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Segmentation Redux – Have one but Don’t be a Moron

I got a thoughtful comment on my post called “3 signs your market segmentation might suck” from Rob saying:

I worked in a company that had some good software and some smart folks
that solved hard problems. They were small, about $5M in revenue and
they were in Financial Services, Health Care, Government, Automotive,
Transportation, Retail, and, ahhhh, Anything for a buck. When I tried
to adjust the strategy to focus the company on a segment or two, the
long time CEO always came to 2 arguments. 1. We can’t afford to turn
down business? 2. We can’t afford to put all our eggs in one basket.

He couldn’t get his head around the amount of effort and expertise
to took to solve specific problems and to be able to communicate with

How do you convince a the leadership of a small company to push for
what seems like a counter-intuitive strategy of focus, where you have
to say no to potential buyers?

Good question.  The hard part of focusing on a target market is getting your head around the idea that you might be walking away from business or saying “no” to potential deals.

The first thing to keep in mind is that the whole point of a decent segmentation is to focus people’s efforts.  For marketing it means that you are targeting your lead generation efforts on a particular segment and building your sales support materials to be consumed by those segments.  For sales, it means that your target account lists, demos and sales presentations are geared to those segments.  For product management it means that you have those segments in mind when you are defining use case scenarios, and persona’s and defining requirements.  That is not at all the same as turning down deals or walking away from business.  What you are doing is focusing your scarce resources on areas where you think there is the best opportunity for your business.

So let’s say you work for a startup and you have a couple of customers that are for example, credit card companies.  Your reps are merrily calling on other credit card companies and your marketing is fairly targeted to the business problem that credit card companies have but then by some trick of fate, a prospect shows up that is in Healthcare.  Do you:

a) rap your sales rep’s knuckles and make him write “Healthcare is not our target vertical” 100 times on the whiteboard while you delete the lead?

b) proclaim that “Healthcare is the new financial services!” and immediately get sales, marketing and product management focused on developing Healthcare as your new target vertical?

c) spend some time evaluating the opportunity to decide if the prospect represents a common business problem for the vertical and if so, whether your solution can solve it?  If it is and it can, then cautiously move forward with the deal with an eye toward putting some focus on this segment once you have gained some customer experience.

Here’s the point I am tring to make.  Companies need to be smart about where they focus their time and money but at the same time they need to be flexible enough to recognize opportunity when it is staring them in the face.  Use your segmentation to try to focus your efforts but by all means, be flexible enough to change it in the face of evidence that there is a decent opportunity elsewhere.

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  1. I want to “rap my sales rep’s knuckles and make him write “Healthcare is not our target vertical” 100 times on the whiteboard while I delete the lead”, but then that’s just me. 🙂


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