CRASH COURSE: Customer Segmentation
By Daniel Murray
There are 2 HUGE mistakes Marketers can make in 2023. The first being, forgetting to drink their morning coffee.
The second? Saying you’re Marketing to ~everyone~.
If you’re Marketing to everyone, I hate to break it to ya, you’re marketing to no one.
But do not fear, Tamara Grominsky is here to teach us how to AVOID Marketing to everyone!
Tamara is a VP of Product Marketing who builds product marketing and growth teams that drive go-to-market strategy for SaaS companies.
Let’s dive into what Tamara had to say about customer segmentation on the 133rd episode of The Marketing Millennials Podcast, in her own liiiightly edited words.
1. How to start customer segmentation:
Customer segmentation is the foundation of every marketing strategy.
But it’s so often forgotten by teams because it’s a TON of work.
If you can’t understand exactly who you’re selling to, building for, or marketing to, you’re never going to be effective (RETWEET).
Everything will be one size fits all, as opposed to a compelling message.
Step one: you need to see if you have anything to start with.
Are you coming in with absolutely no idea who your customer is? Or do you have some existing segments that may just need to be refined.
For most people their segments are old. They’re probably not true anymore.
Let’s say you’re starting from scratch. You need a two-pronged approach.
The first prong is looking inward at your own business. Let’s assume that you’ve been around for more than a year and have 200 customers. Take a look at all of that data.
Who’s buying from you today? Who is signed up for a trial? Who purchased and churned? Look for clusters, trends, and patterns.
You’re looking for customer segments that are large enough to matter AND analyzing those business segment’s performance.
The second prong is looking outward.
You need to understand how large the potential market segment is.
Is it large enough to sustain your growth ambitions? Who else is competing against you? Do they already have a leg up?
That doesn’t mean you shouldn’t focus on the segment, it means that you’re going to have a different competitive strategy than if no one was in that segment (Marketing Besties don’t shy away from a challenge).
2. Doing segmentation on a tight budget:
You’ve identified 3 core customer segments and you’re excited about all 3 of them.
In order to win the market, at some point you need to capture all three.
How do you decide who to focus on first?
Take all 3 segments and map out the experience across that customer journey.
Pretend you’re the customer. Are they speaking to you directly? Does this feel super disengaging and generic?
(Put yourself in their shoes!)
Now you’re on the website. How does that speak to you? Are there buying flows? Is there any messaging at all?
Then you’re signing up and doing the onboarding survey. Are the experiences tailored?
Map out that whole life cycle. That will give you a look into what’s working and what’s not.
The second thing is aligning with other stakeholders and deciding which segment to focus on.
You can’t have the Marketing team focusing on segment 1 while the product team focuses on segment 2 (that’s a recipe for DISASTER).
There are tons of layoffs right now. People are reducing their team size and budgets.
You need to take a narrow focus to drive growth. The best way of doing that is by understanding what segments you should be honing in on.
If you haven’t started customer segmentation, this is your sign to start it today.
3. The right time to open to reach new markets:
Let’s assume you’re an early stage business. This is your first product, you have an early adopter cohort.
As a product marketer, map out what that segment might look like. What would the potential adjacent segments be?
Segmentation is like the game Risk. You have to win the world.
(Risk and Catan are 2 of the BEST board games ever.)
You want to own Australia, because you get an extra bonus for having an entire continent.
Think about your early adopter cohort as Australia. Fortify that base. Make sure it’s really strong. You’re the best player. You have a product market fit for them. (This analogy = 🔥.)
Then what do you do next? Branch out into the next territory off Australia.
Map out the same thing. What are the adjacent segments? Plot that before you’re even ready.
As you’re engaging with your early adopter cohort, understand their use cases for the product.
Then go to the market and see who else has that problem. Start building new cohorts all over again and ease into it.
When you find a new market segment, don’t go and change your whole homepage. Don’t spend millions of $$ to drive people in.
Instead, build a landing page where you have specific value props.
Use paid search to find that audience, bring them in through the landing page, see how the messaging resonates. Get them into the product. Then follow up with customer interviews.
Only once you’re confident that you have product market fit with that new segment, amplify it and add it to the homepage.
4. Biggest problem when doing customer segmentation:
Bias and opinion.
If it’s a founder-led business or you have employees who’ve worked there for a long time, they have this notion that “we’re for this person.”
(“We’ve always done it this way” 🙄🙄.)
It can be difficult to get people to put that bias down and look at what the data is showing.
Once you have buy-in from everyone, evolution of segments is a lot of work. People think great, you now have your segments, you’re good to go. It’s static.
But you need to measure constantly to see how our segments are going to evolve.
Once you have your customer segments, the work’s not done. The work begins.
You were compelled to start the business for a particular reason, but maybe there’s an entire other market of customers where you can solve their problems in a better way.
That will drive more growth for the business.
5. Is Product Marketing a Marketing function?
Product marketing is not a marketing function (HOT take, but I’m here for it).
It’s hard to be a product marketer. You have two different people in your name, product and marketing. You’re a middle child. You don’t belong anywhere.
So where should product marketing sit in an org? Product or marketing?
Neither of those.
Product marketing is a business strategy function and should sit outside both product and marketing.
An effective product marketer is an intermediary, the one taking strategies and bridging them together.
Product Marketers do themselves a disservice by calling themselves marketers, because what they do really is a business strategy function.