One of the most critical tasks for marketers like you is identifying the right target market.
It may be tempting to target every company and contact you come across. However, the real power lies in focusing on the highest-value market segments.
Trying to appeal to everyone? That’s where things go wrong:
Market segmentation solves these issues by helping you create targeted campaigns focused on the companies most likely to buy your products.
Completing the steps in this article will help you direct your marketing and sales efforts to suitable targets, saving time, cutting costs, attracting higher-quality opportunities, and closing more deals.
Proper market segmentation lets you focus on high-value customer groups and craft more effective, personalized strategies.
After all, you need a list of named companies (target accounts) and contacts you can target with social media advertising, cold outreach campaigns, and LinkedIn connection requests.
But how do you get started?
In this article, we’ll show you why segmentation is the foundation of your marketing strategy, how it leads to an Ideal Customer Profile (ICP), and how to apply it to transform your B2B marketing.
Have you heard of the Pareto Principle?
Twenty percent of your customers typically generate 80 percent of your revenue.
This concept is especially relevant in B2B marketing, where large, complex accounts often represent a significant portion of your revenue and profit.
Specific customers are more profitable and accessible to serve because they align better with your product, are in the right geographic location, or offer long-term potential.
This is why market segmentation is crucial for any company looking to grow.
The principle is simple:
Not all customers are equal, and not every company is an ideal fit for your product or service.
By identifying distinct segments within your market, you can target those most likely to convert and provide the most significant long-term value for both buyer and seller.
Focusing on these market segments allows you to tailor your marketing, sales, and service strategies while providing the highest possible value for your customer.
By narrowing your focus to a few well-defined segments, you’re not just casting a smaller net—you’re fishing in suitable waters with less competition.
Here’s how targeting specific segments can transform your marketing results:
1. More Focused Prospecting and Content Creation
Your prospecting becomes more strategic when you know precisely who you’re targeting.
By doing market segmentation, your salespeople will know precisely which companies and contacts within those companies they should target when doing outreach.
The same applies to your marketing team.
By having an overview of which accounts they target with advertising or content, they can create marketing messages that resonate with their audience, leading to higher conversion rates.
2. Discovering New Opportunities
Segmentation also helps uncover opportunities you might have yet to notice.
By analyzing the traits of your best customers, you can identify similar companies that may benefit from your product.
With tools such as Ocean.io, you can simply input the domain of your best customers, and the AI lookalike search will suggest similar companies.
3. Personalized and Relevant Marketing
Today’s buyers expect personalized marketing, and segmentation helps you deliver.
When your messages address the pain points of specific segments, engagement increases—and so do your results.
This applies to all of your marketing and sales, whether a cold outbound email, a blog post, a newsletter, or an advertisement on LinkedIn.
4. Targeted Ads That Get Results
When you know who you’re speaking to, your ads perform better.
Segmentation allows you to create ads that speak directly to the pain points of specific segments, resulting in more conversions and less wasted ad spending.
5. Less Waste, Higher ROI
Focusing on the most profitable and reachable segments reduces waste and increases ROI.
Imagine getting your message across to thousands of relevant buyers every day. If you have correctly segmented your market, that is possible.
As a result of this approach, you will lower customer acquisition costs while increasing returns on your marketing efforts.
6. Shorter Sales Cycles
Focusing on well-defined market segments leads to shorter sales cycles.
When your message resonates with the right audience, prospects move through the sales funnel faster and with fewer objections.
Additionally, by eliminating unqualified leads early on, your sales team can concentrate their efforts on high-potential prospects more likely to convert.
This reduces time spent nurturing dead-end leads, allowing your team to focus on closing deals faster. This results in efficient resource use, quicker sales processes, and higher revenue.
7. Higher Customer Satisfaction
Focusing on the right market segments leads to higher customer satisfaction.
When you target customers who genuinely fit your product, they feel understood and supported because your solutions align with their needs.
This increases retention and profitability and fosters more robust relationships with high-value, long-term clients.
Plus, when your product and customers are a great fit, they’re more likely to become loyal advocates and refer you to others, further fueling your growth.
But how do you do market segmentation? Let's dive into how to do it step-by-step:
The key to effective B2B marketing is targeting the right segments.
By narrowing your focus, you can better allocate resources and create tailored campaigns that resonate with your ideal customers.
Ready to take a more strategic approach? Follow this step-by-step guide to segment your market:
Pull data from your CRM, financial systems, and marketing tools to uncover patterns and insights.
Start by exporting this data into a spreadsheet for easy analysis and filtering:
Focus on critical details such as your customers' industry or vertical, company size, annual revenue, and how much profit you make so you can easily filter these properties in your spreadsheet.
This will let you see important patterns and identify common traits among your best customers, laying the groundwork for effective segmentation in the next step.
With your market segments identified, it’s time to prioritize them based on revenue and profitability.
