Targeting the Right Audience: Customer Segmentation

Customer segmentation is the process of dividing a broad target market into smaller groups of customers (segments) that share common characteristics. In B2B, segmentation often uses criteria like industry, company size, geography, or behaviour to group accounts or buyers with similar needs​.¹ The goal is to:

• Develop Customer Insights: Gain a deeper understanding of the needs and preferences of different customer segments.
• Improve Marketing Results: Create more targeted campaigns and tailor messaging to resonate with specific segments.
• Improve Customer Retention: Enhance customer service and relationship management by understanding the expectations of each distinct group.
• Drive Product Innovation: Develop products and services that meet the specific needs of different customer segments.
• Optimise Resource Allocation: Focus resources on the segments that offer the highest potential return.

The many flavours of segmentation

Segments can be defined in many ways. Common B2B segmentation approaches include:

• Firmographic Segmentation: This is a fundamental method – e.g. focusing on SMBs vs. enterprises or targeting specific verticals (finance, healthcare, etc…).
• Technographic Segmentation: Segmenting based on the technology stack used by potential customers.
• Intent Segmentation: Identifying companies actively researching solutions based on their online behaviour.
• Persona Segmentation: Creating detailed profiles of ideal customer types within target accounts.
• Journey Stage Segmentation: Grouping customers based on their stage in the buyer's journey.
• Buying Behaviour: Understanding the characteristics of how customers make purchases.

Segmentation is a powerful strategy because it lets marketers craft pinpointed messages for each group​. By personalising to each segment, you typically see better response and conversion rates. It’s worth noting there’s no single “right” way to segment – the best method depends on your business and market, and often you’ll combine multiple criteria (e.g. segment by industry and company size) to refine your targeting.

Implementing Customer Segmentation

Start by deciding why you are segmenting and what you hope to achieve. Are you trying to tailor marketing campaigns? Identify which customer group has the highest churn? Or a segment to target for ABM campaigns? Your goals will influence which segmentation criteria make sense. For instance, if your goal is more personalised messaging, you might segment by industry or persona; if it’s to improve upsells, you might segment by product usage.

• Step 1: Choose segmentation criteria

  Based on your goals and knowledge of the market, select the key dimensions along which you will segment. Some common criteria in B2B include:²

  • Firmographics → industry, company size, region
  • Tier/Value → e.g. segment customers by revenue potential or strategic value​
  • Needs/Pain Points, Customer Sophistication → maturity or awareness level
  • Behaviour → engagement, purchase history

  It’s often useful to combine two or three criteria to define meaningful segments that are multi-dimensional. For example, industry vertical + company size is a popular combination of criteria that is very helpful on focusing sales and marketing efforts.

  tip

  Don’t choose too many segmentation variables at once; start with a few that matter most, so you end up with a manageable number of segments​.

• Step 2: Define your segments

  Next, decide on what your segments are. You may already know where your sweet spot is, but it can be helpful to pull reports from your CRM, marketing automation, analytics tools as required. Look at your best deals, how quickly they are, who your best (least painful) customers are and see if you can identify common denominators.

  For example, a software company might decide to segment prospects into:

  • Segment A Enterprises in finance
  • Segment B SMB tech startups
  • Segment C Mid-size firms in other industries

  List out each segment and the criteria definition, for example:

  • Industry Description → Briefly describe each industry
  • Key Trends → List 3-5 major trends impacting the industry
  • Major Challenges → List 3-5 key challenges faced by businesses in this industry
  • Emerging Opportunities → List potential growth areas or new opportunities
  • Estimated Market Size (TAM) → Use data from reports – note the source
  • Estimated Growth Rate → Annual growth rate – note the source
  • Key Data Sources → List the reports, websites, or associations you used

  Consider tabulating it. You can download the toolkit to access a pre-built template.

• Step 3: Group customers into segments

  Optional, but it is good practice for your data architecture and integrity to backfill your existing customers into segments within your CRM.

  1. Review and structure your database. This might mean ensuring each account record has fields for industry, size, etc…. For behavioural segmentation, compile usage metrics or campaign engagement data.
  2. Then, apply filters (for example, filter your database for all accounts in Australia in healthcare with revenue > $50M – that’s Segment X).
  3. To ensure you collect the data needed for your chosen criteria consider making fields mandatory, or implementing automation to auto-fill.

