3 Reasons Why Segmentation Is the Foundation for New Opportunities

I was reading a book recently about value-added selling, and there was a section where the authors wrote about the purpose of a company. How do different leaders in the business world define the reason for a company to exist?  The answers included a range of reasons:

  • To make money
  • To be profitable
  • To beat the competition
  • To bring value to the world

Regardless if you agree with these or have another reason, for any of these purposes to be achieved requires customers to make these goals happen. You need a set of customers that want what you have and will commit to spending their money to drive you forward.

Why is this so critical to brand growth? Because many times when companies are seeking new opportunities to grow their brands, it appears they forget this basic fact. We see again and again that the quest for growth begins with an idea seeking a place to fit in, rather than the other way around. This is most apparent in the world of consumer goods where new variants of products with incrementally different benefits appear on the shelves regularly. Take the hair care category as an example. Add a new SKU with some small nuance to the shelf and watch the customers roll in.  Unfortunately, that tends to lead to cluttered shelves, overwhelmed consumers, and cumbersome product lines to manage.

We see again and again that the quest for growth begins with an idea seeking a place to fit in, rather than the other way around.”

I use hair care as an example most of us (even me, with less hair every day) can relate to, but the reality is it happens everywhere from banking products to smartphones to toys. The approach is often to push R&D for a new idea that seems to stand out in some way and then go find a market for it.

The truth is that understanding the market, determining how customer groups differentiate themselves within that market, and exploring where those different groups have pain points, or underserved needs, is the way to build a true foundation for finding opportunity and driving growth. In short, segmentation.

Here are 3 reasons why segmentation needs to be the foundation for identifying opportunities:

1. Creating Clarity


Segmentation, by its nature, provides a level of clarification for how the landscape of the market you’re competing in looks. It helps you see how the customers sort themselves out around critical factors that drive their behaviors and decisions. In creating this structure, you get a better understanding of how the world looks today, how the customers you’ll be going after approach and engage with that world, and what it will take to motivate different customers to do business with you. With that understanding, you then have the launch pad set for delving deeper into those segments that present the best alignment with your goals.  You can dig into what pain points they have, what jobs they are trying to accomplish, what needs they feel are underserved, etc. And from this, you can figure out where to focus your efforts.

Understanding the market, determining how customer groups differentiate themselves within that market, and exploring where those different groups have pain points, or underserved needs, is the way to build a true foundation for finding opportunity and driving growth. In short, segmentation.”

2. Sizing the Prize


Of course, once you’ve figured out which segments to pursue and identified some opportunity areas you think exist for driving them toward your brand (or deeper into your brand) then you can readily size and prioritize those opportunities. It’s no good pursuing an idea that feels new and different if the magnitude of the win is marginal and small. Likewise, it’s no good pursuing an idea that’s new and different if it really doesn’t align with anything that matters to the segments in your marketplace. Because we know how these segments spend in your category, what drives them to spend, and how large they are as a population overall, we can make an educated assessment of the size of opportunity for new ideas you’d like to pursue. This allows you to create some priorities that are relevant and grounded in market potential.

3. Aligning and Focusing


And once you’ve sized and prioritized, you are one step away from proselytizing to your company at-large and getting everyone aligned and focused on where you’re going. Make no mistake, alignment is an ongoing aspect of everything you’ll do when you define and establish segments in your organization.  But the beauty of having these segments, knowing which opportunities you want to pursue with them, and clarifying the potential win when you succeed, is that it becomes easy for everyone in your organization to use this as the north star. They can constantly refer back to the who, what, why, and how related to where you’re going with the brand.  It can be your rallying cry and unifier.

If your organization wants to achieve its purpose, then the opportunity focus must be clear, and the team aligned on executing around a goal.”

Why might companies not take this route? Perhaps because the idea of identifying opportunity through segmentation seems daunting or time-consuming. Yet if your organization wants to achieve its purpose, then the opportunity focus must be clear, and the team aligned on executing around a goal. That means getting people lined up around something. And what better “something” than a clear target that defines the foundation of how you’ll move forward?

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