A market segmentation process is fundamental to develop your sales potential as an agency and service business. The benefits are not only financial.
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The Market Segmentation Process for Agencies: Strategies for Success

Like an Orange, Your Market Is Full of Juicy Segments

When you see a marketing message that feels like it’s written directly to you, you are experiencing the value of Market Segmentation.  When you segment your market, you can create messages and offers that are more targeted. As a result, people will respond more, your lead attrition will be lower, and the amount of work and effort you and your team have to do to land the sale will shrink. In short, segmentation is key to achieving your full potential of growth and profitability.

In this article, we look at a few of the many benefits of employing marketing segmentation strategies and a simple process to start segmenting your clients.

Pivotal benefits of market segmentation

Segmentation enables you to focus on the potential clients who are most likely to buy the services you offer with messages and offers designed for them. Instead of marketing to the world, you market to only a targeted portion of it. This:

  • Reduces your time and cost

  • Let’s you create much more specific marketing content

  • Results in better conversion rates, higher margins, and improving profits

  • Helps you target clients like your current best, reducing client acquisition costs

  • Helps you exceed your financial goals

Here are a few examples of just how powerful market segmentation can be:

  • You’ll find that your email campaigns have higher open rates – Mailchimp saw a 14.3% increase in segmented campaigns.

  • By targeting customers that ‘looked like’ their best customers, Royal Canadian Mint added around 140,000 customers to its books in a single campaign.

  • McKinsey & Company’s study, ‘Big Data, Analytics, and the Future of Marketing and Sales,’ found that retailers experienced between a 3% and 5% increase in returns on promoted sales by using market segmentation.

  • MetLife found that by focusing on ‘lookalike’ customers, their customer acquisition costs tumbled, saving them an incredible $800 million and resulting in what they called ‘the most significant change to the brand in over 30 years’.

How does market segmentation work?

For agencies, segmentation is the process by which you separate your clients by their needs, their problems, or other characteristics that correlate with their issues and needs. This allows you to create highly targeted marketing content that matches your value proposition to the client segment.

As a service firm, your focus can be described as two-dimensional and divided into four quadrants, as shown here:




Breadth of Service Offered





Number of Markets Served



Service Focused

(horizontal specialization)





Fully Focused



Market focused

(vertical specialization)


As a fully focused firm, you provide a limited range of services to a very narrow and specific market segment. You will be recognized for your expertise in the service you provide, allowing you to increase prices by adopting a value-based pricing strategy. However, you must be careful to ensure that your segment is large enough to sustain your business financially and be alive to potential competition.

As a service-focused firm, you offer a narrow range of services to a broad market segment. You’ll need a wider marketing effort than a fully focused firm and may need to adjust your services to meet client needs as you add new market segments.

As a market-focused firm, you offer a wide range of services to a narrow market segment. Your industry focus will make your business development more efficient, and as you gain industry knowledge, it simplifies your service delivery. You may need to ensure you can offer a wide range of services, which can be costly.

An unfocused firm tries to serve as many market segments as possible with as many services as possible. The danger is that you become a jack-of-all-trades, not recognized for expertise and unable to command premium prices.

Segmenting your market – the different types of market segmentation

There are six types of market segmentation:

1. Demographic

This focuses on characteristics such as age, gender, occupation, and income. For a B2B audience, characteristics such as company size and industry will be the primary considerations. An example here is an electronics store that segments by family income.

2. Geographic

Focusing on the location of customers when location influences the buying decision. For example, real estate agents.

3. Psychographic

The focus with this segmentation is within categories such as interests, values, and lifestyle. Examples of such segmentation may include energy companies and budget stores.

4. Behavioral

With this type of segmentation, you market to factors that may include product knowledge, previous purchases, usage, and business awareness. An example of this is Apple marketing its products to existing users. An example closer to home is a service that segments to life stages – for example the needs of a family when their first child is born vs. when their youngest goes to college.

5. Transactional

This focuses on customers’ spending patterns, grouping by behaviors such as frequency, recency, and amount. This allows businesses such as clothing stores to group customers for more effective marketing.

6. Needs-based

This focuses your efforts on your audience’s needs. These include problems to be solved, functional requirements, emotional needs (what makes the client feel happy), and values and beliefs.

For most B2B service firms, this last segmentation type – needs-based – is where you should focus. As a service agency, you deliver solutions that solve problems.

A process for needs-based market segmentation

Needs-based segmentation requires that you first define your clients’ needs – the common requirement that categorizes clients together. The thing that you need to identify is your clients’ unmet (or under-met) needs.

When working to identify these needs, consider what job the client needs to be done and their desired outcomes. 

The value you provide will be aligned entirely with assisting the client in reaching these outcomes. This enables you to segment your market and focus your energy more effectively. By providing a service that meets these needs and delivers anticipated results, your service becomes unique, highly marketable, and highly valuable.

As you are developing your segments, you should avoid:

  • Ignoring new ideal client profiles – these are likely to indicate that market needs are shifting or that new opportunities exist.

  • Stagnation of your segments – segmentation is an ongoing process

After market segmentation, what comes next?

Market segmentation based on your clients’ needs will help you uncover and market services to those needs. It’s the first step in the process of segmentation, targeting, and positioning (STP).

Segmentation is the process that enables you to customize your marketing and your service offering to match the market’s needs as exactly as you can.

You can then consider pricing, service delivery methods and language that your segment understands and that will help your business soar.

To learn more about how market segmentation can help to ignite your sales and put you on the path of exponential revenue growth, reach out to Anchor Advisors.

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