Market segmentation

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I know what is meant by a market

A market can be understood as:

  • A place or a mechanism where buyers and sellers come together to exchange goods, services, or assets
  • A job executor and a core functional job they are trying to get done
  • Market = shared problem = shared solution = shared use case
I know the different ways to describe and think about a market 2

TAM, SAM and SOM are acronyms that represents different subsets of a market.

  • TAM or Total Available Market is the total market demand for a product or service.
  • SAM or Serviceable Available Market is the segment of the TAM targeted by your products and services which is within your geographical reach.
  • SOM or Serviceable Obtainable Market is the portion of SAM that you can capture.

The terms "red ocean" and "blue ocean" are concepts introduced by W. Chan Kim and Renée Mauborgne in their book "Blue Ocean Strategy," which was published in 2005. These concepts are used to describe different competitive strategies that businesses can adopt in the marketplace.

  1. Red Ocean:

    • A "red ocean" represents a market space that is crowded, highly competitive, and often characterized by fierce rivalry among existing companies.
    • In a red ocean, companies are competing for the same customers, using similar products or services, and engaging in price wars to gain a larger share of the existing market.
    • The term "red" is used to symbolize the intense competition, where the battle for market share often leads to reduced profit margins and, metaphorically, to the "bloody waters" of competition.
  2. Blue Ocean:

    • A "blue ocean," on the other hand, represents an untapped or undiscovered market space with little to no competition.
    • In a blue ocean, companies create new market opportunities by offering innovative products or services that are different from what is currently available in the market.
    • Instead of competing head-to-head with rivals in a crowded space, businesses in a blue ocean aim to make the competition irrelevant by offering unique value and capturing new demand.
    • The term "blue" signifies calm and uncharted waters, where companies can sail freely without the turbulence of competition.

The core idea behind the blue ocean strategy is that businesses can achieve sustainable growth and profitability by creating new markets (blue oceans) rather than trying to beat the competition in existing markets (red oceans). By focusing on innovation, differentiation, and value creation, companies can escape the constraints of traditional competition and find new opportunities for growth.

To implement a blue ocean strategy, companies often need to challenge industry norms, rethink their value proposition, and find creative ways to appeal to customers who are not currently served by existing products or services. This approach can lead to significant competitive advantages and long-term success.

I understand what is meant by market segmentation

At its core, market segmentation is the practice of dividing your target market into approachable groups. 

Market segmentation creates subsets of a market based on demographics, needs, priorities, common interests, and other psychographic or behavioural criteria used to better understand the target audience.

I understand the motivation for market segmentation
  • Identify a group with similiar needs and wants that can be understood, built for and targeted collectively.
  • Identify a group with the highest probability of purchasing our product.
I know how the thinking on market segmentation has evolved

The shift from more traditional, demographic-oriented segmentation to modern segmentation based on psychology and behavior reflects the evolution of marketing and customer understanding.

This transformation has been driven by changes in consumer behavior, advances in data collection and analysis, and a growing realization that demographics alone often fail to capture the complexity of human decision-making. Here's a brief history of this shift:

  1. Early Demographic Segmentation (Pre-20th Century): In the early days of marketing, businesses primarily relied on basic demographics to understand and target their audience. Age, gender, income, location, and other easily measurable characteristics were the key criteria. This approach made sense at the time as it provided a straightforward way to categorize and target potential customers.

  2. Post-WWII Marketing and Mass Media (Mid-20th Century): With the rise of mass media, such as television and radio, advertisers adopted a one-size-fits-all approach to reach broad audiences. Demographic segmentation remained essential, but it expanded to include considerations like family size and lifestyle.

  3. Late 20th Century - The Era of Psychographics: As competition increased and consumer preferences became more diverse, businesses began to look beyond demographics. The concept of "psychographics" emerged, focusing on attitudes, values, and lifestyles. This shift acknowledged that people's interests and behaviors couldn't be solely explained by their age or income. Psychographic segmentation attempted to understand the "why" behind consumer decisions.

  4. The Digital Age (Late 20th Century - Present): The internet and digital technology ushered in an era of more sophisticated data collection and analysis. This allowed for a deeper understanding of individual behavior. Online behaviors, such as website visits, click patterns, social media interactions, and purchase history, provided insights into consumer preferences. This data-driven approach contributed to the rise of personalized marketing and behavioral segmentation.

