How can brands extract maximum value from their distribution network? Part of the answer lies in point-of-sale segmentation, a strategy that involves defining groups of customers to tailor your marketing and sales efforts to the potential of each.
Simple in theory, but more complex to implement, especially as each company uses its own sales performance metrics.
In this article, we'll take a look at the fundamentals of segmentation, and then see how it applies to the world of mass-market brands.
In marketing, segmentation is the process of dividing a target market into distinct homogeneous sub-groups, called segments, according to certain criteria. The aim of segmentation is to better understand the needs, behaviors and preferences of different customer segments, so that marketing strategies can be adapted in a more effective and targeted way.
Segmentation criteria can vary depending on the product or service, the business sector and the company's objectives: demographics, geography, buying behavior, psychographics (values, lifestyles) or needs.
Once segmentation is complete, companies can develop differentiated marketing strategies for each segment, tailoring their message, distribution channels and promotions to more precisely meet the expectations of each group. This approach optimizes the effectiveness of marketing efforts by offering more personalized and relevant solutions for each customer segment.
More specifically, commercial segmentation refers to the division of a target clientele according to, for example, purchase volume, purchase frequency, profitability or growth potential.
⚠️ Be careful not to confuse segmentation with sales sectorization, which consists of grouping prospects or customers according to their geographical location. Sectorization can take into account administrative territorial divisions (e.g. 1 sales rep per département) or be based on optimized sales rounds.
The principle of segmentation naturally applies to supermarket chains, which develop their territorial network by studying the potential of each geographical sector. These are the famous catchment areas.
The heterogeneous quality of sales outlets (purchasing power, population density, customer age, etc.) means that chains and networks opt for targeted rather than unified marketing strategies. For example, brand assortments vary according to store type, and you can't have as many products listed in the assortment of a convenience store as in that of a hypermarket.
In turn, your brand is faced with the need to segment its network of sales outlets to reveal strategic segments and organize its sales force effectively.
In addition, since sales prospecting and network management are costly, good cost management means tailoring marketing and sales efforts to the potential of each sales outlet.
In general, the first step is to qualify targets according to "market" and not commercial criteria. The most common criteria used to apprehend an account are :
These marketing criteria are fundamental, but not sufficient, as they do not allow you to implement your brand's commercial strategy.
Irrespective of the "absolute" characteristics mentioned above, you can organize your segmentation according to the criteria and objectives specific to your sales strategy.
Let's take a concrete example.
You are sales manager for a brand of Breton cookies. Your products are distributed in 100 stores in the region, and each distributor has committed to stocking 4 product references. This is the mandatory minimum assortment.
At the end of the monthly steering committee meeting, general management is surprised that sales are below projections. Have distributors played the game in terms of referencing?
To ensure this, we're asking you to report on the number of SKUs per store, i.e. the number of SKUs on the shelf compared with the number stipulated in the distribution contract.
You then decide to create segments based on the statements made by the area managers over the past month.
The figures are as follows:
The reporting clearly shows a significant disparity between stores, and confirms a problem of assortment compliance by certain sales outlets.
Based on the results observed, you propose an action plan with strategies adapted to each segment.
Of course, efficient segmentation requires proven, up-to-date data. In the example above, we assume that the sector managers have carried out their shelf surveys across the entire network, using a CRM application designed for the retail sector.
As a reminder, we recommend that you visit your sales front (see definition below) every 2 to 2.5 months, giving priority to :
As we've just seen, it's perfectly possible to create segments on the basis of commercial criteria, and these are as numerous as there are indirect sales objectives: merchandising, location, market share, and so on.
Remember that segments can evolve over time, as we'll see in the following example.
You've just signed a new agreement with E.Leclerc stores in the Rhône-Alpes region. As your brand of Breton cookies is mainly found in the west of France, you assume that opening up this geographical area will be more challenging from a marketing point of view, as the inhabitants of the region have never heard of your brand.
In this particular case, the new segment refers to... the sector! So why make it a segment at all? Because customers who don't know your brand will undoubtedly need to be "stimulated" a little. While your customers in Nantes may intuitively recognize your logo, which they see regularly on Télénantes, on FC Nantes buses and on Facebook, those in Lyon are completely unfamiliar with it. As your marketing director will tell you, communication is repetition. In other words, you need to ensure that consumers are exposed to your brand on a regular basis to encourage adoption.
Activation can therefore take place via animation in the most strategic points of sale. You may even choose to create a sub-segment with the 5 most profitable stores in terms of sales!
💡 To optimize the number of products in store in relation to your annual negotiation agreements, learn how to master digital holding.
💡 To find out whether the points of sale in your network are the most strategic, discover digital distribution and value distribution.
As we saw above, the main objective of segmentation is to maximize the value generated in the distribution network. To achieve this, many brands organize their field sales force according to the following rule:
It's not an exact science - so percentages may vary - but you get the idea.
With this in mind, most sales departments define a priority segment, generally called the sales front, in which the most strategic stores for the brand are to be found. Their importance is linked to their sales, or to the development challenges they represent.
Here are some typical examples:
Conversely, sales outlets considered less strategic can be grouped into secondary segments, and visits to these stores will be spaced out over time.
As a result, the principle of segmentation is often accompanied by a scoring strategy, which assigns a score to each account (= point of sale), reflecting its level of importance or priority in the company's strategy.
Scoring can be established on the basis of a number of criteria, such as holding rates, order frequency, sell-out trends or the history of relations with your company. For large volumes of data, it is often beneficial to use datamining to identify relationships between the data attached to each account and the associated performance levels. The patterns detected by this layer of engineering enable sales strategy to be redirected on the basis of actual data, rather than on the beliefs of others. And once again, your sfa crm will be your ally in your analyses.
Each company is thus required to list - and sort by order of importance - the objectives it intends to achieve, with segmentation contributing fully to each of them.
The above criteria do not constitute an organizational strategy per se, but they can form the basis of one. Depending on your development strategy, you may choose different operating modes, such as :
It's important to distinguish between overall strategy, which describes the means to achieve marketing and sales objectives, and the organization of marketing and sales functions to implement strategic plans.
By taking into account the various elements covered in this guide designed for brands, you should be able to segment your points of sale and thus optimize the value of your distribution network.
