Identifying value in B2B segments – it’s not where you always expect it

Identifying value in B2B segments – it’s not where you always expect it

Size has long been used as a basic indicator of the value that can be obtained from business customers. Operators have traditionally focused on larger organisations. Such an approach can mean opportunities to grow margins can be missed. A different, value-focused approach is required.

Organisational size matters – but it can hide value

The size of an organisation is often used as a factor when creating a B2B focus. For many years, larger organisations have attracted the most attention from operators, with the result that SMEs and SoHo businesses have often been underserved. The old adage “follow the money” held largely true, with the result that corporate accounts were the real focus.

In other words, operators were examining just one key metric – gross revenue – and overlooking factors such as margins secured, as well as growth trends relative to peer organisations.

However, other operators are following a different approach. Some have explicitly – and successfully -  targeted SME / SoHo customers from the outset, recognising that the sheer number of such organisations made them a ready (and willing) target. But, there’s another approach that can help operators pinpoint opportunities, regardless of the size of an organisation.

Value-driven approaches

One operator, for example, uses three metrics to drive its efforts to grow B2B revenue. In this model, size is just one factor. It also sought to identify value. By using a number of factors (such as margin as well as gross revenue, frequency of roaming, duration of roaming, and others), a value could be assigned to an organisation, which could then be benchmarked against others in the same sector. Finally, geographic location was included in the model.

The value allocation allowed outliers to be identified – those with value above peers in the same sectors and industries. Such companies provided better margins – and presented an opportunity to drive further revenue with targeted offers. Similarly, companies with lower value could also be targeted for enhancements to move back towards the sector norms. In addition, some locations could be seen as clusters of growth, perhaps due to new, local incubators or policies to attract high-growth start-ups and organisations.

The results of this approach led to some surprises. Size, while a relevant and useful metric, isn’t necessarily correlated with value. What the operator was looking for was companies that generated better than average margins, while representing a growth opportunity.

Once identified, these companies were assigned account managers, whose task was to present new solutions and to work with the organisation to discover growth opportunities that supported their development.

Know your customer – effective account management

This is an interesting approach, based on a deeper understanding of an organisation and a rejection of legacy approaches that use size alone to assign account management and development teams to companies. The results were positive – while the operator was not the largest in its market, it consistently secured market-leading margins from its customers.

Operators recognise the value of B2B customers. But, traditional approaches may no longer be suitable – they may not reflect the dynamic nature of the business environment, in which size isn’t the key factor. So, when searching for B2B opportunities, it seems the old adage cannot be overlooked – know your customers, so that you can work with those that really need your services.

Identifying organisations with the potential to grow is thus critical, rather than expecting that, simply by being a larger organisation, they will deliver the results and returns you expect. Of course, having identified such organisations, operators need to take steps to build on existing revenue and margins – a topic to which we’ll return in a future post!

Meanwhile, if you would like to talk to our team to see how our experience can help you boost B2B revenue and margin, while converting potential to growth, then please get in touch!

SME, B2B Customers, B2B, SoHo

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