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In this edition:

• Column: Market Segmentation Explained

• Inspiration: PedidosYa’s “World Cup Delivery”

• Upcoming: Unlocking the Future of Customer Acquisition Panel

Column: Market Segmentation Explained

Market segmentation is often seen as an end (instead of a means to an end) to many marketers.

Let’s take a look at the category and make generalizations based on age, motivators and pain points to identify who our brand best serves.

That last sentence alone should make a trained marketer’s eyes burn.

If you’ve been keeping up with my latest columns, you know by now that market orientation is the first step for any marketing program to work, followed by backwards research to maximize one’s resources.

Only after that do we jump into market segmentation.

But you see, the point of segmentation isn’t to find who our brand would best appeal to. That’s totally backwards (hint: instead you should find a need in the market and build a brand to serve it).

The goal of segmentation is to create a map of the market. This means that the map you’re looking at is likely the same map that your competitors are looking at. The difference lies in what follows next — who you will choose to target.

But from a category standpoint, if we’re not clear on what the map looks like, there is no chance that we will ever be able to navigate the terrain effectively.

Types of Segmentation

There are many methods to segment the market. They each have a role to play based on one’s budgets, level of expertise in the topic, and time constraints.

Ideally, everyone would do thorough behavioural or actionable grid market segmentation (more on those later on), but the reality is that sometimes lesser forms of segmentation will do the job just fine.

So, what are the main types of segmentation?

• Demographic

• Firmographic

• Psychographic

• Hybrid

• Behavioural

• Meaningful/Actionable Grid

It might come as a surprise to some how there are so many methods to slice a cake, but the deeper you think about it, it actually makes sense.

Let’s start with the good ol’ demographic segmentation. You simply take a look at the total category, divide it up based on age, income, gender, race, education, income, location, and so on.

The obvious benefits of this method is that it’s easy and simple to do. But the drawbacks are immense. This not only overgeneralizes people in the market, but it assumes that several of people’s traits that they are born with are major determinants of how and what they consume in the market.

It sounds bonkers that someone would decide to split out the market based on such things, but I can tell you that the majority of marketers out there (albeit untrained marketers) are doing it this way. That’s the first misstep in most marketing strategies.

Just take a look below at this research done by BBH Labs in the UK. There is more group cohesion between people who floss or drink Orangina than between people of the same generation. This should tell you enough about how effective this method is.

Moving on to firmographic segmentation. This method is specific to B2B and is actually not bad. What you do here is you essentially take a snapshot of the total category whom would potentially buy from your company and slice it between industry, revenue, location, private vs public, headcount, financial year cycles, and so on.

This would give you a pretty good idea of the lay of the land, and set you up for the next stage of marketing planning where you’d create buyer personas for each of your target segments. You’d like end up with a half dozen to a dozen profiles whom you’d be able to better understand through market research before going after them in any sort of way.

Again, this is a B2B method that is pretty simple and works quite well most of the time.

After that we have psychographic segmentation. This is an “out of the box” approach that largely relies on the US VALS^TM Framework, which is a proprietary psychometric method that measures Values, Attitudes, and Lifestyles—in conjunction with behaviors and demographics—for developing countrywide typologies. It was invented back in the 70s and is still in use today.

The obvious benefit of this approach is that it’s a pretty easy and ready to use framework, but the downside is that it’s quite generic and misses a lot of nuance. Grouping the entire population into Innovators, Thinkers, Achievers, Experiencers, Believers, Strivers, Makers, and Survivors is a pretty broad stroke that makes us marketers feel good, but catches up to us later on with.

But one way to use this is by conducting primary research with your own customers to measure how they over or under index against each typology.

Then you have the hybrid segmentation approach — which is essentially a mix between psychographic and demographic segmentation. This works ok for geotargeting and making media and sponsorship choices, but ends pretty much there in terms of added benefits.

This brings us behavioural segmentation. This approach is what most marketing professionals would call proper marketing because it uses the previous quantitative survey (informed by your qualitative work) to cluster your representative sample size into groups based on behaviour.

We’d formulate a survey to understand purchase attitudes, category behaviour, decision making, past buying, and so on, then slice it based on demographic and firmographic correlations. This is what gives life to the “marketing lingo” other departments often find cute, but that are quite informative (newbies, occasionals, confident enthusiasts, engaged explorers, etc.).

Meaningful Actionable Grid

The final and most thorough form of market segmentation is the meaningful actionable grid (which works equally well for both B2C and B2B).

In this method we start out by identifying 10 to 15 key variables that are meaningful to our company and could be used to segment the market later. For example, if you’re a corporate finance firm that puts together debt or equity deals for medium sized businesses, you’re going to identify a list of variables of how your potential customers might be different from each other. For example:

• Annual revenues

• Do they have a CFO

• Business margins

• Are they a past customer

• Have they ever engaged with your sales team

• Geographical location

• Growth stage

• Industry/sector

• M&A activity

• Are they tied to particular regulatory requirements

Then you’d measure how impactful each variable is based on whether or not it would influence buying behaviour (in this case, does it meaningfully influence whether or not they engage with your finance firm), followed by how actionable are these variables (ie: 1 being we’d never be able to get this data, 5 we can likely infer based on other factors, and 10 we have detailed access to this data).

