Segmentation II

This leads us to one of the most common strategy traps for wholesaler distributors: the sales "relationships." 

In the business-to-business (B2B) arenas in which most distributors operate, segmentation is generally most powerful when it deals with the economics behind business.  Although companies comprise individuals (with all their psychological baggage), organizational and financial pressures tend to drive B2B buying behavior over the long term.  A buyer is unlikely to care about he "cool factor" of a product or how funny the sales rep's jokes are if the buyer is in danger of losing his or her job  because there is a material shortage that shuts down the production line.

This leads us to one of the most common strategy traps for wholesaler distributors: the sales "relationships."  Companies that rely on their sales force as their primary source of customer information are especially susceptible to the idea that performance is determined by the personal rapport between individual buyer and seller.  We are very cognizant of the value sales representatives offer customers and do not want to come off as belittling, but the paradigm in which sales rep value equals company value presents a serious roadblock to proper compensation design. 

Accepting the mystical power of the buyer-seller relationship at face value leaves your company ignorant of customers, unable to execute a strategy, and held hostage by "high-performing" sales reps.  Systematically obtaining customer insight from sources outside of the sales organization is simply a requirement for good segmentation because it adds needed perspective and objectivity.

ACTION POINT: Look past the buyer-seller relationship to better understand your customers.