The need for effective market segmentation is practically a universal truth when it comes to introducing new products, particularly for new companies. But it is a universal truth that is seldom followed.
Based on past experience and interactions I have with Gartner clients, the vast majority of technology companies do a poor job of either clearly defining target segments or, if they do have clear targets, don’t follow through by focusing their marketing and sales efforts around those segments. The primary exception to this trend are companies whose whole business is built around a focus on one vertical market. But even there, more detailed segmentation could provide benefits.
Why does this happen when everyone agrees that segmentation is important? I believe that it is largely driven by fear.
- Fear that there will not be enough opportunities to meet the initial revenue targets
- Fear that the targets are not right—-opportunities will be missed
- Fear that being focused limits the long term potential
In some regards, the fear is legitimate—the early stages of product introduction are the most pressure packed. It is understandable that people feel the pressure. But the reality is that the best way to alleviate that pressure is to be highly focused–marshalling all the scarce resources toward a common target.
At the same time, having well defined segments does not have to limit you to only pursue those opportunities—it is a guide, not a mandate. I advise clients to think about this like a simplified archery target as shown below:
Your target segment is the bulls-eye. This is where the bulk of the marketing focus should be–creating content and campaigns, for both inbound and outbound usage, that “speaks” to that target.
The next ring is adjacent segments with similar needs. If sales teams need to expand their pipeline and leverage existing relationships, guide them to pursue clients with similar needs, even if they are not in the target segment. Do not support their efforts to steer you toward customers with different needs just because they have a relationship or a “big opportunity”–in most cases these will either be rat holes or require so much effort or product enhancements that it won’t be worth it.
Finally, the outer ring is people that find you. Ideally, your inbound marketing efforts will lead prospects in your target segment to you, but you can’t control that. Others will find you as well. Apply the same filter that you do for sales generated opportunities. If the needs are similar, then its worth pursuing. If it takes you down another path, you may want to think twice.
As you can see segmentation starts with marketing, but extends to sales in terms of qualification. It is not a “marketing responsibility”–embrace it across the organization.
As you roll out this approach, it does not mean forever. Monitor your results. If you are less successful than hoped, you may need to adjust your target segment definition. But don’t do it based on knee jerk situations. Be thoughtful and adjust as quickly or slowly as needed.
For Gartner clients that want to explore this in more detail, you can check out my latest research note, “A Practical Guide to Market Segmentation” (fee/subscription required).
What do you think? Would using the Segmentation Target Model help you get more people bought in to your segmentation efforts?
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