  5. Modern Behavioral and Data-Driven Segmentation (Present): Today, businesses are increasingly focused on understanding and predicting consumer behavior. They leverage data analytics, machine learning, and artificial intelligence to segment customers based on their online actions, purchase history, and even their social media activity. The emphasis has shifted from "who" the customer is to "what" they do.

  6. The Psychology of Decision-Making (Present): In the most recent evolution, businesses are delving into the psychology of decision-making. This approach involves understanding customer motivations, emotions, cognitive biases, and the journey from awareness to purchase. It recognizes that while demographics and behaviors are crucial, they don't provide the full picture of why customers make the choices they do.

This shift toward modern segmentation based on psychology and behavior is driven by the recognition that customers are complex individuals with unique motivations. It aligns with the move toward personalized marketing and the importance of delivering relevant, targeted content to customers. Advanced data analytics and technology have made this approach more feasible and effective, allowing businesses to understand and engage with customers on a deeper level.

I know the components of market segmentation 7

In the context of market segmentation, a segment refers to a distinct subgroup or subset of the overall market that shares similar characteristics, needs, or behaviors. It is a homogeneous group of consumers who exhibit common traits or exhibit similar preferences and can be targeted by businesses with specialized marketing strategies.

Segments are created by dividing the larger market into smaller, more manageable units to better understand and cater to the diverse needs and preferences of customers. Each segment is defined by specific criteria or variables, such as demographics, psychographics, geographic location, behavior patterns, or socioeconomic factors.

For example, within the market for automobiles, different segments may include luxury car buyers, eco-friendly car enthusiasts, budget-conscious individuals, or families seeking spacious and safe vehicles. Each segment represents a distinct group of consumers with unique characteristics and preferences, allowing businesses to develop tailored marketing messages, products, or services to cater to their specific needs.

Segments are crucial in marketing because they enable businesses to focus their resources, efforts, and strategies on the most relevant and profitable customer groups. By understanding the characteristics and motivations of each segment, companies can effectively target their marketing campaigns, create customized offerings, and build stronger relationships with their target audience.

In the context of Jobs To Be Done, a segment is a subset of people in a market, each with a different set of unmet needs.


Traditional segmentation often focuses on easily measurable and filterable characteristics like industry, company size, and job role, which can be useful for targeting and campaign design.

However, these characteristics may not always be the best predictors of actual behavior or preferences.

Most of the time, our motivation for creating profiles is to predict behavior, decision-making, priorities or the lack thereof.

Therefore, it makes sense to organize profiles into categories which impact behaviour.

Here are some examples of behavioral profile categories:


Personality profiles are profiles designed around certain personality traits, tendencies and ways of thinking.

An example of a personality profile might be "Energetic, people-pleasing high-performer"


Situational profiles are profiles designed around a situation a person finds themselves in, be it in a role, at a certain point in their role journey or faced with a particular challenge.

An example of a situational profile might be "New scaleup hire".

Concept awareness

Awareness profiles are profiles which share some types of knowledge, insight, experiences or view points withing a certain concept or knowledge domain.

An example of a concept awareness profile is "Leaders who are cognizant of their emotions and mental health"


Constraint profiles are designed around the limitations experienced by the profile holder, such as culture, leadership, budget, market conditions, mandate or cognitive diagnosis.

An example of a constraint profile is "Person who works in an organization with poor leadership but has no mandate to affect leadership mastery, behaviour or priorities"

In the context of market segmentation, profiles refer to detailed descriptions or representations of the characteristics, attributes, and behaviors of individuals or groups within a specific segment.

Profiles provide a deeper understanding of the target audience within each segment, allowing businesses to create more personalized and effective marketing strategies.

The name of a profile typically consists of a role and a context. The context could be a situation, a personality trait or something else which informs behaviour. Examples:

  • Leader struggling to get people to improve in their work
  • Mother struggling to let go of and allow for her children to be independent
  • Founder not understanding the steps involved in reaching product-market fit

A profile typically includes information such as:

  1. Demographic Data: This includes age, gender, income, education, occupation, marital status, and other relevant demographic variables.

