Segmentation with Purpose: Aligning Objectives with Market Insights

Segmentation is the original personalization. Recently, it has taken a backseat amongst all the talk of using AI and LLM to personalize messaging and offers. But as B2B marketers know, in B2B markets, segmentation still provides the foundation for building your ICP, pricing, positioning, and product roadmaps.

Isurus has helped B2B clients with segmentation analysis for over two decades. Based on that experience, we offer the following recommendations and perspectives.

Know When to Stop

To say segmentation analysis is “fun” may be a stretch, but it is a stimulating exercise that produces compelling insights. It can also open a rabbit hole of deeper and deeper analysis. You can find yourself in a feedback loop of refining the dimensions included in the model, interpreting the resulting segments, and then tweaking the dimensions further, all in the hopes of developing the perfect segmentation—the one that provides the absolute, most accurate view of the market and the silver bullet for success in each segment.

Unfortunately, like with LLM models, segmentation analysis is subjective. You can rerun the analysis in different ways to get slightly different results. In addition, many segmentation tools allow for over-segmentation, generating 5, 6, or even 10 different segments. Too many segments to be practical for a consumer company, never mind a B2B solution provider. Over-segmentation occurs because statistical models can create profiles that are statistically different but, from a practical standpoint, are just variations of the same segment. The best segmentation solution supports concrete action to help you meet your objectives. For example, if you only have the resources to create three versions of solutions, collateral, or campaigns, defining six segments doesn’t help you.

Set Clear Objectives

There are literally dozens of dimensions you can include in a segmentation analysis. The trick is to pick the dimensions that align with the segmentation objectives. For a product marketer that needs segmented go-to-market planning, the segmentation needs to focus on the market’s needs, perceptions, and behavior tendencies. For a product or finance team working on product portfolio planning, the segmentation may use firmographics such as size, segment, and sales volume.

Both approaches are equally valid. However, each generally falls short of meeting the needs of the alternative orientation. In the most extreme situations, internal teams develop competing segmentation schemes that appear to contradict each other, leading to internal disagreements over how best to approach the market. To avoid these internal headaches, we recommend clearly articulating the objectives of your initiative and how the resulting segments will be used and then reiterating them as you socialize your results. Be clear about what your segments are designed to help with and what they are not.

Expect Challenging Information

To varying degrees of formality, all companies use de facto segmentation schemes. Marketing, sales, strategy, and product teams have their own assumptions and beliefs about the market. This segment is more/less likely to purchase a type of solution or have this type of need. The results of any new segmentation scheme will challenge the de facto segmentation.

This is to be expected. Segmentation analysis is not a confirmatory exercise. B2B marketers embark on these initiatives because they believe something is not quite right about their company’s approach to the market. Unfortunately, when the data and segments contest internally held beliefs, it is human nature for teams to become defensive.

Being clear on objectives, how the segments were developed, and their limitations can reduce conflicts and help teams engage with the segments. Tailoring the presentation of the segments for each team and using a Start, Stop, Continue, Change framework in team meetings can also help internal stakeholders embrace the data. You can read more about making research results actionable in our post 7 Proven Tips to Deliver Actionable Market Research Insights.

An Additive Approach

Differing segmentation schemes do not need to be a contest. In the best of worlds, they build on each other. The logical starting point is to segment based on available customer data. By default, existing customer data will be heavily firmographic, including size, segment, etc. This segmentation may be all that your teams can realistically use. However, you may want to take it further by understanding market segments based on their needs, motivations, strategic directions, etc. This type of segmentation requires collecting additional data from customers and prospects. As you design the research for an attitudinal segmentation, use the key firmographic data from the initial segmentation to link the two. With that connection in place, it will be easier to overlay one segmentation scheme over the other and map the segments onto the customer/prospect database.

Primary Research

With two decades of experience, Isurus helps B2B clients collect data and develop effective segmentation schemes. To learn more about segmentation analysis or how Isurus can help you with your efforts, you can contact us here.