Segmentation – The Taboo Word

Customers, at least those who take to twitter, do not like to think of themselves as one of many in a segment. Definitely they do not want to be “targeted”. Some even want to believe that they are a segment of one, with unique preferences.

Big established companies (other than CPG/FMCG) do not like it as well. There are no issues in accepting the simple static segmentation – Geography based, customer size based, or industry type based (NACIS).  Even then, they do not use the word segmentation to describe the classification.   Anything more, like psychographic or need-based segmentation is lost on them.

Start-ups see segmentation as theory and not as something one can use the next day to move things in their business. It helps their case to believe that their product is relevant to everyone out there and creating segments seem to cut that addressable market to a fraction. They insist on using “Product-Market fit” over  “Segment – Version Fit“.

Evidence based marketing managers, pushing for segmentation are not helping their own case with how they communicate segmentation.  The fact that the method for finding customer segments rely on advanced statistical methods do not help.

For sure they do not want to rub it in on customers face that they fit a psychographic profile. Second, they should understand the mindset of the senior executives in big companies and that of the founders at startup before trying to push for segmentation.

Senior executives or startup founders, have formed an intuitive feel, right or wrong,  for what their target segment is. They may not use the word segmentation and they may not define it narrowly but it is there. So when a evidence based marketer starts rattling about the use of statistical methods to define segments and segment sizes, they risk being treated as an academic spewing “tons of theories that are not worth an ounce of action”.

The reality is, segmentation is not an academic exercise. Big or  small, companies cannot afford to cast it aside (and yes, even startups need to worry about segmentation).

How does one evangelize segmentation? Be it in a big corporation or a small startup, here is a three step process

  1. Start with the goal and not segmentation for its own sake. What is the key business challenge the decision maker is trying to solve? What do they stand to gain by finding the segmentation? Do not bother with the how until much later. Definitely do not try to highlight your statistical expertise before you sell segmentation as an absolute necessity.
  2. Position it as resource allocation problem. No business can be all things to all people. We all have only limited resources. Position segmentation exercise as the need to find the best way to allocate limited resources.
  3. Present a template of what the results of segmentation will be. Do a mock-up with plausible segment variables. Present customer profiles as defined by these and present possible segment sizes. Talk about how the business can now, “put all its wood behind an arrow”, with an attractive segment.
Once you sell the need, the how is under your control and expertise.
Startup founders, want to talk about segmentation for your start-up?