  2. Psychographic Information: Psychographic details delve into the lifestyle, values, attitudes, personality traits, interests, and behavior patterns of individuals within the segment.

  3. Geographic Factors: Geographic information focuses on the geographical location or distribution of individuals within the segment, such as country, region, city, or climate.

  4. Behavioral Insights: This covers the purchasing behavior, product usage patterns, brand loyalty, benefits sought, decision-making process, or response to marketing stimuli exhibited by individuals within the segment.

  5. Socioeconomic Characteristics: Socioeconomic data looks into social class, social status, income level, or other economic factors that may influence the preferences and behaviors of individuals within the segment.

Profiles help businesses develop a comprehensive understanding of their target customers, enabling them to tailor their marketing messages, product offerings, and distribution channels to meet the specific needs and desires of each segment. By analyzing and utilizing profiles, companies can create more targeted and relevant marketing campaigns, enhance customer engagement, and increase the likelihood of conversion and long-term customer loyalty.

It's important to note that profiles are developed based on research, data analysis, market insights, and customer feedback. Regular updates and refinements to profiles ensure that businesses stay in touch with the evolving preferences and behaviors of their target audience.

An ideal customer profile is a hypothetical description of the type of company that would realize the most value from your product or solution. These companies tend to have the quickest, most successful sales cycle, the greatest customer retention rates and the highest number of evangelists for your brand.

A persona is a fictional representation or archetype of a typical customer or user within a specific target audience. It is a tool used in marketing, product development, and user experience design to create a detailed and relatable description of an ideal customer. Personas are based on research, data, and insights gathered from real customers and are used to humanize and understand the needs, motivations, behaviors, and preferences of the target audience.

A persona typically includes:

  1. Demographic Information: This includes age, gender, education, occupation, income, and other relevant demographic details.

  2. Background and Context: It provides information about the persona's lifestyle, family, cultural background, and any other relevant contextual factors.

  3. Goals and Motivations: This section highlights the persona's primary goals, desires, and motivations related to the product or service being developed or marketed.

  4. Needs and Pain Points: It identifies the persona's needs, challenges, and pain points that the product or service aims to address and alleviate.

  5. Behavior and Preferences: This covers the persona's behavior patterns, preferences, attitudes, and decision-making processes relevant to the product or service.

By creating personas, businesses can gain a deeper understanding of their target audience, allowing them to develop products, services, and marketing strategies that resonate with the customers they aim to reach. Personas serve as a reference and guide for decision-making, enabling businesses to empathize with customers, make more informed choices, and create better user experiences.

It's important to note that personas are not based on individual customers but rather aggregate characteristics and behaviors observed among a group of customers. They are used as fictional representations to help businesses align their strategies and offerings with the needs of their target audience and enhance customer-centricity.

Profiles and personas are closely related but have slightly different meanings.

Profiles refer to detailed descriptions or representations of the characteristics, attributes, and behaviors of individuals or groups within a specific market segment. Profiles provide a broader understanding of the target audience within a segment and are typically created through data analysis, research, and market insights.

On the other hand, personas are fictional characters that represent a specific segment of the target audience. Personas are developed based on the information gathered from profiles, but they go a step further by combining the profiles' attributes into a single, relatable individual. Personas humanize the data and provide a more tangible representation of the target audience.

To clarify the relationship between profiles and personas:

  1. Profiles: Profiles are the foundation of personas. They include detailed information about the characteristics, demographics, psychographics, behaviors, and preferences of individuals within a segment. Profiles provide the raw data and insights from which personas are derived.

  2. Personas: Personas are created based on the profiles to develop fictional characters that embody the typical traits, motivations, needs, and preferences of the target audience. Personas go beyond data by humanizing the information and creating relatable individuals that represent the segment.

The concept of a target audience is closely related to the concepts of segments and profiles in the field of marketing and market segmentation. Let's explore their relationship:

  1. Market Segmentation: Market segmentation involves dividing the broader market into smaller, more defined segments based on specific characteristics, needs, behaviors, or preferences of potential customers. Segments are homogeneous groups of consumers who share similar traits or requirements. The purpose of segmentation is to understand and categorize the market into distinct groups that can be targeted effectively.