  You should end up with a set of segment buckets that cover your target market. Ensure that the segments are distinct and internally consistent – each customer should primarily fit one segment that differentiates it in a useful way. (If you find many accounts falling into multiple segments, you might need to refine your definitions to be mutually exclusive​).

  tip

  If you are segmenting based on account value (Tier 1, Tier 2 etc…) consider using the number of employees as a proxy for company revenue as the former is typically more up to date on e.g. LinkedIn than publicly available revenue data.

• Step 4: Using your segments

  Prioritise Segments

  Choose which segments to focus on first, rather than going all-in and spreading yourself too thin.

  Evaluate the size and attractiveness of each segment: How many potential accounts are in it? What is the revenue opportunity? How well do your solution and value proposition fit that segment’s needs? This helps prioritise where to focus. You might score segments or simply rank them (Segment A = high value, Segment B = medium, etc.). It’s common to decide on a primary target segment (your sweet spot) and secondary segments.

  Develop Strategies

  With clearly defined segments you can get strategic across your sales and marketing. This could include developing targeted messaging or content. For example, Segment A (Large Finance) might get content emphasising compliance features, whereas Segment B (Tech Startups) might get messaging around rapid growth and easy onboarding. You may develop industry specific web pages and drive traffic from paid media campaigns. Also, sales outreach can be segmented (different talk tracks for different segments). Essentially, treat each segment almost like a “market of one” and craft campaigns/offers accordingly. Ensure you also set KPIs per segment if relevant (e.g. track conversion rates by segment, or churn by segment).

  Monitor & Revise

  After implementing segmentation in your operations, continuously monitor performance metrics per segment. You may discover, for instance, that Segment B responds very well, while Segment C shows low engagement – which could prompt a strategy change or even re-segmentation. Segmentation is iterative. Over time, you might further subdivide a large segment or combine segments if you find they behave similarly. The key is to use real data to validate that your segmentation is helpful. If needed, revisit this process to adjust criteria. Always keep segments up-to-date in your systems; one best practice is to tag each new lead/customer with the appropriate segment from the start so that reporting and analysis by segment stay accurate. This is the reason why you should not hard-code segments into your database.

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Customer segmentation vs ICP — what’s the difference?

• Customer Segmentation: Divide your entire customer base into groups (by demographics, behaviour, etc….) for tailored marketing and product strategies.
• ICP Definition: Focus on defining the ideal customer—typically a subset with the highest potential value—to streamline sales and high-touch marketing efforts.

Best Practices for Segmentation

• Make sure each segment is measurable, sizable, and distinct.
• You should have enough data to identify who fits the segment (measurable) and the segment should be large enough to matter but narrow enough to truly have common traits.
• Aim for segments that are actionable – you can actually target them differently in marketing.
• It often helps to give segments intuitive names or nicknames (e.g. “Growth Startup” segment) so the team easily understands them.
• When combining multiple criteria, double-check that the segment still makes sense as a cohesive group. For example, grouping by industry and behaviour might be insightful (e.g. “Manufacturing customers with low product usage” as a segment for a re-engagement campaign).
• Use visualisation if possible – e.g. a chart or table comparing segments – to clearly communicate the differences.
• Periodically revisit the segmentation scheme; as your customer base grows, you may see new natural segments emerge.

danger

Don’t do this!

One pitfall is over-segmentation – creating too many tiny segments. This can over-complicate your marketing (trying to create 15 different campaigns for 15 segments) and often some segments won’t be statistically significant. It’s often said that 3-5 primary segments is a manageable number for most businesses but of course this is subjective. Base it on your ability to execute. If your team is small, one primary and a secondary segment is more than enough. Land first, expand later!

Another mistake is basing segments on assumptions or stereotypes instead of data. For instance, assuming “all tech companies behave the same” could be misleading; make sure to validate segment characteristics with research. Additionally, avoid segments that are too superficial – e.g. segmenting purely by company size might not be sufficient if the companies’ needs are actually very different. Often a blend of criteria yields more meaningful groupings.

Finally, failing to actually use the segments is a rookie error. If you define segments but then continue with one-size-fits-all messaging, the exercise has no impact. Make sure segmentation drives differentiated tactics and that you track results by segment to prove its value (e.g. see if Segment A’s engagement improved after personalisation).

Footnotes

Footnotes

1. B2B Customer Segmentation: What It Is + Best Methods, Twilio Segment ↩

2. The 5 Most Popular Methods of Segmentation for B2B, Leadspace ↩