How do you figure out how to segment your market?

There are many ways you could segment your market for your marketing and sales motions: from industries to personas to company size to geographies (and for B2C companies, major demographics like age, gender, etc come into play). The questions you need to ask are "Do these groups of customers have fundamentally different needs for our product?" and "Would we acquire these groups of customers in different ways?". Wherever the differences are greatest, you'll want to start there.

Another key consideration is resourcing: do you have enough people to create focus areas among your marketing/sales/post-sales teams? Do you have enough bandwidth to create personalized messaging and campaigns? Do you have sufficient budget to split paid campaigns into different segments?

Market research data or industry reports may be able to tell you what some of the largest groups are that you should go after, but you'll also inherently start to learn this when you start running marketing campaigns & selling.

For example, it was immediately apparent to our sales team that institutional investors (hedge funds, equity analysts) spoke about research differently and had different objectives than insights and marketing professionals. Then we started to notice that B2B SaaS companies had different research challenges targeting niche groups of professionals than consumer goods companies doing research with the general population. As our teams scaled, this is where we made distinctions and split up our sales and marketing teams into "pods" to focus accordingly. Market research will come into play again when we need to make a strategic decision for which vertical to take on next and how to position ourselves differently.

It's also worth noting that you may use a totally different framework for customer segmentation to structure your post-sales teams. For example we have segments for self-serve vs sales-assisted customers. Self-serve customers are segmented by subscription type, and sales customers are segmented by spend level to determine the level of support/service they can receive so that our team can scale their efforts.

1. Ideally you would draw on both a combination of quantitative and qualitative data to shape your segmentation research. Start with a hypothesis of who your TAM (total addressable market) is. This will help you to identify new market segments you may not have thought to target. For example, for Glassdoor our TAM is comprised of all working age adults who are either currently employed or want to be employed. Segmentation can then be used to expand the sandbox (market) that you’re playing in by expanding your current definition of who your true audience is - so you can see which segments present the best opportunity, the ones who are most valuable (i.e. highly engaged, monetizable) and/or the ones with the most growth potential who you can more easily convert.
2. To obtain a more forward leaning segmentation that is more long lasting, segment on audience wants, needs and attitudes as opposed to current behaviors which can constrain you as market and social conditions change.
3. Bonnie Chiurazzi’s Pro Tip: Take the time to really identify what is the problem, pain point(s), and action to take. This is critical. As Einstein quotes: “If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.” Screen respondents on behaviors, attitudes, wants and needs to see who is included in your segmentation. Don’t limit yourself to very specific personas.

For example, in the area of employer branding, Bonnie screened respondents on the responsibilities they held, not their job title as different roles across the company have differing responsibilities at various companies. This greatly increased the number of people she was able to gather insights from. If Bonnie had screened by job title, she would have only had a small handful of Employer Branding professionals to draw insights from. But by widening the net, she was able to include respondents both in talent acquisition and in marketing roles who had Employer Branding responsibilities.

I believe the best way to segment your market is to do initial high-level qualitative interviews to get a broad understanding of the market, followed by a robust quantitative segmentation, and then follow up with in-depth qual with what you believe are your priority segments.

A quantitative segmentation leverages a cluster analysis that considers:

• company/customer demographics and technographics (size/industry/revenue/region etc.)
• Attitudes - how they think/feel/pain points and perceptions of you and your competitor set
• Behaviors - what they do, how they buy, purchase journey (self serve vs. sales assisted)

Many companies will just segment the market based on #1.#1. But, #2#2 and #3#3 are critical. A cluster analysis of all three factors allows you to find groups of similar customers based on the smallest variations. A large-scale survey across geos (sample sizes of 600-1000, depending on the market) will generally include a discrete choice model that forces participants to make trade offs between attributes or features so you can really pull customers apart based on what they value and not just their demographics or technographics.

Once you have a sense of various clusters/segments and what defines them and how they differ, you can internally align and workshop which 1-2 segments are your targets and are priority. Your segmentation survey should help you understand not only the segments but also what is your company’s differentiated value (what can ONLY you do for customers that competitors can't) and what types of companies really care about that value (what characteristics do they have in common). Once you’ve identified the priority segments, you can move on to learning about the specific personas inside those orgs.

With segmentation keep in mind that your goal is to be more targeted in prospecting to support sales and marketing, and also give Product a north star for who to build for. So at the end of the day the end output has to allow marketing to change who they target and with what message and for sales to get higher quality leads as a result. If your segmentation can’t provide that, it’s a big investment to make!

This is largely industry specific. Definitely research your market and listen to the data. An extremely important data point that should come your way is from your sales motions and how your plays work with each audience. It's important though to resist the tempation to over segment - that's a rabbit hole that is hard to get out of.

