Revital Libfrand, Co-founder Ignite Cloudware

Customer Segmentation in B2B SaaS Sales–

Overview

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Is customer Segmentation for SaaS different from others?

Customers segmentation is a common practice that divide the company target markets and/or customers into subsets that have something in common.

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Is customer Segmentation for SaaS different from others?

As SaaS is a new business model that enables business customers to benefit from the most advanced technologies at a lower-cost subscription model. Keeping the customer acquisition cost (CAC) low and manageable become critical factor for the SaaS vendor success.

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Is customer Segmentation for SaaS different from others?

Companies use customer segmentation to: • Address relevant offering to each segment • Allocate sales resources according to the relevant segment • Communicate with each segment in the relevant channel

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Is customer Segmentation for SaaS different from others?

Segmentation Definition Challenges in B2B SaaS Sales: • Different sales cycles are required when approaching B2B sub-

segments • Allocating the required sales resources for each sub-segment

directly affect the CAC • Mismatching resource with the relevant sub-segment creates a

gap. My customer pays 199 $

MRR …and thinks he owns our company…

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Common Segmentation Models- Overview

Geographic Segmentation

Segmentation By Customer

Type

Demographic Segmentation

Behavioral Segmentation

Segmentation By Occasion

Segmentation By Value

Where is my

customer?

What is he doing?

Who is my customer?

How is my customer using the product?

When should I propose

my product?

How much the

revenue I get?

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Common Segmentation Models - Overview

Geographic Segmentation

Divide your target market

By country, region, zip code etc

Segmentation By Customer

Type

Divide your target market

by their business,

consumer vs companies

Behavioral Segmentation

Divide your target market according to

their usage of your product

Demographic Segmentation

Divide your target market

by age, gender,

education etc

Segmentation By Occasion

Approach your

customers is based on

special products you

sell specifically for special occasions

Segmentation By Value

Divide your customer

according to potential

revenue they would bring

to your company

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Common customer segmentation in B2B SaaS Companies

Customers Funnel

Small Business

Geography

Mid-size Business

Geography

Enterprises

Geography

Most of the B2B SaaS Companies divide their customers funnel to small, medium and enterprises companies; in accordance the company allocate sales REPs, usually geography based, to handle the sales processes.

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Next Challenge: define each segment….

SaaS companies are struggling with providing an accurate definition to each segment… Characteristics for segment definition:

• Small, medium and enterprise segmentation is defined according to customer’s yearly revenues; i.e. small business- companies with annual revenues of 1M$

• Small, medium and enterprise segmentation is defined according to customer’s number of employees; i.e small business with 100 or fewer employees

Customer perspective

• Small, medium and enterprise segmentation is defined according to the product package the customer bought.

• Small, medium and enterprise segmentation is defined according to the annual/monthly revenues the customer contributes to the vendor

Saas Vendor perspective

Let’s take a look at the sales cycle process….

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Sales process characteristics

Enterprise Medium Company Small Business

Each potential buyer within the organization has other interest/needs

Intermediate difficulty

Need is usually clear and easy to identify

Identify need

Involves several people from business side as well as IT side

Involve few people Usually done by the business owner

Decision making

Complex alternatives process evaluation

Intermediate alternatives process evaluation

Not always done, might check other alternative pricing

Solution Alternatives evaluation

Usually complex and long process (few month to years)

Intermediate sale cycle (few weeks to few months)

Usually very short (days-to few weeks)

Overall sale cycle

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Sales process characteristics

Enterprise Medium Company Small Business

Must have legal department to approve the contract…and they always have something to change

Intermediate process, legal counsel will shortly approve the generic contract if no critical issues are present

Short process, buyer will not involve a legal counsel if generic contract is proposed

Contract Issues

Many interactions to complete the sale process

Intermediate number of interaction

Few interaction # of interactions with customer

Seriously evaluated prior purchasing

The issue is evaluated slightly prior purchasing

Standard support is usually accepted

Maintenance & Support

Willing and use to pay premium fees as long as ROI is demonstrated

Price is one of the parameters been considered

Price sensitive Price

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Sales process characteristics - summary

Small business - short & simple sales process

Medium company - Intermediate sales process

Enterprise – long & complex sales process

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How is the GAP created?

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Suggested Segmentation for B2B SaaS

Customers Funnel

Geography

Small Business Package

Mid-size Business Package

Enterprises Package

• Adjust segmentation characteristics for each market - You can’t define a global homogenous characteristics for small, medium & enterprises without localizing the levels per geography. A medium size company in the USA with 1000 employees might considered an enterprise in a different country.

• Evaluate the sector your company is targeting. For example: products targeting IT department; sales cycle complexity also depends on the IT department size; i.e. a huge constructions building company with thousands of employees but with medium size IT department

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Suggested Segmentation for B2B SaaS

Customers Funnel

Geography

Small Business Package

Mid-size Business Package

Enterprises Package

• Create a package per segment The package should meet the segment needs (SLA, legal, security, availability etc) and must justify your investment in the sale process

• The sale cycle must be adjusted to the customer nature way of doing businesses…sales process within an enterprise takes months even if your great product price cost only 199$/month

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…and let’s ensure we make it work…

Customers Funnel

Geography

Small Business Package

Sales REP

Mid-size Business Package

Sales Manager

Enterprises Package

Sales Executives

• Assign relevant sales professionals that would be knowledgeable with sales process and the customer nature

Are you struggling with clearly define sales processes within

your inside sales organization?

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Ignite Cloudware Provides wide Sales & Marketing services to SaaS vendors. Our inside sales team setup & ongoing management in a nutshell :

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Ask me how to build an optimized inside sales team for your SaaS business

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+972-72-2116601

revital@ignitecloudware.com