How to increase sales? Part 1 – Segmentation of Customers.

We all understand the categorization of customers like A, B,C. But, do you know how important it is to define the segment of your customers. In the distribution channel business, we deal with different types of customers. Let’s take a few examples Retailer, Showroom, Trader, Reseller, Corporate, Government, End User etc. So, now the question is what is the advantage of defining the segment.

Recently, I met Mr. Patel, who was one of the top distributors of Gujarat in the IT Hardware & Electronics Industry. During our discussion, I suggested them to define all customers based on segment. He immediately realized that this is going to be immensely beneficial for his organization. He called the internal meeting the very next day and explained the concept to his team and within a week they did the needful.

After, a week they got an opportunity for distribution of a premium brand earphone. As they have defined the segment they were able to do the data analysis with it. They find out what quantity could sell to each segment based on the past performance of other premium products in each segment. The advantage was that the whole team was able to sell the products exactly to those customers who were prospective buyers instead of pushing it to everyone.

It saved not only time but also helped them to make more sales. Focus working was possible not only in new products but in existing product lines. While reviewing the outstanding and Average Payment Collection Days (APCD), segmentation helped them to recover money faster from the market. Also, they were able to see the profitability of each segment, which otherwise would not have been possible.

One of the other key advantages of defining the segment is that you can review each territory along with each segment. In every important territory, how many types of customers you are serving, and what is the average revenue of each segment in each territory or vice-versa. Salesperson-wise sales in each segment in each territory can be analyzed which can identify lots of gaps and opportunities.

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