Hit the Target with Smart Market Segmentation

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Does your team know exactly which prospective new customers it’s targeting and why? Fighter pilots learn to segment bandit groups and friendly aircraft alike, efficiently targeting the bad guys and maintaining situational awareness of their airspace. Your marketplace isn’t much different. Do you know who to target, why and how?

Customer and Market Segmentation can simplify complex markets, improve customer connections and new business win rates.

Market segmentation is the process of defining and subdividing a homogenous market into clearly identifiable segments having similar needs or demand characteristics. The objective is to design sales and marketing plans that match the expectations of customers in each specifically targeted segment or group.

Fighter and bomber pilot missions rarely called for targeting and destroying every threat presented.  We segmented the battle space first, then influenced or targeted those groups or segments that could impact mission success.  We monitored other groups, but left them alone unless their threat status changed.

Likewise, we know that few companies can provide all things to all opportunities in their marketplace.  Through the process of product development, positioning and branding, your organization provides a specific solution set to specific needs or problems.  So which segments of your market will you target?

Consumer goods companies (B2C) are particularly adept at segmentation. To their benefit, they have terabits of data on consumer retail purchasing behavior, demographics, psychographics and geography.  P&G, for example, has segmented the diapering Mom market somewhat psychographically, targeting the Luvs diaper brand at “Experienced Moms”, while their Pampers brand targets “New Moms”. Coca-Cola knows that Texas is Dr. Pepper country, Denver is Pepsi country, and they market and sell accordingly. Ever had to guess at whom Lexus is targeting with their tv ads?  Didn’t think so. Smart customer segmentation helps each of these brands target and market to the right customer segments.

Similar segmentation can be accomplished for B2B markets, but can involve more challenging research and a more strategic understanding of buyer behavior.

Segmentation of business buyers may include grouping them by:

  • Value perceptions.  Is there broad competition and little differentiation perceived by buyers? Or has real market differentiation been accomplished, and a premium price earned for the value delivered?
  • How products or services are viewed. Smart market research and good listening over time can yield unique buyer insights that differentiate how buyers might consider using a product, or the benefits potentially attainable.
  • How products or services are purchased.  Is it a transactional or strategic decision? A collaborative purchase following an extensive research and buying cycle, or an RFP tossed onto the street?

For smaller firms or those with niche markets, solid marketplace data can be a challenge to acquire. Educate your team from top to bottom on your segmentation approach, and listen to the qualitative or anecdotal feedback coming from those interacting with prospects and customers. Segments and insights will begin to take shape, and sales/marketing strategies can be fine-tuned.

Attempting to be all things to all markets and customers can be costly. Avoid a ride in your parachute by segmenting your space and targets. Then develop the products, services, and sales and marketing strategies that match the needs of your well-defined market or customer segments.

Jack Liles flew combat missions in the Navy F-14 Tomcat after graduating with a Business degree from The Citadel, and successfully transitioned into a sales and marketing career following his naval service. He’s held leadership roles at the ad agency Leo Burnett, Coca-Cola, UPS, several start-up tech and consulting companies, and is an occasional military analyst on CNN. Jack is a Partner at TechCXO, an executive professional services firm that provides C-level leadership and consulting services for clients seeking accelerated growth and revenue. Reach Jack at jack.liles@techcxo.com

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