The Enterprise Customer Segmentation Matrix

R. Pritchard

Summary Bullets:

• Since customer databases are available for mass business markets alongside providers’ existing major enterprise knowledge, service providers have traditionally segmented target markets by number of employees.

• Service providers are realizing they need to be more sophisticated and are trying to identify factors like digital maturity and proportion of knowledge workers.

More often than not, enterprise telecoms service providers segment the market in terms of employee numbers. Typically, they divide the market into SOHO/micro (0-5 employees: owner-managers don’t count as employees), SME/SMB (from 6-250 employees), and corporate/enterprise (250+ employees). Of course, these definitions vary from one service provider to the next, and often, specialist markets such as the MNC segment and public sector are addressed outside of the employee count model. The main drivers behind this are: (1) ‘this is how we’ve always done it,’ (2) ‘we can get databases of the target market by employee numbers,’ (3) and ‘any other approach is too difficult.’

A number of drivers are changing the landscape. First, unlike in economics, trickle-down theory actually applies in tech. Historically, the products and services offered to smaller businesses and MNCs were a world apart. Today, they are all likely to need security solutions, require unified communications and collaboration tools, and use applications hosted in the cloud. Equally, the cost of bandwidth has become less of an issue, and the exponential growth of broadband and fast mobile mean connectivity is increasingly a commodity.

In parallel, customer needs are getting more diverse and sophisticated (in most cases but not all) as technology platforms, applications, and services become key elements of doing business in the digital age. Of course, individual enterprises have their own specific needs, and in a telecom world of tight margins, hyper competition, and a plethora of options, there is a move toward mass customization, often passing the choice, implementation, and management of services directly to the customer.

In this context, product and service propositions are converging across all sizes of business customer. But they still need designing, delivering, and supporting in different ways to match individual customers’ needs – therein lies the challenge. Service offerings will continue to range from basic connectivity to sophisticated bespoke solutions.

Service providers will carry on organizing around numbers of employees (and often verticals) for operational reasons. At the same time, providers acknowledge that this is quite an unsophisticated go-to-market strategy and that they need continuously to get smarter to help control costs and flex to meet customers’ demands.

Recently, more progressive service providers have started considering addressing the relative digital maturity, dependence, and sophistication of customers, but this is hard to quantify on a mass-market basis. Service providers can, however, identify common characteristics by vertical; for example, a media agency is likely to require advanced services that can carry high bandwidths securely, across multiple locations, and when users are on the move whereas a manufacturer is more likely to have a much larger static employee base but still have super users in its knowledge management, sales, marketing, and C-suite roles. This can guide the balance of products and services offered as well as refine the appropriate go-to-market and sales messages.

By creating a matrix that identifies which sectors tend to have greater digital maturity and dependence, this can be cross-referenced with enterprises’ size to identify the most attractive markets for direct sales, and which opportunities are more transactional, and thus can be automated/customer portal-based or sold via resellers. This strategy optimizes potential revenues and margins as well as hold down costs.

Although it is a fairly crude evolution, the matrix go-to-market strategy will at least help to identify which customers to target with which propositions – and all that within the context of having to work in the context of existing customer lists, relationships, and organizational structures.

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