"How do I find more customers?" Here's how every SaaS start-up can map out its market and find more customers.
A common go-to-market strategy is the beachhead, whether building a new product, entering a new market, or repositioning.
With its routes with US military hero Dwight Eisenhower, this approach is based on finding the right fit for your resource, strengths, and weaknesses and securing this before moving forward.
Today, we're showing how market segmentation helps a business find the "right" buyers and how you can run a segmentation exercise.
Let's go!
What Is Market Segmentation?
Market segmentation is best described by its originator, Wendell Smith:
Market segmentation is dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes
Dividing a market into separate groups enables SaaS providers to see buyers and users in segments with similar needs or behaviors.
Each group is targeted with a marketing strategy that serves them directly.
Types of Traditional Market Segmentation
While much marketing literature talks about four main types of market segmentation (demographic, psychographic, geographic, and behavioral), I'd suggest you look at the market to segment it into groups of customers based on:
1. Demographic Segmentation: This divides the market based on demographic data such as industry, company size, location, and decision-makers' job titles.
2. Firmographic Segmentation: This focuses on company characteristics such as industry type, annual revenue, number of employees, and geographic location.
3. Behavioral Segmentation: This groups ideal customers based on behavioral patterns, product and service usage, buying preferences, and decision-making processes.
4. Needs-Based Segmentation: Based on the specific needs, pain points, and goals of different customer groups.
5. Usage Segmentation: A segment including customers based on how they use the software, such as frequency of use, features utilized, or level of engagement.
6. Psychographic Segmentation: This means cutting up the market based on psychological variables such as attitudes, values, and motivations.
7. Geographic Segmentation: The final market segmentation strategy is geographical, looking at location, region, or country.
New Forms of Market Segmentation
While there are seven types of market segmentation above, these sometimes don't cover the bases you want.
That's where Dr. Else van der Berg's market segmentation levels come in.
These are:
- Jobs To Be Done Segmentation: Focuses on outcomes from the segmented customer
- Pain Points Segmentation: Focuses on the reasons driving purchasing behaviors
- Alternatives Segmentation: Focuses on what could drive the segment from an alternative into loyal customers
- Values and Fears Segmentation: Focuses on the psychological and what drives the customers' behavioral traits (AKA what's keeping them up?)
Market Segmentation and Positioning
Market segmentation and positioning exercise interlink.
With positioning, you are looking at:
- What sets your software apart from the competition
- What makes your software relevant to the buyer
- What makes your buyer trust the software you offer
- How consistent you are in delivering on points 1-3
Inherently, you will need to create some form of market segmentation report to demonstrate which segments you're positioning for. This often ties into developing your ideal customer profile(s).
Think of the ideal customer profile as the perfect buyer of your software. They know you, they know the value, and they have a brilliant customer experience.
Running a market analysis to find your TAM is step one.
From there, you want to find your SAM. Market segmentation will feed market research to build 3-5 "bets" on which segment could be the ideal customer.
You'll then interview and test each segment. Your positioning, product, and resource will determine how you grade each segment.
How To Grade Your Segments
One of the easiest market segmentation tools is the market segmentation spreadsheet.
Product-market-fit and SaaS product marketing expert Maja Voje has written extensively on grading your market segments via this spreadsheet.
Image courtesy of gtmstrategist.com/resource
This exercise allows you to focus on one ideal customer and nail that before considering any others. Market segmentation is the bedrock of growth.
7 Steps of Market Segmentation
There are plenty of variations in the process of market segmentation, but I like to go through this:
- Be clear on the goals of the segmentation strategy
- Take to your network, Apollo, database, customers, and prospects - but don't forget LinkedIn and Apollo - that's where to get market segmentation data
- Select what type of segmentation you want to do based on your goals and research
- Assess your data to create 3-5 detailed profiles of the segments
- Gauge the attractiveness of segments based on size, growth potential, profitability, competitiveness, and compatibility with your company's resources and skills
- Run further analysis on the 3-5 to narrow this down to 1-3 segments
- Create a marketing strategy for each segment t targeted marketing strategies and tactics for each identified segment, continuously monitor and adjust strategies based on market feedback and changing customer dynamics.
How Is Marketing Segmentation Used In Target Marketing?
With your marketing segmentation live, you can feed your marketing team with the information they need to run highly effective, targeted marketing.
That's the dream of B2B marketers. Valuable insights and target segmentation are vital ingredients to a marketing plan.
That's because, from your segmentation analysis, you'll develop an ideal customer profile and associated buyer personas.
These guiding documents are used to build marketing strategies.
The most obvious illustration is with targeting. Whether it's building an account list for ABM or building adverts on Google or LinkedIn, you can leverage the segmentation.
From there, you'll enable your marketers to divide your product, collateral, and messaging into what is most relevant to each segment.
Going a step further, you can integrate this data into your HubSpot CRM for a constant reminder of the segment this contact and company sits within.
Lastly, it will help you target your marketing efforts better, as relevance is crucial in 2025 and beyond.
Why Run a Market Segmentation Exercise?
That's a valid question. After all, the bigger the audience, the better opportunity. Wrong.
Your software has been developed to solve several challenges. Those challenges come from users. Users come from buyers. It makes sense to know who those buyers are and what makes them tick.
When you understand your segment better, your marketing improves. When your marketing improves, you make better decisions. Two paths often come:
- Build it, and they will come - create your product on a hypothesis and analyze initial user data to identify winning segments`
- Go to our segments and build it - speak to several potential segments, rank on their attractiveness to your product, and build the product around them
Whatever the path, you need to analyze your market. With market segmentation in B2B, you can:
- Tailor your positioning to resonate more effectively with that audience and positively influence their purchase decisions - from tone of voice through to pricing and packaging
- Create marketing messages that underline understanding and highlight the value your software offers vs. other options
- Develop content that your segment loves and, more importantly, needs
- Customize your product around what your segment wants for a personalized experience
- Achieve your beachhead strategy before addressing other ICPs in the market segmentation grid
- Have a market segmentation slide to remind revenue teams, employees, investors, and more of whom you're targeting what they want, and feed that into your marketing game plan
Create Ideal Customer Profiles For Your Segments In PowerPoint (PLUS How-To Guide)
The next step to getting product market fit with your segments defined is building your ideal customer profiles and segments.
To help you do that, we've created a free ideal customer profile and buyer persona template + guide pack in PowerPoint.
Click here to download your free ideal customer and persona PowerPoint templates and guide.
Stay tuned for more advice in our SaaS marketing for leaders series of guides. If you need help, you can talk to me anytime here.
James Milsom
When I'm not spending time quoting What We Do In The Shadows, The Office, or Parks and Rec, I'm watching the Georgia Bulldogs (Go Dawgs!), walking our dog Crosby with my wife, McKenzie, or geeking out on tech. I find time to eat, sleep, and work out too (honest!)