Guest article by Bob Apollo of Inflexion-Point Strategy Partners:

Market segmentation is one of the most powerful tools in the B2B sales and marketing toolbox. If done well, it can dramatically increase sales and marketing effectiveness. But done badly or not at all, it can waste an incredible amount of resource. So here’s a question for you: how much effort might your organisation be currently wasting on ineffective segmentation?

The answer could well be a lot more than you think. Because all-too-often the tendency is to attempt to define a target market so large that it includes every possible prospect that could conceivably purchase your product or service. And in doing so, you inevitably include a huge number of people and organisations that are unlikely to ever buy anything from you.

Traditional segmentation no longer works

Traditional market segmentation works by defining the edges or boundaries of the market. It is typically based upon demographic dimensions like organisation size, industry sector and location. But any rational analysis of buyer behaviour in complex sales environments shows that these factors have a very weak correlation to the likelihood of buying.

In every client situation I have so far been involved in, whilst demographics might play some modest initial role, the factors that really predict the likelihood of sales success are much more to do with the prospect’s environment, their current situation, the way they are organised and their buying behaviours.

Your ideal prospect

These are far subtler, but far more important, axes of segmentation. They can’t be mastered by simply buying in a commercially available mailing list. They require that we take the trouble to deeply understand what an ideal prospect looks like, what matters to them, and how and why they make buying decisions.

You can’t possibly hope to come to terms with these issues by taking a traditional marking-out-the-boundaries approach to market segmentation. In fact, the only way – in my experience – you can master this is by taking a centre-out approach.

Organisations need to start by identifying the common demographic, environmental, situational, structural and behavioural characteristics of their ideal customers, and creating an “ideal customer” profile for each of their target markets.

An attractive approach

The more of these characteristics any prospect exhibits, the more likely they are to become a good, profitable customer – and the more likely they are to see you as a perfect supplier and long term business partner.

There’s another compelling advantage, and the switch from outbound to inbound marketing has amplified it: if you position your company and create attractive content that is likely to appeal to these “perfect prospects”, they are far more likely to find you and to seek you out.

A more aligned conversation

And when you engage, there is a much better chance that your respective attitudes and objectives are going to be aligned. What you say, and what you have to offer, will resonate with them that much more powerfully.

When you first qualify a potential prospect, you’ll have a much better idea of what you ought to be looking for. You’ll know what issues to explore. And you’ll stand a much better chance of qualifying bad deals out early, before a great deal of wasted effort is invested in them.

Eliminating wasted effort

In fact, one of the great advantages of a customer-centric, ideal-prospect based segmentation is that you can eliminate a huge amount of the wasted effort associated with conventional approaches.

    • It becomes clear (as if it wasn’t already) that buying-in commercial, demographically based mailing lists is a waste of resources, even if they claim to be “opted in”
    • The value of researching your prospects and understanding what interests and motivates them becomes that much more obvious
    • Your ability to craft attractive messages and have compelling sales conversations is dramatically enhanced
    • You will spend a lot less money and time on unproductive things

Take the next step

You can download my guide to identifying with your ideal prospects and stakeholders here. Involve representatives of your entire customer facing staff. Establish a consensus around what that “ideal prospect” looks like in every market. Align the whole organisation around it. And make sure you focus on the high spots at the centre of your markets, and steer way from those unproductive edges.


Thanks to Bob Apollo of Inflexion-Point for this guest blog, which originally appeared on the Inflexion-Point Strategy Partners site in November 2013, click here to view it.