To segment or not to segment that is the question.
For too long sales has allowed marketing to dictate what a segment should be. But the simple reality is that sales segmentation and marketing segmentation are substantially different. In fact, it is these very differences that make sales strategy so different from marketing and even corporate strategies.
Marketing defines segments as “A group of people that share one or more demographic and / or psychographic characteristics”.
However, sales people deal with people, not groups.
Traditional segmentation usually takes into account how attractive a segment is to a company, and how competitive the company is in that segment. Sales segmentation also includes a third parameter, how attractive the company is to buyers in that segment.
Buyers, even the ones with common requirements, have very unique and specific requests, and the approach taken in marketing segmentation is not set up to deal effectively with them. Traditional segmentation falls short of the individual buyer expectations, desires and needs. Moreover, clients in different segments want solutions that are similar but are not identical. So sales has to develop the ability to make changes to standard products and services to deal with individual customer’s expectations.
Sales misses the opportunity to tackle individual expectations if it doesn’t narrow down its segmentation to a micro market level. And then it misses the opportunity to develop a competitive edge.
In the retail sector Ikea, Bunnings etc. are included in the “retail segment”. But each of these retailers has its own store manager and addresses a different end user segment (demographically). These two factors alone make it unwise to treat every customer in the retail sector as being essentially the same.
From a sales perspective, any sector or group of customers with a unique need, or which requires some adjustment to a product or service; or which requires a different sales activity or approach; or any group where the major competitors are different, is a unique sales segment.
Therefore organisations have to start looking at segments from the point of view of how attractive they are as an organisation to buyers in each segment and how effectively they can compete. A key here is to stratify the markets correctly. The function of strategic sales is to define the most attractive segments. When a group of clients buy a different version of a given product, when buyers pay in different formats, and/or when buyers expect a different sales approach (e.g. key accounts, versus once off purchases), each represents a different segment.
Whilst the demographics and the psychographics may be similar enough for marketing to reach these groups, in sales they are too broad to be truly effective. Not because marketing got it wrong, but because, whereas marketing deals with groups, salespeople deal with individuals. And every individual in a segment is uniquely different – sufficient to warrant a different definition for sales segments than is used in marketing.
Sales is far tighter than marketing. That’s not to say that marketing segmentation is wrong or inaccurate, but only that it is too broad to enable sales to achieve the focus it needs in order to maximise opportunities and limit drainage on scarce sales resource.
If you would like to learn more about sales market segmentation analysis and planning or audit your sales segments please contact us on (+61) 03 9533 0000.
Remember everybody lives by selling something.
Image taken from To be or not to be – Home of Hamlet, with apologies to Hamlet and Shakespeare.