Successful Software Companies Use Segmentation for Growth

December 16, 2009

Whether you are a founder and or CEO of an expansion stage software company one of the keys to your future lies in your ability to drive revenue growth.

As a Venture Capital firm that provides growth capital with a team of partners who all have strong operational experience one method we espouse to all of our portfolio companies to drive revenue growth is through segmentation of the market opportunity as you build your distribution model.

Most software companies that have sales forces – regardless of whether they are inside, inside/outside, field sales, partner sales or some combination – practice some form of market segmentation within their distribution model. In its most basic form it may be segmentation by geography, zip code, industry or company size.

The key to segmentation is understanding the data around leads, qualified opportunities, close rates, number of deals, average deal size and revenue over a period of time by geography, company size and industry. Usually it is looked at on an annual basis and revisited every year.

As an executive you want to be able to analyze the data and look for trends that highlight where you should invest your resources both people and capital to accelerate growth and capital efficiency within the business while reducing your risk. You are looking for areas where you are experiencing above average growth in the segments you are analyzing. This data should allow you to ask the questions like… if I had 1 additional headcount in sales against what segment would I allocate this resource to maximize my return, if I am going to create new marketing messaging for my website which segment should that messaging resonate with, if I am going to develop some new features within my product which segment should be a priority to build for?

Segmentation is like looking for veins of gold in the mountain. When you find them you want to mine them for growth.

All the best!



Venture Partner

<strong>George Roberts</strong> is a Venture Partner at OpenView. He enjoys partnering with companies and helping them achieve their goals through strategy, focus and operational execution. From 1990 to 2003, George spent 13 years at Oracle Corporation, most recently having served as Executive Vice President of North American Sales. While at Oracle, George was responsible for over $1 billion in revenue and more than 2,000 employees, reporting directly to the company’s CEO and Chairman, Larry Ellison.