Segmentation empowers businesses to tailor their marketing efforts, optimizing resource allocation for higher customer engagement and increased sales. Yet despite the positive results, many businesses fall short in their segmentation and targeting efforts. They often struggle to identify the right segments or target inappropriate market sections. This misstep usually stems from a lack of quality data, misinterpretation of market dynamics, or inadequate understanding of the business’s unique value proposition. As indispensable tools for businesses aiming to navigate the intricacies of the market effectively, this blog dives into common pitfalls and best practices of Segmentation and Targeting acting as a comprehensive guide. As Theodore Levitt rightly stated,

“If you’re not thinking segments, you’re not thinking.”

Understanding Segmentation and Targeting

‘Segmentation’ and ‘targeting’ – these terms, central to marketing parlance, carry weighty implications for businesses worldwide. But what do they entail, and why is their implementation often riddled with pitfalls?

Segmentation refers to the process of breaking down a large, heterogeneous market into smaller, homogenous groups based on shared characteristics. These shared traits could span a wide range – demographics, purchase behavior, needs, or interests. The goal of segmentation is to simplify the complex universe of potential customers into more manageable, actionable groups. By segmenting the market, businesses can streamline their decision-making processes and allocate resources more effectively.

On the flip side, Targeting pertains to the process of selecting particular market segments that a company considers most profitable or relevant. After segmentation identifies and organizes these segments, targeting swoops in to determine which of these segments to focus on and engage with.

A Fine Line: Differences between Segmentation and Targeting

Although used interchangeably in casual conversations, segmentation and targeting when viewed from a marketing lens carry distinctive meanings and roles.

Segmentation zeroes in on splitting the total market into meaningful groups. It involves organizing accounts and roles within those accounts into distinct groups, providing revenue leaders with a comprehensive picture of the most lucrative opportunities.

Targeting, conversely, focuses on the selection of specific segments for engagement. Targeting is all about deliberate decision-making—choosing segments deemed valuable for business while disregarding those that do not align with the business’s strategy or objectives.

The Art and Science of Segmentation

The world of segmentation is vast and varied, with multiple approaches, potential pitfalls, and best practices. Let’s take a deeper dive into these aspects.

Approaches to Segmentation

In the B2B space, segmentation is usually driven by the size of the accounts. The bigger the accounts, the higher their complexity. However, this complexity brings along with it a higher revenue potential and more appealing transaction economics. Smaller accounts, although easier to deal with, often yield lower transaction sizes and lesser revenue potential.

A commonly adopted approach to B2B segmentation entails dividing accounts into opportunity tiers. Although these tiers may vary depending on the specifics of a business, they typically include:

• Key Accounts: Comprising 10-100 accounts, these are Fortune 500 companies (or their international equivalents) that are high-volume buyers.
• National Accounts: Typically 50-500 accounts, these are Fortune 1000 companies (or their international equivalents) with core needs that the business can cater to.
• Core Accounts: Ranging from 100-1000 accounts, these are large, complex accounts that demonstrate a clear need for the business’s products or services, though they might be buying at medium-to-low volume presently.
• Small and Medium Businesses: Potentially reaching up to millions of accounts, these are smaller, simpler accounts that aren’t usually directly covered, but represent a significant revenue potential.

Another approach hinges on the concept of Total Addressable Market (TAM) and Total Serviceable Market (TSM). TAM provides a picture of the maximum market potential—a representation of the growth ceiling for a firm. TSM, on the other hand, filters TAM down to a more pragmatic subset of potential customers, using segment hypotheses.

The evolution of technographics has further revolutionized segmentation. Technographics offer valuable insights into companies’ technology stacks, use cases, and adoption rates. This information is particularly useful for businesses selling technology products or services, as it allows them to tailor their segmentation strategies based on the technology preferences and needs of their potential customers.

