We see a lot of market segmentations in our work. Often these segmentations are the weakest part of the marketing plan. Many segmentations are limited to firmographic data and in some cases are simply a list of industry verticals. They are meant to find a market that fits the offer. Instead, we should segment based on emotional and economic value creation to build an offer that fits a market.
Good market segmentation brings together customers that buy the same way and get value from a product or service offering the same way. It ensures optimized use of an organization’s resources through targeting customer segments who derive value from the offering in a way that is in alignment with the organization’s objectives of maximizing revenue, profit or margin at a reasonable cost to serve. Market segmentation is the foundation of value-based pricing. In value-based pricing the goal is to capture a fair share of the differentiated value of an offering relative to the customer’s next best competitive alternative.