Defining Segmentation and Market Segments - John Buten - Revenue Today - Episode # 053

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Sales, marketing, and RevOps. It's sink or swim out there, and yesterday's strategies and tactics won't help you today. This is Revenue Today, and I'm your host, Jared Robin. Join me as we interview revenue leaders in our community to learn what steps we could take right now to help you scale yourself and your company. Revenue Today is sponsored by Rev Genius, and we're on a mission to bring inspiration and creativity to all revenue professionals in the world. Want to shout out our sponsor Demandbase. Demandbase is smarter GTM for B2B brands. They help marketing and sales teams spot the juiciest opportunities earlier and progress them faster by injecting account intelligence into every step of the buyer journey and orchestrating every action. For more information about Demandbase, visit demandbase.com.

You might be wondering, you know, what is this funny image that I have up here? Also, I want to relate. Earlier this summer, I was up in Maine, way up there, Swan's Island, and it's a place where most of the people are involved in the lobster fishery or in fisheries. And the thing everybody was talking about on the ferry boat and at an event I was at was this thing called Fish Finder from SiriusXM. And I thought they must be talking about the band Phish, but no, it's an actual fish finder, a satellite service, just like satellite radio. And this is a screenshot from it that shows you taking atmospheric data and various surface temperature data and knowledge about the depths of the oceans and currents on where the fish are. And I thought this was a great metaphor for what we're doing here in targeting and segmentation. What's interesting is everybody was talking about it. It's 10 years old that they've been doing this, but with the changes in the environment, that's had a big impact. You know, so traditionally where they set their traps are changing. And likewise, with the price of diesel going up above $6, it was a hot topic. If you can take 1 or 2 hours out of your fishing trip, it has a big impact on your bottom line. So that's what we're going to be doing here today is figuring out, you know, how to use data to find the fish. So let's start fishing. Best practices for segmentation. We do a lot of one-on-one customer inquiries with our clients to talk about segmentation. And we hear a lot of different problems that they face and challenges in doing segmentation. It's interesting, usually the first thing that comes up is they feel like they don't have the data to be able to understand the market. But then when we peel away at the surface, we find out they do have access to data. There are plenty of companies. There are companies like Explorium, and there's access to data. It might not be free data, but they have access to data. And the challenge, though, is then they're not sure what data to ask for or look for. They haven't defined the segments in the right way to understand what they should be looking for, or once they get the data, they don't always agree on what the data means. The data itself doesn't tell them where to go, they have to do some analysis and they have to have a process to get all the different stakeholders on the same page. So we're going to talk a little bit about this process today, about how to define segmentation and and a process to get to alignment on what segments to target. We'll start off on the attributes of segmentation. Now, most companies we see can get stuck in some of these traditional segmentation definitions. So they'll be focused on understanding the different industries, the different geos, or by company size. And this isn't surprising because this is how we get the data often or what we already have in our database. But what we want to challenge companies to do is to think about some of these harder-to-obtain data points and really think about what are the attributes that are going to differentiate companies on how much they need the offering. Those differences in need are going to be much more compelling in order to find which segments are better and worse for your offering. So instead of just thinking about industry, think about location. And not just where they are, but are they urban or rural? Or the age of the company. Do they have older mainframe systems or particular technology or even a buying center? Do they have accounts payable that's large? Do they have a D&I initiative? Even organizational culture. So one example was for a company that does sustainability, and they looked for companies that have a commitment to sustainability and have signed on to some sort of climate pledge. that's a really good predictor of whether they're interested in sustainability offerings. So this is something companies have often struggled with, is finding the right attributes to define aligned to their buyer needs. I'll give a couple more examples here. So in this first one, HR services, companies that do benefits management, typically they're looking for company size. But they have to be careful because if you look at company size in terms of revenue, you might find, say, financial services customers, companies that have high revenue but don't actually have that many employees relative to, say, a services company that has many more employees given the revenue size. And that's just at the account level, at the company level. Iris, you were saying there's data that you can get beyond that too.

Right, we see a very similar picture when we work with many of our customers. Company size is a very basic traditional attribute that many people, many companies use. But we can go deeper and look at the size of the HR department because we're trying to sell to them. And we can also tell you whether the HR department is growing or reducing. And of course, that will make them more receptive or less receptive to hear what you have to offer.