Start by identifying which customers or segments generate the highest revenue for your business. See if you can determine which customers contribute high revenue and strong profit margins.
After this initial ranking, you should see which industries or segments align well with your product offerings. These segments should be a priority for your sales and marketing activities.
This simple filtering will uncover other patterns in your customer base, such as how many employees your ideal customer has or their LTV. This is helpful information when you want to build your list of accounts using databases at a later stage.
Once you’ve identified potential market segments, you should evaluate and rank them based on a set of standard criteria.
This process allows you to prioritize the segments that align most closely with your business goals and have the highest potential for success.
It is important to emphasize that you are not excluding certain market segments; you are just picking a starting point.
For most companies, sales and marketing resources are limited. That means you most likely won’t be able to cover more than one or two market segments at a time.
You will launch campaigns targeting other market segments over time, but this exercise aims to create a focal point for your marketing and sales and then expand into other markets.
List all the relevant market segments in a spreadsheet. This will serve as the foundation for your analysis.
Then, evaluate each segment by considering the following standard criteria such as:
1. Competition: How saturated is the segment? How expensive is acquiring customers in this segment relative to the expected revenue (LTV)?
2. Profitability: Is working with this segment profitable for your company?
3. Segment Size: How large is the segment of companies you can target? Are there hundreds or thousands of potential customers?
4. Customer Lifecycle: Do customers stick around for long or churn quickly? A longer lifecycle makes that market segment more promising.
5. Lifetime Value (LTV): How much revenue can you expect from each customer over time?
6. Growth Potential: Is the segment expanding or declining in size?
7. Buying Power: Are companies in this segment financially stable and have the financial resources to invest in products and services like yours?
8. Case Studies: Do you have a track record of successful implementations with companies in this industry? Do you have existing case studies?
9. Decision-Maker Access: How easily can you reach key decision-makers?
10. Referral Potential: Could customers in this segment promote your product? Are they willing to promote your product or content?
For each potential market segment, assign a score of 0 to 3 for each criterion, where 3 is the highest (most favorable) score, and 0 is the lowest.
For example, if segment A has high profitability but limited access to decision-makers, it may score 3 in profitability but 1 or 0 in access.
After scoring each criterion, sum the scores to calculate the total potential for each segment.
Using ten criteria, the highest possible score is 30, and market segments with higher total scores represent higher-priority opportunities and a more promising market segment for your company.
Depending on your business, you may want to add criteria specific to your industry or strategy. Non-standard factors (as outlined in Step 4) can help further refine your prioritization.
While the standard criteria listed in the previous section will help you narrow down your potential market segments, you might need to include non-standard criteria as well.
While databases like Clay, Apollo, and Ocean provide valuable data for ranking market segments, you may need to look beyond these sources to refine your targeting.
Some unique attributes might not be readily available in a database but can be crucial in identifying high-value segments your competition might not know.
These non-standard criteria add an extra layer of qualification, making your targeting even more precise and allowing you to be even more efficient with your sales and marketing activities.
Let’s say you are selling to companies in the maritime technology space. Here are some examples of non-standard criteria you could use for additional scoring:
Incorporating these additional criteria ensures that your scoring captures more granular details, leading to better prioritization of market segments and can also help you in qualifying or disqualifying prospective customers during sales conversations.
After scoring your market segments, the final step is to decide which ones to focus on.
You don’t need to target all of them at once—picking just one or two high-potential segments will maximize your resources and drive better results, and you can return to other segments in the future.
Begin by selecting the market segment with the highest score. This segment probably shows the most promise in profitability, growth, and alignment with your business goals.
Ideally, you should focus on just one market segment, especially if you’re working with limited resources or are in the early stages of creating your marketing strategy.
If necessary, you can expand to two or three segments, but be mindful that each additional segment will require its own tailored campaigns, ideal customer profiles, messaging, and resources.
By narrowing down to a small number of segments, you can dedicate your time, budget, and attention to creating highly relevant marketing strategies.
This focused approach allows you to understand your target audience better, craft personalized messaging, and ultimately increase your chances of success.
Remember, quality beats quantity when it comes to market segmentation.
Choosing just a few well-defined market segments will position your business for growth and help you create more effective campaigns.
A common mistake many B2B marketers make is creating a single, generalized Ideal Customer Profile (ICP) for all the market segments they want to target.
In reality, the reasons why companies in different market segments choose to buy and what they buy can vary significantly.
Building a tailored ICP for each market segment is essential to truly refine your segmentation strategy.
Each segment may have different revenue potential, buyer motivations, or challenges, so you should customize your ICP to reflect those unique attributes.
The core components of your Ideal Customer Profile (ICP) are:
Segmenting your accounts into tiers allows you to focus your campaigns on the highest-value companies while personalizing your approach to connect with different types of prospects.
According to FullFunnel, categorizing accounts based on their revenue potential can help allocate resources more efficiently and tailor marketing and sales efforts to each segment's specific needs.