Take the two scores and multiply them by each other to get your final score:

Now we select 3-6 of the highest scoring variables to help us map out the market. In this case: annual revenues, whether or not they have a CFO, and what is their growth stage.

We then plug them into an X/Y axis and begin collapsing the cells that are too similar to each other that wouldn’t warrant being their own separate segments.

After that we must calculate how many companies are there that fit the newly collapsed segments, what’s the total market value based on our average deal size (in this case let’s say $5M), what’s our share within each segment (how many of our existing customers fit each segment description), and give them a memorable name.

We now have clear market segments that are actually relevant to us:

Note a few things:

• I’ve collapsed SMEs with no CFOs and Large companies with no CFOs because from our corporate finance standpoint there aren’t any significant differences between how we’d deal with them.

• We’ve crossed out all start-ups because they typically rely on angel investors to grow and are too risky for us to raise money for.

• We crossed out all multinationals because these companies typically have major banks (i.e.: Goldman Sachs) already taking care of them and with much greater access to capital.

Through these simple yet rational decisions we’ve landed on a much more relevant market segmentation that tells us where the biggest opportunities are (SME and Large scale up companies with no CFOs) and how much share we have within each segment.

The next step from here is determine which segments we will chose to target as a company, but that’s a whole different conversation that I’ll cover in a future column.

Segmentation Is About The Market, Not Your Company

It’s important to remember that when we segment a market it should technically look very similar to our competitors’ segmentation. That is because we haven’t actually made any decisions yet as to who we will go after — that is part of making strategic choices on how to grow our business.

Whether you have a big research budget to craft an insightful behavioural segmentation, or a smaller one that only enables you to get going with US VALS^TM the important thing is to go into this exercise clear eyed.

There are trade offs for each method but ultimately it’s up to you, the marketer, to weigh the pros and cons based on your own circumstances.

Inspiration: PedidosYa’s “World Cup Delivery”

The most common challenge marketers face are limited budgets.

It’s no secret that the bigger the budget the more one can do with a campaign.

But the true testament of creativity isn’t when we have unlimited amounts of cash to play with.

Instead, I want to see you be creative with a tiny budget.

And that’s what PedidosYa and GUT Buenos Aires did back in 2022.

This is the stuff of champions.

📢 Community Shout Out

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• Share this week’s newsletter on LinkedIn.

• Write something nice about it and add a question.

• Tag me on LinkedIn so I can see it.

I’ll answer it in the post comments and pick someone to give a shout out in my next column!

Upcoming: Unlocking the Future of Customer Acquisition

• May 16 @ 4:30 pm - 7:00 pm MDT

• Earl Grey Golf Club - 6540 20 St SW, Calgary, AB T3E 5L2 Canada

• REGISTER HERE

In an era where the landscape of customer acquisition is ever changing, staying ahead of the curve is not just beneficial; it’s essential for any marketer looking to make a significant impact. This exclusive Panel & Power Hour session brings together a trio of local marketers (including yours truly), each with a distinct set of experiences and insights into the dynamics of customer acquisition in today’s marketing world.

What You Will Learn:

• Emerging Trends: Uncover the latest trends in customer acquisition, from technological advancements to shifts in consumer behaviour.

• Strategic Insights: Gain valuable insights into developing and implementing strategies that resonate with today’s consumers.

• Real-World Applications: Learn from the firsthand experiences of the panelists, who have successfully navigated the challenges of marketing in various industries.

• Interactive Q&A: Engage with our experts in a dynamic Q&A session, where you can seek advice, clarification, and deeper understanding of the discussed topics.

Whether you want to refine your strategy, explore new avenues for growth, or simply stay informed on the latest customer acquisition trends, we designed this Panel & Power Hour for you.

REGISTER HERE.

• May 16 @ 4:30 pm - 7:00 pm MDT

• Earl Grey Golf Club - 6540 20 St SW, Calgary, AB T3E 5L2 Canada

More of PPA:

• 🤝 Connect with Pedro on LinkedIn and/or X

• 🍻 Come by the WJ office for a brew

• 💌 In case you missed it:

  • How To Approach Marketing Research

  • You Are Not The Customer

  • How To Use Proper Targeting in Marketing

PPA 

Pedro Porto Alegre is a seasoned marketing professional with in-depth experience building brand and communications strategies for top-tier B2C and B2B organizations across Canada. His repertoire extends from crafting and executing integrated multi-media brand marketing campaigns to the commercialization of performance-driven innovations for multimillion-dollar and nascent brands alike.