So getting deeper, going beyond the traditional. Another example was an AI company that provided AI solutions. And their traditional way of thinking about the market is very based on industry. We know financial services is a big user of AI, high tech, telco. But when they really dug into what kinds of companies were the best fit, it's companies that already have people doing predictive analytics that want to raise the bar, that want to do more. If they don't have predictive analytics people, then they can't really consume the software. So that was a major indicator for them. Are they using certain kinds of software already? And that's something also, right?

Yeah. And another dimension or more information here could be, are they using any specific HR technologies? Are they using SAP HR systems or Oracle or whatever, or Salesforce? And again, that makes them a good segment for you or a bad segment for you, depending on your technology and how it integrates with that. So adding more technology or technographic dimensions can make it better.

Yeah, yeah. So thinking beyond the traditional segmentation to something that aligns to needs. Another example was a company that does outsourced IT. It scales with the number of desktops that there are, but there's very different needs for companies with knowledge workers that have lots of applications on the desktop versus, say, gray-collar workers, say folks that work in hospitals or retail that only have 1 or 2 applications that they use, but having the system up and running is really critical. They have 2 different segments that have different need sets. So the next step is once we identify the right kind of attributes, how do we look at the different segments and try to evaluate them? And here I think we typically see companies gravitate towards market size, and that's, you know, also because it's hard-won data. It's hard to get to sometimes. But once you get that size of those different segments or the growth of those segments, that's not the only thing you want to look at. Yes, that's very important. You want to follow the money. You want to understand also where the competition is. Is this a crowded space? But it's equally important to look internally. So things with strategic fit. Is this aligned with other things in your business model or your organization's competencies? Is this segment on the pathway to doing other segments that are strategic to you? And also your ability to win. And companies often look too much at their product and how it stacks up against competitive products. But thinking about market segments, we need to understand the marketing and sales capabilities. Do we have lists in-house already? Do we have teams that can write content? Do we have sales coverage that can go after these kinds of— this segment? So you need to factor all of those things in. Once you calculate, you know, or use some kind of ranking scheme around this, you can start getting a fish finder kind of map, and that's what the example will show next. You know, so here's an example that we saw from a client that does 3D printing for medical devices. So they're printing artificial nips, artificial hips and knees, and they're looking at the dentist market, which is growing very fast for crowns and implants. And it looks very attractive. However, when they look at their ability to win and their strategic fit, they can see that that's a very different market, dentistry. And it also has fewer barriers to entry versus some of these medical applications. So they see something like plastic surgery is a smaller market, but one that fits much more closely with their business strategy because they're already in these hospitals. They know how to talk to medical providers. And they have this great ability to win because they have lots of skill in getting into regulated markets. So a great way to think about targeting an opportunity and finding those places to grow that aren't the usual expected ones.

Yeah, that's a very interesting example. And we have a cluster of customers similar to this nature, ones, the enterprises that are selling to doctor clinics, for example. And what they told us is that it's also very hard to find information about doctor clinics. Mm-hmm. So if that's your market, that's a difficult one. It's very difficult to know what is the doctor's expertise, what is their location, they are dynamic. Those small— smaller clinics, they might move a lot. So segmenting local businesses and small, medium businesses is difficult, specifically doctor clinics or restaurants. And finding reliable data about them is even harder than usual.

Absolutely. And very critical that you have to operationalize these ideas. That's one of the keys. So being able to size these markets and get data about sizing is usually indicative of whether you can then operationalize that and go to market and reach them. And I think that's the final step is thinking about the segmentation approaches and how you take segmentation and activate it. You've defined a segment.

Whoa, another great episode of Revenue Today. For show notes, links, and mentions, visit revenue today.live. For all my friends in the Rev Genius community, thank you. It's been awesome to spend this time with you. Please DM me any feedback and ideas in our Slack channel or on LinkedIn. If you're not in Rev Genius, join us at revgenius.com. It's free and it only takes like 2 seconds and you'll be joining a group of 27,000 revenue professionals strong. We've got it all. Looking forward to seeing you there. Catch you on the flip side.