I have taught The Power of Market Research at UCSC Extension Silicon Valley for over 5 years and segmentation is an important concept that I review with all of my students.  Segmenting all of your potential buyers into logical/semi-homogenous groups is the first step to being able to do targeted marketing to each segment.

Targeted marketing allows you to use positioning and messaging that shows how well you understand your customers’ needs and how your solution addresses their needs better than anyone else.  It’s an ingenious way to market, but too often, companies (especially start-ups) ignore segmentation and go after the largest possible mass market they can, thinking that there are more dollars to be had. 

The danger of this approach is that you may spend a lot of money and time on marketing but are spreading such a generic message that it doesn’t resonate with ANYone.

Instead, why not take a segment of your market and speak specifically to their needs?  For example, if you have a software solution that can be used to manage clients, you could market your product to anyone who has clients and may have some success with people who haven’t seen a solution like yours before.  But imagine how much greater your hit rate would be if you targeted your solution to lawyers and how they can manage their clients.  You would use terminology to show that you understand the specific challenges of managing law firm clients and show how your solution helps them address their clients needs, and their OWN needs, better than other solutions that exist.

If you can get a large % of wins from the smaller market of lawyers/law firms, that may prove to net more sales than getting a small % of wins from all possible buyers of your client management solution.

This whole concept of segmentation is also very important when you are doing any customer research.  When strategizing about the research you will be doing, you want to make sure to have sufficient representation of the segments that you and your company are targeting to ensure that the insights from the research can be applied to your targeted sales and marketing efforts.

I’ve found that company size is most likely to be an important way to segment research data since small businesses typically have different requirements than mid-sized to large businesses. Especially when it comes to software solutions – smaller businesses tend to have less sophisticated requirements re: integration with other solutions, etc. but the opposite is true for larger companies. 

Size, application, industry, etc. are all important things to consider when developing your own segmentation strategy.