Market Segmentation, could it help your number?

Firstly what do we mean by Market Segmentation?

Personally I would describe Market Segmentation as a strategy that involves carving out subsets of customers/targets whether organisations/individuals that all have common characteristics and values. Segmentation enables aligned Sales & Marketing functions to design/execute tailored strategies with the aim of increasing efficiency and revenue via the distribution of a company’s products and services.

Considerations before segmenting?

Before you all run away cutting up information and plugging growth numbers in because you believe you have a great idea, it’s critical to understand why you are segmenting the market and what your ultimate goal is to work towards.

Whether your goals are new/existing product growth into new/existing markets, increasing average order values and even generating improved Lifetime Customer Value (LTV) or reducing Customer Acquisition Cost (CAC), your goals need to be (SMART) and monitored along your journey relentlessly.

Many businesses will intuitively feel entering a new market is the next big thing, we have all seen the numerous sales blog’s and surveys that tell us it’s what others are doing. Remember you are not them, and who will tell us how successful they were in 12 or 36 months and whether it was the correct decision.

You shouldn’t follow like sheep if you haven’t achieved great things where you operate today, providing equitable success is being achieved, and if not then Market Segmentation may also be your fix and certainly a more informed option.

Don’t bite off more than you can chew, segmenting will require additional resource and in many cases financial backing of some kind, so ensure your proposition is low risk and I would strongly recommend that you begin with your existing markets.

Where do you start?

I recommended that you should begin segmenting your existing focus areas and why, well because you already hold a substantial amount of knowledge here within your business. You simply may not have realised how to use this information to great effect or where to find it within your business to do something with it.

Market Segmentation should involve as many people as possible that may be able to add valuable insight, leave no stones unturned, uncovering as much information about your current customers, targets, products as possible no matter how big or small. The most complicated aspect is how you logistically get this information from the people without holding a meeting – I would recommend small group sessions of no more than 6.

How many times have we all gone away and completed lots of research/work on something when actually the answer, advice or information is sat within someone and we may have even been wrong in our assumptions, we just didn’t ask the question or involve the people on the ground – ensure you setup a project team and involve the people after all it is probably these people you will need to deliver any changes to, so take them down the path with you.

Here’s the more the difficult part - being the Who, What, Where, When, Why & How? No matter if it’s organisational (Account) or individual (Contact) Market Segmentation you need to understand them in the context of your goals.

• Who: delivers you the greatest return, sales etc.?

• What: do they look like as a business/contact?

• Where: are they, do I have them all, can I find more?

• When: do they buy, is it seasonal etc.?

• Why: do we perform well here, product, price, fit etc.

• How: much time do we spend here and at what cost?

There is an old analogy “Like shooting fish in a barrel” and that’s exactly what you are trying to do from a Sales & Marketing perspective by placing lots and lots of identified targets you know will buy and specifically that you want to buy into a barrel. So it’s simply not wise to chuck everything in, you don’t want waste energy and resource to catch Mackerel when you want Cod.

Establish and rank your Market Segments in order of the likelihood of achieving your pre-determined goals based on the output of the people, sales data and trends analysis.

As an example your top “Organisation” target may look like this:

• Manufacturing Sector

• Plastics and Rubber Products

• 50 or > Employees

• Turnover > ￡10m

• < 10 Shareholders

• Net Assets >￡400k

And your prime “Contact” target may look like this:

• Manufacturing Sector

• Plastics and Rubber Products

• Board Member

• Finance Department

• Finance Director or Controller

• Decision Maker/Influencer

• Hot / Warm

You will now have to find these targets, assess your available pool versus the overall market opportunity and build up your segments where needed. Ensure you have identified all your segments in a way that you can easily extract them for Sales & Marketing purposes and push on with your next step the strategy.

What benefits could you potentially achieve?

Of course now you have segmented the market its now all about the execution and what you do with it from a Sales and Marketing perspective.

You will have found out a great deal about your markets during the process and now look to move areas to Low Cost Origination (LCO) methods, Inside Sales, Outside Sales or simply walk away from some etc. However providing you continue in your journey you are likely to enjoy many benefits as below.

• Improved efficiency in deploying resource to established target areas.

• Significantly improved brand awareness.

• Increased market share growth probability.

• Customer retention and share of the wallet improvements.

• Increased sales capacity from removing resource away from non-efficient areas.

• Improved conversion rates across the funnel.

• Sales morale improvements.

• Increased profitability and lower cost to serve.

• Ability to create tailored strategies to segments.

• Greater ability to react quickly to market opportunity.

• Marketing capabilities will be vastly improved.

I hope you have found this article informative, interesting and useful.

I would really appreciate any constructive feedback and comments that you may have.

Robert Hulse