Marketing Segmentation

What is marketing segmentation?

Marketing Segmentation

Interestingly, marketing segmentation is not listed in Wikipedia – the mother of all definitions. However, Wikipedia does define “market segment” as “a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function.” Marketing segmentation and market segmentation are different. Marketing segmentation is, well, a way to segment your marketing, not a market. It’s time we gave marketing segmentation a definition.

Here’s our definition, marketing segmentation is the process of individualizing marketing efforts to a subset of targeted contacts or companies meeting related criteria. In plain English, it means marketing to sections of your database to address specific, and like needs. Using email marketing as an example, without marketing segmentation businesses would send out spray and prey email campaigns to every contact in their database. Recipients would become annoyed as they’d receive irrelevant content too frequently that doesn’t meet their needs.

To achieve marketing segmentation, businesses should do two things. First, turn to their most valuable asset, their database, and compartmentalize it. Second, split up their sales pipeline into two separate pipelines, one for marketing and one for sales.

Step 1, analyze your database for segmentation

Let’s first look at compartmentalizing your database. If you have a clean and accurate database you can probably skip this paragraph. However, if you’re like most companies and have an immature or messy database, take the time to get it in order. Your database is the foundation for your marketing segmentation strategy. To clarify, database segmentation is different from marketing segmentation. Database segmentation is a part of the overall marketing segmentation solution and helps you send more personal emails while avoiding unnecessary ones. Once your database is segmented, create unique and relevant content to send to each segment.

Before segmenting your database, it helps to make a list of how you’ll market to your database. When you understand how you’ll market to your database you’ll know what database information or fields you’ll need for segmentation. Reference our article 101 ideas for B2B lead generation to spark your thoughts.

For this article, let’s assume we’ll use email marketing as our marketing strategy. Next, identify your segmentation criteria. Here are 16 examples of how to segment your database.

  • Email address vs. no email address
  • Interest-based preferences – does the prospect/customer like product A or product B? does your prospect/customer like information on products, use cases, documentation? These are just a few examples. Use interest-based questions in your web forms to collect data.
  • Title – is the prospect/customer a Vice President or in Engineering?
  • Referred by – was it a partner who referred the contact to you?
  • Source – did the lead come from a tradeshow, purchased list, internet search?
  • Clicked links – has the prospect/customer clicked any links in your email campaigns sending them to your company website? This indicates interest.
  • Geography / territory / time zone – where is the prospect/contact located?
  • Recency – was the contact added to your database within the last 3, 6, 9 or 12 months?
  • Networking – where did you meet the prospect/customer, at a restaurant, trade show, on-site?
  • Frequency – who is buying more frequently than others? Separate these folks from the rest of the pack to hone your selling efforts.
  • Monetary – which customers are spending the most? Push them to the top of your stack.
  • Pareto’s Principle of 80/20 – Pareto state’s that for many events, approximately 80% of the effect comes from 20% of the causes. Identify which customers bought something in the past year and what they paid. Figure 80% of the total sales for the year and determine which customers contributed that amount; these are your “A” customers. Next, identify the next 10%; these are your “B” customers. Identify the next 10%; these are your “C” customers. Mark everyone else a “D”. Ignore the Cs and Ds and focus your sales and marketing efforts on the As and Bs.
  • Buyers by Product – who’s buying and who’s not? which products are they buying?
  • Sales stage – where is lead/customer at in your sales and marketing efforts? Feel free to use our article on the sales pipeline to get some ideas of the pipeline stages to use in your database.
  • Lost business – which opportunities have been lost? Don’t forget about them, they may have other projects or interests. You’ve invested a lot of time and energy trying to sell to them. Don’t let that go to waste.
  • Active vs. inactive – for example, who has not opened or clicked an email in the last 180 days

Most marketing automation solutions have built-in technology to help you partition your database into individual contact lists by running a query on your database. The query can be a one-time query only or an ongoing query that adds new contacts to your list as they appear in your database and match your requirements.

Step 2, allocate a marketing pipeline and a sales pipeline

The second step to marketing segmentation is to split the sales pipeline into two separate pipelines. We’ve gone into depth on this topic already so we won’t repeat ourselves. Read this article on dividing your sales pipeline for more information. In summary, sales will manage a pipeline of leads, contacts, and opportunities ready to talk whereas marketing will manage everyone before they’re ready to talk.  Marketing’s pipeline is most likely interested in getting an education vs. a sales pitch.

Once your contact lists and pipeline process is separated, create unique and relevant marketing assets (whitepapers, kits, email messages, etc.). Finally, leverage closed loop email marketing to send personalized email messages and nurture your lists using lead nurturing technology.

Good luck with your marketing segmentation efforts. Special thanks to Lori Feldman, the Database Diva, for providing her list of ideas for database segmentation.

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