How to segment markets

3. Tips for better market segmentation

These suggestions may help your team decide how to segment your markets.

New product teams often find it difficult to segment their markets in ways that are fruitful. Here are some tips that will help:

  1. Does this segmentation tell you which customers to call on? With good segmentation, this is usually obvious.
  2. Does this segmentation tell you the topic of conversation for the interview? This should be the customers’ “job to be done,” not your technology. Example: “We’d like to meet with you to understand your needs for motion control in hydraulic presses.”
  3. Are the customers in your target segment competing against each other? It’s often helpful to segment in terms of the product your customers produce, e.g. makers of extruded residential window profiles, or bridge coatings. This is especially true if your product or service will likely improve their product, not just their process.
  4. In some cases, it’s OK to segment by customers’ process, e.g. type of plastic injection molding method the customer employs. But this is only true if you think you’ll have little or no impact on your customers’ product.

Consider where in the value chain you’ll likely have the biggest impact. Your direct customers might be molding plastic parts, but if their customers “call the shots,” focus on your customers’ customers. In this case, your segmentation might revolve around the type of product being molded (e.g. kitchen appliances, storage containers, automotive interior parts, etc.) Product managers and others tasked with innovation and marketing responsibilities should be familiar with the process of defining a market segment. 


Keywords: market segment, market segmentation tips, segment markets