Operationalizing Your Segmentation Strategy: Company-wide Initiatives to Consider

Expansion-stage companies often face tough sales challenges: limited resources, small customer bases, and tremendous pressure to grow to name a few. These and other constraints can make it tempting for them to sell their products and services to any interested buyer. But that’s a mistake. To grow effectively, they need to focus on the right customers.

The best sales expansion strategies hinge on segmentation because it allows them to grow profitably while optimizing their effectiveness. Simply put, segmentation is a matter of choosing your battles, so that you’re selling to the customer segments you can best serve and that care the least about your weaknesses.

There are a number of ways to tackle segmentation. You can go all-in on a single customer segment or be the platform for a broad customer base while simultaneously honing aspects of your product and go-to-market strategy to one or more specific customer segments. In between there are many other strategies that can be successful as well.

Consider Zmags*, a company that illustrates what it means to have a solid strategy focused on a single customer segment. In 2010, the Flash-based page flipping publication platform decided to narrow its customer focus from publications, direct marketers, retailers, and brands to set its sights exclusively on commerce — the retailers and brands that can use interactive catalogues to drive online conversion or offline sales.

Zmags tackled its segmentation across a number of areas, including marketing, product, and sales. The company began with the development and release of marketing content regarding mobile and social commerce relevant to its target audience, including webinars and whitepapers. Six months later, Zmags released a version of the product specifically targeted at its segment and built a professional services team designed to support the needs of larger commerce customers.

Toward the end of this year-long undertaking, Zmags shifted its sales process from primarily inside sales to a combined field and inside sales model and hired a chief operating officer / chief marketing officer with segment experience.

The segmentation approach allowed Zmags to win major retail and apparel customers, including Kenneth Cole, Tesco, and Express. Its average deal size grew by 700 percent and the company experienced overall growth of 1,730 percent in just three years.

Implementing segmentation as successfully as Zmags requires developing company-wide initiatives around narrowing your company’s focus on its target segment. Below are some types of initiatives to consider.

Adjusting Your Product and Go-To-Market Strategy

If you’re trying to appeal to a broad customer base, while also adjusting your strategy to appeal to one or more specific customer groups, here are a few approaches you may want to try

• Marketing-based segmentation requires you to calibrate your marketing materials to each segment, using the case studies, buying criteria, and words that appeal to that particular market segment. You may also want to target specific influencers and marketing channels accordingly.

• Sales-based segmentation involves organizing your direct sales force so that individuals or teams are focused on a given segment. This strategy may also include choosing indirect sales channels that are best suited for customer segmentation.

• Product-based segmentation requires you to produce whole features or products that are calibrated for the needs of a particular segment.

Steps to Segmentation

There are also several important company-wide steps you can take to help you kick off your segmentation strategy:

• Recast and resharpen corporate goals and strategy with your target segment in mind. To make segmentation successful, a company must allocate capital and human resources to support the push into the segment, as well as identify and empower the person responsible for the segment push (typically the vice president of sales, marketing, or product).

• Establish a cross-functional team around the owner of the segment push. This team will support further research or refine the segmentation approach, target selected segments early on, and optimize marketing messaging and the sales process prior to scaling.

• Update your performance measures relative to your segment. Relate employees’ goals to new sales in the target segment, new sales in the target segment as a percentage of total new sales, and other relevant measurements.

• Rid the company of distractions. As you progress with your segmentation, identify the non-core areas of your business and eliminate them over time.

Growth Through Segmentation

A well-executed segmentation strategy can produce tremendous results for an expansion-stage company. It provides an opportunity for an organization to grow and specialize despite more limited resources than larger competitors. A successful segmentation effort requires more than just a decision by company executives. It’s important to involve specific business units for maximum impact.

In an upcoming article, I will outline tactics for executing your strategy in the sales, marketing, product and customer services departments.

*Zmags is an OpenView portfolio company

Photo by: UCD School of Medicine & Medical Science