Pitfalls in Segmentation

Despite its advantages, the road to effective segmentation is fraught with potential pitfalls, including:

• Inside-Out Segmentation: Many businesses fall into the trap of relying on historical revenue to segment accounts. This approach often fails because past successes do not necessarily predict future opportunities, especially in dynamic markets.
• Grandfathering Account Classifications (Account Hoarding): Some organizations classify accounts based on pre-existing relationships, driven by the misguided belief that this lowers the risk of customer churn. This approach can lead to resource misalignment, hindering scalability.
• Creating Too Many or Too Few Segments: While segmentation aims to capture buyer-seller nuances, overly complex segmentation matrices can drive administrative complexity and additional costs. Conversely, oversimplified segmentation models may fail to account for differences in customer value and needs, leading to misaligned marketing and sales coverage models.

Best Practices in Segmentation

When done right, segmentation can unlock significant growth opportunities for businesses. Here are some best practices to guide your segmentation strategy:

• Keep It Simple: Aim for a balance of simplicity and discrimination by keeping the number of segments between three and five.
• Common Segment Understanding: Ensure sales, marketing, and service organizations use the same customer segmentation to promote cross-functional harmony and efficiency.
• State and Enforce Segment Policies: Establish clear guidelines, exception policies, and a governance process for account-segment assignments to maintain the structure of segments and make concessions for valid reasons.
• Stay Relevant: Reevaluate segments at least once every three years as part of your commercial planning process. This allows you to retrospectively assess segment performance and evaluate new segment hypotheses, keeping your segmentation strategy relevant as your business evolves.

The Art and Science of Targeting Buyers

In the competitive landscape of business-to-business (B2B) marketing, one crucial element stands out: targeting. This process, a meticulous exercise in resource allocation, involves prioritizing segments and accounts. As one might expect, this can be a contentious issue. Inevitably, someone in the sales force will be disadvantaged when their accounts are deselected, tying targeting closely to the mechanics of territory design.

Segmentation and targeting can be thought of a series of magnification lenses—from wide angle (the total addressable market for the entire enterprise) to microscopic (individual buyer and influencer archetypes within accounts.)

Approaches to Targeting

There are three levels of targeting: Segment Targeting, Within-Segment Targeting, and Within-Account Targeting.

Segment Targeting

Segment targeting is the prioritization of segments defined in the segmentation exercise. This process might involve focusing on large enterprise healthcare companies for “Tier A” acquisition efforts based on opportunity, while explicitly stating that the focus will not be on large enterprise technology companies.

While the process of segment targeting is straightforward – with executives simply selecting segments for focus based on the segment hypotheses – the challenges lie in socialization, communication, and operationalization. This typically occurs in the annual forecasting and budgeting process, with the targeted segments receiving higher goals and more attention from both marketing and sales.

Within-Segment Targeting

Within-segment targeting has traditionally been a bottom-up process, primarily the responsibility of the sellers. They are typically tasked with examining the accounts in their territories and formulating plans to move existing opportunities through the funnel or to drum up new leads. However, these plans rely heavily on the sellers’ intuition and existing relationships, potentially missing significant opportunities.

Contrarily, a data-driven and scientific approach is a more effective method for within-segment targeting. Account data should be enriched with segmentation metrics in the CRM database and updated at least annually. This data can then be used to prioritize accounts within each segment. Seller input remains crucial, but ultimately, data, not emotion, should be the primary driver of targeting decisions.

Within-Account Targeting

Targeting can be refined further, drilling down to the specific buying situations and roles within accounts. Understanding buyer scenarios – the specific use cases that describe how buyers, influencers, budget holders, and users collaborate to generate the need, evaluate services and products, and make final decisions – is a qualitative, not a quantitative exercise. It requires conducting in-depth interviews, focus groups, or even observing stakeholders in their natural work environments.

Pitfalls in Targeting

Targeting in B2B marketing is not without its pitfalls. Missteps often involve a lack of in-depth research in Buyer Scenario Analysis, an overreliance on demographic data, and a failure to update and improve targeting strategies continuously.

• Overconfidence in Buyer Scenario Analysis: Revenue professionals, while often highly empathetic, can fall into the trap of overconfidence, leading to inaccurate buyer personas and purchasing scenarios.
• Overreliance on Demographics: While demographic data is easily accessible, relying solely on this can lead to a one-dimensional view of the buyer.
• Stagnant Targeting: Targeting strategies should be continuously updated and improved to stay current with the buyer population.

