Segmentation

What is segmentation?

Segmentation is grouping customers by size, industry, need or buying behavior so each group gets the right sales approach. In business markets, the most common bases are geography and firmographics, such as industry, company size and ownership. A segment is useful when its members buy in a similar way and respond to the same offer.

Why it matters to a revenue leader

Segmentation decides who gets a field seller, who gets inside sales and who gets served through a partner. Get it wrong and expensive sellers chase small accounts while large ones get generic treatment. Daniel Yankelovich and David Meer argued in HBR that segmentation earns its keep when it rests on how customers behave and buy, and on needs that are going unmet. Labels that do not predict purchases do little for sales. For a services company, a hospital system that buys on compliance and a property manager who buys on price need different motions, even in the same zip code.

A pest control company splits its 3,000 commercial accounts into three segments: 300 multi-site food and healthcare accounts that buy on compliance, 2,200 single-site offices and shops that buy on price, and 500 property managers who buy for whole portfolios. Each segment gets its own coverage model and offer, and quota follows the segment's potential.