  2. Profiles: Profiles, as discussed earlier, are detailed descriptions or representations of the characteristics, attributes, and behaviors of individuals or groups within a specific market segment. Profiles provide a deeper understanding of the target audience within each segment.

  3. Target Audience: The target audience is the specific group of individuals or customers that a business aims to reach, engage, and serve with its products, services, or messages. It is a subset of the overall market and aligns most closely with the business's objectives. The target audience is identified based on the segmentation and profiling process.

The relationship between these concepts can be explained as follows:

  1. Segments: Market segmentation divides the market into distinct groups (segments) based on common characteristics. Each segment represents a specific subset of the target audience.

  2. Profiles: Profiles provide detailed information about the individuals or groups within each segment. They offer insights into the demographics, psychographics, behaviors, and preferences of the target audience within each segment.

  3. Target Audience: The target audience is determined by selecting one or more segments that align with the business's goals and strategies. It represents the specific group of consumers the business wants to reach and serve.

In summary, market segmentation creates segments, profiles provide detailed information about individuals or groups within each segment, and the target audience is the selected subset of the market that aligns with the business's objectives. Segmentation and profiling help businesses understand their target audience's characteristics, needs, and preferences, allowing them to develop tailored marketing strategies, products, and messages to effectively reach and engage their desired customers.

I understand different types of segmentation and their motivation

There are different types of segmentation approaches depending on your needs.

Need segmentation

Need segmentation means segmenting the market by who has or do do not have the problem you're solving (and to which extent they have it).

Priority segmentation

Priority segmentation means segmenting the market by who cares about and is willing to invest time and resources into solving the problem.

Indicators of priority segmentation can be the existence of a budget or the usage of time spent on similar activities.

Problem awareness segmentation

Problem awareness segmentation means segmenting the market into how intimately familiar they are with the problem you solve.

Another way to think about this is professional segmentation, meaning how educated and knowledgable they are within your domain.

Situational segmentation

Situational segmentation means segmenting the market on a particular situation they find themselves in.

Incentives segmentation

Incentives segmentation means segmenting the market into how they are incentivized.

Information diet segmentation

Information diet segmentation means segmenting the market into which people, channels and institutions they follow and, what sort of information they consume.

Strategic segmentation

Strategic segmentation means selecting a sliver of the market in which you can specialize and be extraordinarly relevant. For example, you may offer generic leadership development, but decide to focus only on CMO's in companies between 100 and 200 employees to give you an edge and a deep understanding of the particular leadership challenges within this domain.

I understand different market segmentation criterion types 10

Demographic grouping is based on measurable statistics, such as:

  • Gender
  • Age
  • Income level
  • Marital status
  • Education
  • Race
  • Religion  

Geographic boundaries.

Psychographics are the more personal characteristics of a person, including:

  • Personality
  • Attitudes
  • Values
  • Interests/hobbies
  • Lifestyles
  • Behavior

Determine how your product or service will fit into your target's lifestyle. How and when will your target use the product? What features are most appealing to your target? What media does your target turn to for information? Does your target read the newspaper, search online, or attend particular events?

Specific reactions and the way customers go through their purchasing processes.

I am vary of the segmentation context

The segmentation context refers to what you are trying to offer the market. The segmentation for one product might be totally different from another (and even segmentation of parts of products might be different).

I understand the different types of goals a buyer may care about

- Social
↳The desire to look good.

- Financial
↳The want to reduce costs and/or expland revenue

- Emotional
↳The desire to feel good.

- Functional
↳Get something tangible done.

- Consumption
↳Enable others to utilise a solution.

I know what is meant by targeting

Targeting is the process of selecting which segments to focus on.

  • Who do you want to serve?
  • Who do you most enjoy serving?
  • Who are willing to be served?
I know which factors to consider when selecting a segment to target

Potential factors to consider:

  • How much friction/resistance do I expect in the sales process?
  • How much tire kicking do I expect in the sales process?
  • How much would I love working with and helping these people?
  • What goal am I trying to achieve (revenue, customer aquisition, building a network of professionals, etc)?