Targeting Best Practices

• Reliance on Data: While seller intuition is essential, data should ultimately drive targeting. Using enriched account data and segmentation metrics can help prioritize accounts effectively within each segment.
• Understanding Buyer Scenarios: Understanding the specific use cases of buyers, influencers, budget holders, and users can offer a clearer understanding of the buying dynamics and help in effective targeting.
• Continuous Improvement: Even the best targeting strategies can benefit from regular tracking and analysis of their effectiveness.

Unlock Growth Opportunities with Segmentation and Targeting

Segmentation and targeting, when understood and implemented effectively, are powerful tools for navigating the complex B2B landscape. They provide a comprehensive understanding of market opportunities, enable precise targeting, and support the deployment of resources in a cost-effective manner. However, as highlighted, these strategies can unlock significant growth opportunities.

If you are interested in diving deeper into these topics and want to establish a blueprint for growth in modern B2B, download the whitepaper “A Roadmap for Modern B2B Go-to-Market—Part 1: Growth Design.” This comprehensive guide will equip you with all the knowledge you need to navigate the complex landscape of segmentation and targeting successfully. So, don’t wait, download your copy today and start your journey to a more focused, targeted, and successful business approach.

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In the shifting sands of the digital era, business-to-business (B2B) sales and marketing motions have transformed drastically. Where traditional face-to-face sales pitches once dominated, technology and evolving buyer preferences have since reshaped the playing field. As a result, the rise of subscription-based models, an emphasis on customer experience, and the dominance of digital channels have all made their way into B2B go-to-market strategy(ies).

Define and Optimize Your B2B Go-to-Market Strategy

Leaders who can establish consistent and dependable revenue streams, and embrace technological disruptions and new business models, all while counteracting seasonal variations, macroeconomic influences, and competitor moves will prevail. Sounds simple right? Not so much. Such resilient revenue channels don’t arise by chance; they’re meticulously crafted. This focused approach is known as a go-to-market (GTM) strategy.

Go-to-Market (GTM) Strategy: A plan that outlines how a company will sell its products or services to customers. It encompasses everything from identifying and segmenting the target market, positioning the product or service in that market, to choosing the appropriate sales channels and setting the right price. The GTM strategy ensures that all parts of an organization are aligned and work cohesively to bring a product or service to market successfully.

Design for Sustainable Growth

Developing a robust B2B go-to-market strategy in an ever-evolving landscape may seem daunting, but the fundamental principles remain the same. The first step starts with building a blueprint to find and maintain predictable growth. In helping enterprises with complex purchase cycles, designing, diagnosing, and retooling their go-to-market strategies, the path to growth is not shrouded in mystery. Driving growth is akin to operating a factory. You begin with a blueprint, gather the raw materials, assemble, and add value to those materials in assembly lines, and finally ship the product out the door. Marketbridge’s tried and true blueprint for growth (see part 1 of our 3-part whitepaper series) comprises Market Selection, Routes-to-Market, and Organizational Structure.

1) Market Selection

It is always tempting to look inward when thinking about strategy. Starting with organizational problems, technology integrations, or new data sources can be more comfortable for executives because these issues are well-known for being easily accessible. However, growth starts outside the walls of the enterprise, and that’s where the go-to-market strategy should start. After all, the market is literally in the title of the discipline.

Three elements make up Market Selection:

1. Growth Opportunities: the chunky, big areas of growth that the enterprise should bet on over the next few years to grow revenue
2. Segmentation and Targeting: understanding the universe of accounts and the roles inside of them, and deliberately choosing targets within them (and ignoring others)
3. Revenue Motions: The strategy inside of an account to actually land the revenue, matching buyers with value.

2) Routes-to-Market

While the Market Selection process looks at the world from the perspective of the customer, the Route-to-Market planning process is concerned with the company getting to the customer. Route-to-Market planning includes marketing and sales coverage and channel economics; addressing channel conflict; and role design in the internal sales force. It is very much a mechanical and economic exercise, whereas market selection is an empathetic and creative exercise.

