What marketers get wrong about segmentation

We'll explore highly misunderstood marketing topic: segmentation [MarketingProfs StrategicB2B Today] December 2022 Market Segmentation: Where Companies Go Wrong When you're facing a lot of competition, one way to understand your situation is to segment the market—because a properly segmented market will give you a better view of the competitive landscape. It will also help you see whether there are segments that no competitor is targeting. Also, since your competitors probably don't segment their markets—they are trying to target buyers everywhere they can find them—you would be able to see in which segments you could win. This article will explore segmentation, a highly misunderstood marketing topic. Segmentation breaks up a market into groups. The original idea of segmentation was that customers within the same group/segment want the same benefits. In addition, segments differ in how critical various benefits are for each segment. For some reason, however, marketers have settled into simple but wasteful classification systems instead. What People Get Wrong About Segmentation Unfortunately, most companies "segment" their market merely by using a category from a list of potentially numerous categories. For example, at a recent Forrester conference I watched an analyst list 22 ways to segment the market, including company size, industry or vertical, growth rate, market position, and so on. The analyst essentially said to the audience, "You figure it out." B2B marketers, in particular, are often asked to focus attention on "vertical marketing," which refers to an industry, trade, profession, or other groups of customers. The idea is to offer products and services that are specialized to customers in a particular industry. Many software companies tend to focus on verticals. An example is Guidewire Software Inc., which offers an industry platform (software as a service) for property and casualty insurance carriers in the US and worldwide. So, let's say you decide to break up the market by verticals. Well, you aren't segmenting the market (I call them classification systems, not segmentation), but you decide to focus on one vertical—let's say it's the healthcare vertical. OK, what does the healthcare vertical care about most? You don't know. So, you start making assumptions and assume everyone in healthcare cares about the same benefits. The problem is that they do not. And, as a result, you start wasting money on trying to communicate to them. From the perspective of competition, all you see are the competitors who target healthcare. If there are several competitors, you start feeling there is no way to break out of this high-pressure market. A Better Way to Segment Your Market and See Competition Clearly If you want to clearly see your competitors in the market, then segment your market on benefits. Doing so will allow you to see where exactly in the market a competitor is playing, and you can see where you may have a distinct advantage. With benefit segmentation you often get 3-6 different segments. What you often find is that competitors are spread out across all the segments (although they know it since they don't segment the market correctly). Segmenting on benefits gives you an opportunity to focus on segments where you can win. So, how do you go about segmenting your market? You can use customer data, focus groups, managerial judgment, and even a combination of those approaches. [Read More ►]( [Allen Weiss] [Allen Weiss] MarketingProfs CEO Professor of Marketing [Researching Your B2B Buyer Personas]( Researching Your B2B Buyer Personas [PRO member webinar] B2B Buyer Personas are the key to your successful content marketing strategy. Creating useful buyer personas starts with effective research. Discover how to research your target audience to both "know" your potential customers and understand their needs. Available to MarketingProfs PRO members only. [Start building effective buyer personas!]( [How to Use Positioning Frameworks to Build Powerful Messaging]( Underperforming Messaging Got You Down? If your messaging isn't landing with your audience the way it used to, if it lacks focus, or if it just isn't converting, join MarketingProfs CEO Allen Weiss for a free webinar to learn why your positioning may be to blame. You'll discover why creating a positioning framework that can withstand the test of time is critical for building powerful messaging that connects with customers and helps defend your position in the marketplace. [Register today!]( Resources [article] [A Powerful Demand Generation Tactic: Lead Magnets and Customer Segmentation, Together [Article]]( [article] [Segmentation in a Web 2.0 World—and Beyond [Article]]( [webinar] [The Future of B2B Marketing: Hot Advice & Smart Insights for 2023 [PRO Webinar*]]( [article] [Six Key Criteria for Market Segmentation [Infographic]]( [webinar] [Using Data & Analytics to Drive ABM Success [Webinar]]( *Available to MarketingProfs PRO members only [MarketingProfs] Your Strategic B2B Team Your team for this issue (in alphabetical order): Megan Cordero, production director; Vahe Habeshian, publications director; Allen Weiss, MarketingProfs CEO and B2B Positioning & Messaging Consulting lead. 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