Companies that clearly define their target audience and focus on conquering that addressable market can become very successful, especially if their target audience is part of a focused well-defined market. On the other hand, lack of clear segmentation and understanding of your customers will likely lead to massive waste (and failure). It is almost impossible to know how much to invest and how measure results without it.
My first startup Socrative, did just that…eventually. We focused on helping K-12 teachers by saving them time and showing them what their class understands via a real-time mobile testing app (Acquired by MasteryConnect June/2014). At first it wasn’t clear to us who we were serving (schools, principals, students, teachers or parents) and we had even less clarity as to how to segment our users within each of these groups. However as we advanced we decided to focus on teachers and within that we developed distinct teacher segments.
For example: Tech-savvy teachers that were adopting a variety of tools, then down-selecting to only a few which they use consistently. The challenge there wasn’t to reach them but to keep them engaged, and when we did, we got tremendous amount of referrals. Another, very different segment, was tech-averse teachers who needed to use tech in their classroom to satisfy school mandates. As you can imagine we had a very different approach for them (more about Socrative here).
More recently, serving as the SVP of Product Innovation at Lifion and ADP (world’s largest HR company), we leveraged the same approach but now at an enterprise level. We deeply understood why our customers want to spend the time, effort and money to upgrade their HR software and had different GTM approaches based on their job-to-be-done (e.g., go global faster, be a more attractive employer, reduce HR operational costs, integrate systems, etc.) without these segments our journey to scale from 30 to over 600 employees would not have been as rapid and successful.
There are many more examples, but I’ll pause here for now and share my common-sense approach for identifying and segmenting your client base. Doing this (and iterating to get there) will impact almost everything else within your GTM strategy and execution and will result in reduced costs and higher velocity.
What is GTM segmentation?
It’s an approach to slice and group your potential buyers into similar clusters. Each of these clusters will have buyers that are attracted to, buy and use your product to fulfill similar needs. Essentially they will be “hiring” your product for a similar job-to-be-done (i.e., a specific need or set of needs they want to satisfy).
It’s important to note that most products can do many things and are therefore being “hired” for many different jobs. For example: You could “hire” a CRM software to a) keep better track of high-value customers b) proactively address potential churn issues or c) create dashboards and reports that accumulate a lot of otherwise disparate customer information (or all of the above at once). All of these are different jobs-to-be-done with different competitive sets and value propositions. In the first example, your product might be competing with a “High-Value” Account Executives while in the second case it would be competing with customer success platforms and in the third example it would be competing with BI tools. Therefore, your approach to marketing and sales will change according to segments and jobs-to-be-done.
What makes a great GTM segmentation and where to start?
Clarity, specificity and ability to categorize customers efficiently into different groups (segments) is the goal.
To get there, you start with segment hypothesis (e.g., Segment 1: Fast growing companies “hiring” my product to recruit faster , Segment 2: low-margin retailers “hiring” my product to keep recruiting costs low, etc.) and then answer the following questions for each potential segment. A good segment is one that is large enough, and that has tight answer to the questions below:
- What Jobs-to-be-done are customers in this segment “hiring” your product for?
- What pain-points are you solving?
- What is the impact you are having? (e.g., Cost savings vs. revenue, how is the impact being realized: more customers, reduced hosting costs, etc?)
- Who is your typical champion? Buyer persona? (i.e., who will be the person/committee making the buying decision and driving the buying process)
- Is there an efficient way to identify customers within the defined segment? (e.g., it is much easier to identify fast growing company vs. companies that have culture challenges)
Segmentation (especially B2B segmentation) is a mix of science and art, there is no mathematical process to reach the best results and it requires both a deep understanding of your customer base and creativity.
Test on your current customer base
Once you have reached several potential segments “test” them on your customer base:
- Choose customers from current customer base, assign them to a segment and see whether your answers to the question above hold true for the customers you selected.
- If a single client can easily fit in multiple segments then your segments are not distinct enough and may need to be combined or broadened.
- Are there many customers that don’t fit into any segment? that’s fine as a starting point, but will eventually need to be dealt with.
Do the math and prioritize
Once you have a few segments as a starting point and you’ve categorized your customers into them, do the math to prioritize. Using your data about your existing customers, measure the key metrics your care about (e.g., sales cycle, deal size, CAC, NPS, margin, up-sale potential, etc.) and combine with data about the segment (e.g., size, growth, geography concentration) to prioritize where to focus.
Now you can start defining the Go-To-Market strategy and execution (e.g., Sales, Marketing, Customer Success) per segment and across segments, but always in context of your GTM segmentation (see example below). I will cover more of this in future posts.
Example: Your segmentation can show you how you investment in Customer Service/Success is paying off in each segment.
Your segmentation can and likely will change as your business grows and your product evolves, no shame in making changes and adjusting, it’s a required aspect of scaling. If you have comments, ideas or want to connect further please reach out to us at email@example.com.