Start-up founder eyes cross when I ask “what is your segmentation model.”
I often must resort to CPR to revive them.
It is not that the concept is unfamiliar to them. Nor are they shocked into stuttering zombies due to weak mental stamina. It is that segmenting markets is unnatural to them, and often practiced in aberrant ways that make politics look savory by comparison. It is the unnatural aspect which throws both novice and veteran entrepreneurs.
Image using industry verticals to segment the iPhone market, and you’ll instantly understand why some segmentation models are unnatural.
(Brief war story: I once consulted to a firm that had a huge IPO, and then saw their basic business model crumble. During the initial consultation preparing them to enter a new market, I asked “What is your market segmentation model?” They reported it was based on industry verticals, which seemed odd to me. I asked why they selected industry verticals and their CEO said “Well, it is as good as any other segmentation model.”)
My dictionary defines a segment as “one of the parts into which something naturally separates.” Natural is the key to market segmentation. There are many factors for selecting a market segmentation model, but buried in Silicon Strategies’ dozen steps and six key criteria, the natural basis for evaluating competing products is fundamental. Different segments have different needs, priorities, expected outcomes and communication modes. These begin to define the natural segments within a market, and they all start by understanding in reasonable detail customers, marginal customers and non-customers.
One case study concerns a software development platform vendor that came to Silicon Strategies Marketing a few years back. They too were leaning on unnatural segmentation models, and getting unnatural results. Through our review process, we listed and eliminated many market segmentation schemes that did not meet key criteria from the customer perspective, which in a word were natural fits. For this specific product, we discovered that one of the two primary segmentation vectors was the average software project team size and locality. Industry verticals, development languages and even the formality of the development cycle were less relevant than the size of the coding team.
When selecting your market segmentation model, never use a default. Doing so sinks massive resources and time into chasing non-customers, or creating totally irrelevant messages and value propositions. Seeing the market from the perspective of a wide set of customers, and mapping how they relate to products and one another, unmasks segmentation options and shoves you down the path of chasing viable buyers.
It is the best way to get your slice of the pie.