What is Market Segmentation?

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• published: 06 May 2010
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For more information on Market Segmentation visit OpenView Labs: http://hubs.ly/y0dblS0 Luke Hohmann: The classical definition of market segmentation, it's the process of dividing a target market into smaller and smaller markets to understand them and be able to target your products and your services and your messages to reach the buyers in that segment and have a product that meets their needs. The reason that you do this is it enables you to sell products faster. So it shortens your sales cycle, and it helps you sell more thoroughly, meaning once you sell a customer on your product or solution, you're able to sell more of them. Isaac Garcia: We're looking for ways to be more efficient with the dollars we spend and to really build something that's scalable in a large sense and not just selling to a few people that are interested in our product. Luke Hohmann: The act of segmentation is both understanding the problem and ensuring I have the core technology that solves that problem. But it's also in communicating that problem and our solution to that problem in a way that people who want to buy it can understand it. Theis Søndergaard: Market segmentation can help you focus your energy and your resources, and by that, you will increase your revenue. You will lower your cost of acquisition, and especially, you will have a higher retention rate on your customers, because you make sure that what you do is something that your customers actually want. Arnulf Hsu: We serve lots of different people in lots of different markets. It's very difficult to prioritize road maps and backlogs and things of that nature, as well as also go out and target your customers. So, if you're able to segment more specifically, it really gives you an opportunity to laser focus your opportunity, as well as improve the general economics of your business. Luke Hohmann: Many people think that segmentation is this hard and daunting task. We think it's fun because you get to understand your customers, and eventually, you get to talk to your customers. Theis Søndergaard: It will take some work. It will take some phone calls. It will take some customer visits, but in the end, what you get back from it is worthwhile.