The Hierarchy of Segmentation

This approach assumes that you have more than a few potential customers for your product. If you have a super niche product and you know everyone who could ever buy it, stop now, this isn’t for you. 


Segmentation is an outside-in view of your MARKET – whether you have those customers or not. That’s why most segmentation efforts fail. Either you’re confusing segmentation with targeting or personas, or you’re not going far enough. 
In Maslow’s Hierarchy of Needs, most humans don’t reach self-actualization. Hell, too many people around the world aren’t eating and sleeping indoors. That’s true with B2B companies in the Hierarchy of Segmentation.


Basic

Companies at this level have gone beyond the monolithic “customers.” You have identified some subgroups of customers. Maybe you call them “heavy users”, “moderate users” etc., or maybe you use your sales channels “inside sales” and “field sales” as a segment. It might help to see whether those groups are growing or not, but until you evaluate them against the market, you don’t know how big your pie can get.  It’s pretty hard to know how many “inside sales” buyers there are in the world. 


Readily Available Data

OK, so now you’re at the “safety and health” level. Your segments are probably vertical markets. So you’ll have “Financial Services” “Healthcare” and “Automotive” or some such. That’s because you can get the data from the BLS, or some industry document for the market size, and you can easily categorize individual customers. Other common choices fitting the same reasons are revenue or employee size bands. If your definition of “Enterprise” is >10,000 employees, you’re in Readily Available Data land. Now, you might say “what’s wrong with that- we know how big the pie is.” Yep, but the problem with this approach is that’s not where the competition lives.


What Sales Says

OK, getting closer. Now instead of an entire vertical market, you understand that within a vertical there are specific industries. A Google Alert showed me that there’s a thriving and competitive Airplane Seat industry.   If you’ve gotten to this point, and you’re organized around these groups, you have specific marketing materials and sales playbooks for them, and your finance team reports the P&L of these, congratulations, this may be as far as you get, and you should be really pleased. You have “Love and Belonging.” 


The Consulting thing was a joke ;)  Our sister organization is a consulting services firm. But we use the Delvantage process to get them to self-actualization.  Funny thing though, in Maslow’s hierarchy, this is the “Esteem” stage- ha!

Outside-in, Data Informed approach

Otherwise, consider this. Within “what sales says” could be different categories of buyers. Maybe Airplane Seat buyers come in “if it fits in the plane” vs. ”feature/function” vs. “relationship” buyers.


And then we add this crazy idea called Buyer Type.  Now the big mistake that most companies make when trying to reach self-actualization, is that they only consider the buyer types THEY themselves have. These segments have unique buying criteria, and purchasing preferences.


So if you have only enterprise sales, but there are folks out there selling your same product category to those same people online, you have to count them. That’s the only way you’ll know what your potential pie can be. Now you may not elect to go after those folks due to internal or external constraints, but you MUST acknowledge that you COULD. That’s where hidden revenue is often found.


The rule of thumb of segmentation stands: as many as necessary, but as few as possible. If the groups aren’t discrete in buying criteria, or buying preferences, they don’t need to exist.


I worked at a company that acknowledged there was an SMB market, but for some time had chosen not to participate. When they did start the process, they wanted to use the enterprise-type product, but didn’t realize that it couldn’t be sold the way the buyer wanted to buy. When you understand how the buyer wants to buy, combined with WHY they buy, and deliver the solution better than your competitors? That my friends, is self actualization.