How Should You Segment Your Market?

You: a young company.  What: about to bring a product to market. How: Segment your market to find those most likely to buy.   Now, sounds easy?  Its not but it can be relatively painless.  When you first bring your products to market you want to find the "sneezers" (to borrow Seth Godin's term), those who will help develop the market for you by being advocates evangelists for your product and spread the word.  Helping to drive viral adoption.

Many marketers you hire are going to want to perform a traditional segmentation - that is, they will attack a particular geography or vertical as a way to find those sneezers. But I'd submit that's not enough.  To truly be successful in bringing your product to market you have to segment your market by "attitude", yes attitude... those individuals that have the inclination to buy from you... attitudinal segmentation enables companies large and small to find the sneezers, those most likely to buy and more importantly find those who just love to talk to you but will never buy, as well as those who just plain will never buy.  These last two groups represent a huge amount of wasted time, energy and money, which any sales rep worth their salt is anathema to.

Attitudinal segmentation is a best case example of the science of marketing.  Yes, this part of marketing is not art but 99% science. As part of this scientific effort you will ask the market questions to answer the following using a statistically valid sample with a combination of real time virtual, and web survey data:

• Which groups within your potential market ascribe a high degree of value to the capabilities of your solution (don't say ALL because that's not true!)?
• How large are these segments and where are they (you will realize that they cut across verticals AND Geos but the analysis will provide you with logical geos and verticals to start with?
• Where should you focus your scarce sales resources to get the most bang for the buck?
• Which groups of customers should we ignore? Or said better, which groups of customers should we only address opportunistically?
• What elements of your offer - product, service, pricing, ease of use, etc... do prospective customers find most appealing and what specifically about those attributes do they like?

B2C companies have been using attitudinal segmentation for quite some time as part of their Go-to-market strategies. B2B companies can and will benefit from a scientific approach to marketing as well, especially when you combine such a segmentation effort with an evaluation of your offer and its attributes. By understanding what components of your offer (product, pricing, support, etc... ) are most attractive to your potential customers, you will be able to more easily adjust it to maximize uptake by those most likely to buy.  For example, if you are selling a SaaS solution, do your customer's prefer to be billed monthly or quarterly?  Do they want a super friendly easy to use interface that means more screens or a more crowdes interface but only takes one screen to complete the transaction?  You won't really know until you ask!

Remember, its not enough to merely understand your market, you must determine what you should do DIFFERENTLY to maximize the economic value of understanding your market.  This type of segmentation combined with a detailed understanding of your offer enables you to pre-test each segment's reaction to your offer and GTM strategy enabling you to make adjustments to both.

C'mon, what do you have to lose?  Customers, market share and competitive pole position.

Comments

[Scott Deutsch]

Steve, agree with your attitudinal segmentation approach. The execution question though is HOW do you scientificially locate as many of those that make up the selection criteria? Internally we call these perfedct prospects "Zebra's"... each stripe is a valued characteristsic that we are looking for in a prospect... yes, attitudinal segmentation. Our struggle is database filtering to focus our limited sales and marketing time of connecting to these candidates. Any advise?

[Steve Mann]

Scott... damm good question....the beauty is you don't have to locate them. You only need to drive them to your web site. Then you can build a self-qualification tool so that the customer self-segments. You in turn must provide something of value (usually in the form of content) since this is a value for value exchange (they tell you about them, you give them premium content).

Once they've self-segemented then you can market to them. Also, you tend to know a lot about existing customers so this is easily employed with out having to have customers self segment. Depending on your business, someone or something should know enoug firmographics and attitudinal data to predict segment membership. Ive seen companies build a segmentation gear box to take their data, and divide ito customer segments with 70% accuracy.

[Jeff Paul Big League Players Club]

Hi, Great post! I felt great reading your blog post. I’m working with my friend in a small internet marketing business as a web developer. When I’m free I go around for some IT info

[FT]

Steve, can you provide any concrete examples of the attitudinal segments that a B2C company uses today? For instance, the attitudinal segments that a retailer would use to think about modern consumer groups.