Note: Market Selection and Route-to-Market Planning are intimately linked and thus must be designed concurrently and iteratively. It would be a mistake to run each process in sequence, only thinking about coverage and role design once market selection and revenue motions have been finalized. Instead, two teams should work in concert, communicating regularly, and ending up with an integrated Market Selection and Route-to-Market strategy that works together.

3) Organizational Structure

Strategies need structures to operate. The structure of a B2B go-to-market strategy is hugely predictive of its success. Organizations with many siloed teams—particularly sales and marketing—tend to operate in those silos, regardless of the stated strategy. Geographically separated organizations tend to be geography-centric—even if sales territories are realigned toward industries

Organizational Structure can be broken down into two parts. First, the overall design of the organization is concerned with the roles, reporting structures, relationships, and specializations that will execute the go-to-market strategy. Second, capacity planning determines the right number of people that will be required to execute revenue motions in quota-bearing roles.

First Step Toward a Modern B2B Go-to-Market Strategy

While developing a resilient go-to-market strategy is crucial, the reality is that it is only one piece of the puzzle. To truly future-proof your business and set the stage for sustainable growth, a comprehensive approach is necessary. And this blog covers just one piece of the puzzle. Whereas, there are Operational and Analytical frameworks vital for market entry, and ultimately Execution and Engagement activities to drive revenue success.

For a more comprehensive look at the blueprint above, we invite you to download our whitepaper, “Part 1: Growth Design – A Roadmap for Modern B2B Go-to-Market.” We delve deeper into the graphics above and all of the components needed for growth. Learn how to effectively select your markets, choose your routes-to-market, and design an organizational structure that best supports your strategic objectives.

The B2B marketing landscape may be ever-changing, but with the right guidance, your business can not only adapt but thrive.

Download our whitepaper, “A Roadmap for Modern B2B Go-to-Market: Part 1 – Growth Design”​

Learn what it takes to find and maintain predictable revenue growth in our essential 49-page whitepaper.

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Economic downturns can be challenging times for B2B organizations, but they can also present an opportunity to find more scale in commercial models and drive more efficient, sustained growth.

When Demand Dips, Orchestrate Commercial Efficiency & Drive B2B Marketing Effectiveness

For most revenue leaders, when budgets tighten, there is an inclination to pull back in marketing and broader market development efforts before cutting back in demand capture and sales channels. This typically arises because of a sense of comfort with things like deployed quota and direct, last-touch attribution. Regardless of the driver, it is most often the case that a proportional rotation toward the bottom of the funnel can lead to a more inefficient model.

There is an interesting parallel of this dynamic within the B2C world, where many companies over-rotate towards down funnel tactics like search and affiliate because there is a sense of “certainty” around the ROI. The reality though is that this often creates poorly balanced efforts across the funnel and the down funnel marketing becomes increasingly less efficient. We often call this “falling prey to the measurement trap” because the comfort of feeling you have a sense of direct ROI does not necessarily mean the tactic works on its own, without the upper funnel support.

Our recent work with clients, as well as a wealth of emerging research points to the opposite. Investing in brand-building tactics and market engagement more broadly builds emotional connections and demand that can be captured when economic conditions turn more positive. In the B2B context, the commercial structure is a bit more complex. While the same tools for demand capture are often parallel (digital, social, direct CRM, etc.), upper funnel efforts can be more complicated. The true demand capture channel is actually most often a sales channel rather than a marketing channel.

Sales Productivity is Dependent on the Demand

For B2B, the demand capture element in the commercial model must extend all the way from the marketing through to the sales force.

During good times, B2B revenue organizations typically rotate towards a linear add sales capacity model. Enough demand exists in the market to keep each deployed sales resource ‘fed’, and the quickest way to grow is to simply add capacity. Here lies the parallel to the B2C world. In tough times, the urge is always to keep capacity in place, fearing an inability to capture the demand that does come through, rather than investing in the demand for the future. A technology industry CRO painted this anecdote during a recent discussion:

“Over the last couple of years, we’ve been building out our sales force to meet the demand we were receiving, but just as we thought we were reaching the right balance, the demand in market stalled some. Deals are getting delayed and our inbound is at about 70% of goal. Our biggest issue right now is feeding the funnel of the capacity we have in place.”