Tier 1
These are your top-tier clients with the highest Annual Contract Value (ACV) or Lifetime Value (LTV).
Tier 1 accounts are strategic, high-revenue customers that have the potential to drive significant growth for your business.
For Tier 1 accounts, run highly personalized, 1:1 campaigns. This could include custom messaging, direct outreach, and personalized offers that resonate with their unique challenges and goals.
Look back at the revenue generated in a specific market segment and identify customers who generate more than 10-15% of your total revenue in that segment.
Define the potential revenue these accounts could bring in based on historical data and growth trends.
Tier 2 accounts have a medium ACV or LTV, typically generating 4-10% of your total revenue.
These accounts are important but may not require the same level of personalization as Tier 1.
For Tier 2 accounts, focus on vertical-specific or job-role-specific campaigns.
You can personalize your marketing based on industry needs or the decision-makers within the organization, offering semi-personalized solutions that address their particular challenges.
Analyze these accounts' firmographics (e.g., industry, company size) and revenue potential. Identify companies that fall in the medium revenue range and show promising growth opportunities.
Tier 3
Tier 3 accounts have the lowest revenue potential.
They typically contribute a smaller percentage of your total revenue and may not justify the resource investment required for highly personalized outreach.
Sales opportunities with Tier 3 accounts should primarily come from your broader demand generation and demand-capturing activities.
There is no need to run manual, sales-driven campaigns for Tier 3 accounts; instead, focus on automated or inbound marketing strategies to attract and convert these customers at scale.
TIP: Use these criteria to automate the process of segmenting companies in your CRM platform, like HubSpot, for more efficient targeting.
Look at how companies talk about themselves—their products, services, and industry. Aligning your messaging with their language can make a big difference.
Tools like Clay allow you to use AI to scan websites for specific keywords related to your industry.
For example, suppose you’re selling underwater drones for port or ship inspections.
In that case, you can use firmographics (such as company revenue and size) and keywords like “port inspection” to find companies that are a good fit. This keeps your targeting precise and relevant.
For each buyer role, you also need to enrich your ICP by gathering details such as:
Lastly, establish specific disqualification factors, such as company size, revenue, or geography, that make a company unsuitable as a customer.
In a long and complex B2B buying cycle, it is critical to attract the right customers and disqualify bad-fit prospects early on so that time is not wasted on companies that will never buy.
Let’s suppose you are targeting companies in the maritime technology sector.
Your disqualification criteria could look like this:
Use these disqualification criteria in your sales qualification calls or website forms to filter out bad-fit prospects early on.
By incorporating these factors into your initial conversations or lead capture forms, you can quickly identify companies that don't align with your ideal customer profile.
This approach saves time and resources by ensuring your team focuses on high-potential leads while preventing poor-fit prospects from moving further along the sales funnel.
Now that you’ve identified your target market segments, the next step is to build a list of accounts and contacts that match your criteria.
Having a clear idea of who you want to target is crucial, but estimating the potential market's size and what portion you can realistically address is equally important.
Tools like LinkedIn Sales Navigator, Clay, Apollo, Surfe, Hunter, and Ocean make building a targeted list quick, easy, and cost-effective.
These tools crawl the web to find companies and contacts that fit predefined criteria, such as company size, location, or specific keywords used on their website.
Using these platforms, you can also estimate how many companies and contacts exist in your desired market segment.
Once you’ve set up your criteria and started using these tools, you can begin estimating your Total Addressable Market (TAM)—the total number of companies or individuals that could be a fit for your solution. This helps give a broad idea of the entire market size.
Next, you’ll want to narrow that down to your Serviceable Available Market (SAM).
SAM will generally represent the subsection of a market segment of the TAM that your product or service can reach based on geographic, industry, or logistical limitations.
The ratio between TAM and SAM gives you a clearer understanding of how accessible your target market is. For example, you find suitable prospects in the United States, but you are only able to serve customers based in Europe.
Finally, calculate your Serviceable Obtainable Market (SOM), which is the realistic portion of the SAM you can capture with your resources and strategy.
The ratio between SAM and SOM shows how much of the market you can realistically expect to convert into customers.
By combining these estimates with the list-building tools, you can create a table in Clay to connect your chosen databases and prospecting tools, allowing you to compile a list of qualified companies and contacts quickly.
After building your list, export all the records into HubSpot and begin engaging with your prospects through targeted advertising, outreach, or content.
Market segmentation is the foundation of a winning B2B marketing strategy and the first step any B2B marketer should take when focusing on growing the company.
By focusing on the segments that matter most, you’ll create targeted campaigns, improve sales efficiency, and boost profitability.
Market segmentation leads to deeper customer relationships, higher conversion rates, and sustained long-term growth when done right.
Now that you understand how to segment your market, it’s time to put that knowledge into action.
Start by analyzing your customer data, identify your most promising segments, and build a strategy that speaks directly to your best prospects.
The more focused you are, the better your results will be.