In a vertical marketing strategy the most basic of segmentation comes from which audience in the ecosystem you're speaking to. The most basic example would be if you're marketing a Marketplace you'd segment based on Buyers and Sellers.

However, segmentation gets a bit more complex once you're focused on a specific audience. In B2B vertical marketing there could be several factors that come into play including but not limited to size of account (SMB v. Enterprise), regionalization (often relevant in highly regulated industries), and account maturity (new v established business). 

It's important to keep in mind your goal around segmentation: accelerate sales. I've found the most valuable information to base segmentation strategies on are looking at your time to close and win/loss rates based on a prescribed set of segmentations you believe may be influencing your deal cycle. This data will also only be as valuable as the inputs you have on the accounts that you've worked with. In other words, make sure your enrichment and data hygiene are done consistently and are top notch to get the most actionable insights. 

Once you've been in market for a sufficient round of deal cycles you should be able to identify patterns for how your current marketing and sales plays resonate with a specific groups based on the data you've gathered, and where it's failing (the anecdotal information from your sales partners will support this as well but may be highly influenced by reps who can make compelling cases). I recommend taking both those quantiative and qualitiative inputs to determine tests on where you could increase w/l rates and deal velocity and start experimenting. In the end, your segmentation will likely not only modify your marketing but could also drive how your various teams are organized.

Start first by understanding what problems your product or service solves and the personas who are willing to pay for the problem to be solved. Then look at the alternatives in the market for solving those problems (products, services and DIY/free offerings) and how your product or service differentiates (or could differentiate by understanding your core competencies) against those alternatives.

For instance, one company I worked at entered a well known market by providing a low cost, easy-to-use product. The competitors at that time offered tools targeted to enterprises with all the bells and whistles that were both expensive and required lengthy services engagements. Being low cost, the new company couldn't wine and dine executives and focused on marketing to end users with a price point that wouldn't require a lot of approvals. Through this strategy, they were able to land and then expand to other areas of the business, and were eventually seen as mission critical in some enterprises as their share of wallet in the organization grew.

First, it's important to know why you need a segmentation. Is it about go-to-market and creating more effective messaging? Is it about changing your channel / sales strategy? Is it about product development? Media Targeting? Once you have an objective or objectives, a method for segmentation often becomes more obvious. 

When thinking about messaging or product development, I often find it helpful to segment customers based on common needs. In B2B organizations figuring out what types of customers have common needs might mean talking to experts on your customers like sales people, doing desk research, or conducting customer interviews. In B2C organizations, this probably means interviews and / or surveys. 

Sometimes a behavioral segmentation is the right tool. Especially if you are trying to cross-promote or upsell products, you may want to segment customers - and in-turn your strategy - based on how they interact with your products. 

Finally, demographic segmentation is useful because it's usually easy to understand and action on. It's rare that demographics are all that precise (all Millennials don't do anything as we all know), but you can easily make decisions that are "pretty good" based on this type segment. Plus demographic segmentations make for easy targeting in the real world given they are often observable characteristics of people or businesses. 

PS. don't forget to take a look at how others in your industry / adjacent industries have segmented customers. Even if you are creating a new category, there are likely people you can learn from / build off. 

This all depends on the stage of your company and whether you're a PLG or SLG company.

Product-Led Growth companies:

You won't be able to truly segment effectively until your product is mature and you have product analytics set up. In the early stages, you should be able to identify who your early adopter target audience is through customer interviews. Then, based on the roadmap, you should have some hypotheses about the various use cases your product will be good for and the personas that would get the most benefit. As you grow, test these hypotheses and measure with qualitative feedback (surveys, interviews) and quantitative feedback (CAC Payback, conversion to paid, etc). As a quick win - as 1 question in onboarding to help tag users based on their persona.

Sales-led Growth companies:

For SLG companies, you may not have as many customers coming through the pipeline as PLG so you'll have to get a bit more creative. Your first priority should be to include persona, company industry, and company size as a mandatory field in your CRM. This way, you'll get data on which segment is the most likely to convert to an account vs churn during your sales pipeline. Then, use product analytics to track the various personas in the platform to identify which personas expand/retain vs churn. This data may take a while to get in a SLG company, so I recommend supplementing with customer interviews while you await product usage data.

Data should always inform decisions, though it’s OK to supplement it with some qualitative insights driven by observations of market trends. It’s not good enough to simply let the most senior person define the segmentation. Segmentation is relatively easy if you are focused on one specific vertical but gets much more complex for companies that serve across horizontals. This is where the value of data comes in to drive your decision.