How Do You Define Target Segments?
You define target segments by using statistical analysis to build segments from your data, then evaluating each against buyer demand, competitive intensity, and your capacity to serve and compete. Building the segments is an analytical step; choosing which to target is a strategic one.
Build the segments through data analysis, working with a research executive or vendor to categorize customers. How granular to go depends on your organization's maturity. Firmographic data is usually the most readily available and searchable, while notes from conversations or interviews are less structured and harder to use for modeling. When collecting new data, it helps to define a finite set of responses or categories up front so the data is usable downstream. For less mature organizations, the advice is to avoid getting too granular too quickly — normalize less-structured data into a manageable set of discrete values to make it easier and faster to consume. Raw, granular data yields good insight only for organizations with the time and analytics sophistication to handle it.
Once segments exist, identify which to target by evaluating three aspects:
- Buyer demand — the size and nature of demand in the segment, and the factors impacting those buyers.
- Competitive landscape — the competitive intensity within the segment.
- Capacity to serve and compete — your own ability to actually win and deliver in that segment.
These three lenses together inform targeted sales and marketing efforts. A segment with strong demand but overwhelming competition and weak fit for your capabilities is a poor target, even if it's large; a segment with solid demand, manageable competition, and strong fit is where focused effort pays off. Evaluating each segment against all three is what turns a set of analytically-derived segments into a deliberate choice of where to compete.
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