Sizing Up Your Customers

If you don't know this axiom about management, you should: Grade A managers hire Grade A people. Grade B managers hire Grade C people.

Grade A managers know their jobs and roles well. They're more assured and confident than inferior managers. They understand the need to delegate and the strength of a good team, so they have no problem with being surrounded by people who are as good as or better than they are.

They enjoy and relish people who think creatively, take calculated risks and push the envelope.

By contrast, Grade B managers aren't as strong in their jobs or their thinking. They're often fearful of people who think creatively. They'd be the first to undertake tasks themselves rather than delegate them, and they don't like to share the credit for success. They're always looking over their shoulders for the next person gunning for their jobs. They hire inferior people so they don't have to face competition.

Grade C managers are simple folk. They never really move up, never break through, never take chances and always surround themselves by the wrong people.

You see A, B and C managers everywhere. But does this logic apply to more than just managers? Does it also apply to, say, customers? More specifically, is it a way to differentiate among small and midmarket customers?

Adam Robinson, CEO of Irvine, Calif.-based Govplace, recently turned me on to this concept. While his business deals mostly with public-sector customers--state and local government and education--he sees this fragmentation in customers all the time and hears about it from peers.

Why could this possibly be important? Think about it: If small companies (with 20 to 99 employees) and lower midmarket companies (100 to 499 employees) are the rich crop of prospects that will fuel channel growth for the future, you must understand prospective customers' nature to target them more effectively.

Grade A customers are those that understand the value of IT, the need for systems (not just point products) and the role of solution providers in servicing and supporting their infrastructures. Grade B and Grade C customers don't understand IT; they don't get the need for investment, and they don't get the need for support services.

As Robinson notes, Grade A customers will listen to your story because they understand the need for turnkey solutions. They're your preferred customers because they typically have well-thought-out business plans and objectives and are willing to invest to grow their enterprises. Grade C customers know they need a PC, printer and Internet access, but it's pointless to try to sell them a system--they just won't get it.

Because the nature of Grade C customers is more often to be laggards than to be progressive, there's little any solution provider can do to convince them to invest in complex systems or IT services. The question Robinson provoked: Why bother with Grade B and Grade C prospects?

It's foolhardy to blindly target small businesses and midmarket companies. By not understanding the nature of these customers, VARs will face frustrating sales engagements, longer sales cycles, smaller deals and lost opportunities because they were distracted from better prospects.

Likewise, this way to identify and segment customers also means re-evaluating the potential for small and midmarket business. This doesn't mean you shouldn't sell to Grade B and Grade C customers, but you should treat them differently--more as transactional than as valued, extended partnerships. That will allow you to maximize your time and resources, enabling you to target more lucrative customers that will deliver more value over time.

It's an interesting theory, considering that vendors do the same thing to solution providers when they establish partner-program tiers. Are you segmenting your customers and prospects? Send me your thoughts at [email protected].