t working not because it isn’t good, but because it isn’t getting used.

You want your database to grow and get MORE accurate the more interactions with the market you have.?Be sure to arm your market facing teams with a simple and TIME EFFICIENT strategy for segmentation qualification.

C Sorry, these accounts are eventually going to get added to CRM at Five O’Clock on a Friday

The other contributor to terrible CRM data quality when it comes to segmentation is how your marketing organization acquires account and contact information.?Most marketing organizations (and BDR organizations if they report to sales instead of marketing) are under tremendous pressure to grow the database through prospecting and data buys.?If your segmentation differs too much from data provider attributes, you are inevitably going to end up with a lot of accounts stamped with a market segment that really aren’t in the segment or are otherwise not likely to close.

Be very careful in segment definition.?It is better to have a simple segment that is highly accurate than a sophisticated segment that performs better, but is hard to classify accounts into.

D These accounts are why we can’t have nice things?

Every segmentation definition has outliers.?Typically these are defined as negative criteria to the overall segment definition that never get considered (or aren’t known until you start hitting them in the field).?You discover that while European Retailers using Shopify are perfect.?All of a sudden you discover in onboarding of a customer that IF they are also using product X, your best feature won’t work.?Now you have hundreds of accounts in CRM and you have no idea how many use product X.

When you find holes in your segment definitions, it is critical to 1) figure out if you can fill in the data gap through a data buy 2) flag accounts where you know the hole doesn’t apply so reps have confidence in the integrity of segment data and 3) set up a process where you get the information from marketing, BDR, and sales interactions with the accounts.?2+3 in particular is critical to rep psychology so they understand the quality of an account that they are working and feel empowered to make the quality of data better.

E/F The accounts your CFO hates

Quota capacity specification is awesome and dangerous.?Anytime you dedicate quota capacity, you are complicating your demand gen and making your attainment less certain.?If you have territories (let’s say EMEA, Americas, APAC), market size (SMB, Midmarket, Enterprise), and vertical (maybe five key verticals) segmentation, you will have 45 distinct quota coverage targets that will have to be tracked and balanced.?No marketing organization is going to reliably keep inbounds balanced across that many distinct groups.?Some reps will starve.?Others will ignore their excess leads in favor of down funnel activities.

This is one of the reasons dynamic books (hat tip Gradient Works) are so valuable.?My enterprise life sciences reps have deep knowledge about the regulatory environment.?But you know what??If I don’t have enough Life Sciences leads for a given quarter, they are pretty spectacular general purpose enterprise reps.?By biasing life sciences leads and topping off with non vertical segment enterprise leads, I can keep them attaining, making them happy and making me CAC efficient.

So what?

• Be smart when you do segment definition.
• If you are segmenting quota capacity based on geography for anything other than timezone and language stop being dumb.?There are very rare exceptions (and “we sell to the enterprise is not one of them”).
• If your segments don’t require reps to change behavior for a specific set of customers to effect win rates or cycle time get rid of them.?(E.g. if they were to do the things for one segment with another segment and get mostly comparable results, the segmentation is adding complexity and inefficiency to your GTM).
• If your product is differentiated with some type of customer (geo, vertical, technographics, etc), consider segmentation if you have any hope of identifying the segment criteria with data providers or in website and early BDR/sales rep interactions.?If you can’t, figure out other CAC efficient ways of reaching that segment (e.g. partner channels or specialized demand gen like events or industry/association marketing).
• Consider a dynamic account allocation strategy that biases leads to specific reps if you are having trouble balancing quota coverage across your segmented quota capacity (and unsegment it).