There are only a few products in the world that are designed to meet everyone’s needs equally. For the most part, if you think the whole market is your opportunity, you’re wrong.
You may have a distinct opportunity in each segment, but best-in-class marketers make sure they’re targeting the audiences with which they have the greatest opportunity and best chance to succeed.
If you have not done any market segmentation or it wasn’t done correctly, your marketing efforts will be wasted. The best marketing in the world will not work if the message does not resonate, or is not meaningful to the audience (not something they are interested in or not a job they are looking to complete).
Ultimately, it’s about optimizing budget—very few companies have unlimited money to spend on marketing. Where do you focus your efforts? Prioritizing segments where the biggest opportunities exist is crucial in determining where to focus marketing, persona, and content spend.
So, have you done the hard, introspective work to determine where to put your marketing dollars? If not, here’s how.
How To Define Your Market Segments
Phase 1: Identify Optimal Sub-Segments
In the first phase of market targeting, you’ll start with your total available market and progressively drill down to identify your optimal sub-segments.
- Outline your total available market—your entire universe of customers.
- Determine which segments best align with your GTM strategy. Where is the best fit for what you offer? Where is your message most likely to resonate?
- Determine whether you’re likely to succeed in these segments. Are there any significant limitations to your success? Do you have the capabilities you need to address these consumers’ needs? What is the competitive landscape? Are there macro-economic trends you should be aware of?
- Determine your addressable market. Identify what these sub-segments spend on what you offer. For example, if you are a management consulting firm, how much do these targets spend on management consulting?
Phase 2: Use Game Board to Identify Top Targets
In this phase, you’ll plot your target sub-segments from phase 1 on the Game Board to determine which offer the best opportunity.
Assign each sub-segment a score on a 1 to 5 scale for both of the following:
- Alignment with your GTM strategy (there is a degree of art here)
- Likelihood of success (based on your current capabilities, competition and macro-economic trends outlined in phase 1)
Based on your scores, plot your target sub segments on the game board.
- Y axis = alignment with GTM strategy
- X axis = likelihood of success
- Size of the bubble should be based on total potential addressable revenue
- Remove the obvious sub-segments that do no align (those that fall the Avoid section).
- Re-plot the remaining sub-segments relative to each other (this step may need to be done more than once!).
- Use the Game Board key to prioritize which sub-segments you will target.
Market Segmentation in Action
We recently executed our own market segmentation exercise of the retail vertical at Harte Hanks, and this is what it looked like.
Our Game Board:
Our results for mapping sub-segments of the retail industry on the Strategic Gameboard
Based on this market targeting exercise, we have determined which retail sub-segments offer us the most opportunity and where we are most likely to succeed—which allows us to optimize our marketing spend. We’ll keep our eye on the growing potential of some other sub-segments in the retail vertical as we move forward.
Of course, we have repeated this exercise for each of the vertical industries we play in. Learn more our approach to bringing human interaction back to marketing through the 5 Pillars of Best-in-Class Marketing, including market segmentation.
Personas: The Next Step after Market Segmentation
Once you have determined your best targets, it’s time to get to know them—far better than any traditional demographic persona. Here are some resources to help you get started:
Buyer Personas are NOT Customer Segments: What You Need to Know
How to Use Buyer Personas to Improve B2B Customer Experience