Essentially, sales team metrics become less efficient based on the market downturn. But, if that fact then leads to budget pullbacks up funnel, then amplifies the efficiency loss further as the demand spigot turns off. This often leads to a pack mentality in enterprise sales organizations and increases the tensions between sales and marketing.

Leverage Sales-Marketing Integration Differently

This is the opportunity for B2B revenue leaders to separate themselves from the pack by thinking and acting differently. Recognizing that sales capacity is by definition less productive in tough times is a perfect opportunity to invest in marketing to make it more productive. Here are three reasons why:

• Demand Creation is at a Premium
  Marketing plays a crucial role in any B2B organization’s commercial model, helping to build brand awareness, drive demand, and nurture leads. Cutting marketing spend during a recession can make the sales capacity that exists that much less effective, reducing the ability of sales teams to reach new prospects and close deals. Your best sellers will appreciate a commitment to market engagement when other companies pull back.
• Organizational Scale Opportunity
  A recessionary period can be the perfect time to find more scale in your B2B commercial model—deepening the connection between marketing and sales. When demand is down, organizations can focus on building their marketing infrastructure, enhancing their digital presence, investing in new technologies to support sales effectiveness, and improving their lead generation programs and processes. By doing so, they can build a stronger foundation to support sales channels for productivity growth and position themselves to capture market share when economic conditions improve.
• Retain Market Connection for Rebound
  In addition to strengthening the commercial model, maintaining a strong marketing presence during a recession can help to reinforce an organization’s brand and build trust with customers and prospects. Going quiet and stopping promotions can create doubt in the minds of potential buyers about the organization’s commitment to the market and the value of its offerings. Sales can also play a supporting role in this process by turning more time and energy to market development. Ultimately, it provides sales teams with tailwinds when market conditions improve.

Tactical Steps for B2B Revenue Leaders

The starting point is to build a go-forward business case built on the dynamics of the efficient, go-forward model. This acts as a guide for decision-making as demand pulls back and adjustments need to be made, and ensures that all changes are in line with the go-forward vision. For smaller growth companies, this may be taking this opportunity to build the first meaningful market segmentation for differentiated sales and marketing approaches (think SMB vs. Enterprise), for larger companies it might include operational elements like recognizing the shortcomings of geo-based territories and dynamically. The beginning point of this exercise always utilizes the tension of yielding more with less to drive creative thinking. That exercise almost always leads to the role marketing can play in increasing overall commercial efficiency.

Next, it is critical to recognize that the upside from the changes in the go-forward business case are likely not going to be realized immediately. Where possible, use the downturn to ease into the transition. For example, if a new segmentation is deployed and fewer enterprise sellers are needed, let the natural attrition (voluntary or otherwise performance-based) help reshuffle the deck to where capacity is deployed.

Finally, ensure marketing is truly interconnected with the sales force and responds to individual channel issues. For instance, if in your large enterprise segment, ABM plays may be a great way to support account expansion sales plays to drive revenue growth when market demand stalls. This should increasingly be driven by interlocking goals and KPIs. Gone are the days when the lead funnel exists fully separate from the sales funnel, and bringing marketing and sales closer should also include more holistic views of measurement and performance reporting. Ultimately, in B2B, the marketing approach must link to the sales channels distinctly, and bringing marketing to the table in the model transformation is critical to identify the key scale points.

While it may be tempting to cut B2B marketing efforts during a recessionary period, doing so can hinder an organization’s long-term growth and success. Instead, CROs and B2B revenue leaders should view it as an opportunity to find more scale in the commercial model and strengthen the marketing infrastructure. This can help support the efficiency of sales channels and weather future downturns. By focusing on marketing as a key element of the commercial model during difficult economic times, organizations can emerge stronger and more prepared for the future.

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