What this lesson covers
How do I split a market into groups that behave differently enough to market to differently?
- Why mass marketing wastes money
- Demographic, geographic, psychographic and behavioral segmentation
- Tests of a useful segment: measurable, reachable, substantial, actionable
- How ad platforms turn segments into audiences
- B2C (business-to-consumer) vs. B2B (business-to-business) callout: firmographic segmentation by industry, company size, location and need
Why this matters now
Placeholder for the lesson's opening story: a vivid, real moment where a marketer or small-business owner meets this exact problem.
You can now
Split a market into segments and test whether each is measurable, reachable, substantial and actionable.
For your own business or employer: Stop marketing to everyone: name the segments worth your time and money, and the ones to skip.
Industry case studies
Industry Case
Ocotillo & Ash
DTC fashion · Demand creation
Case update 2.1
Module 2 of 8 in this case
Two customers, same dress
Two women bought the same linen dress from Ocotillo & Ash last summer. One paid $118, wore it to work through August, and came back in October for the pants. The other paid $83 during a 30%-off weekend, sent it back for a different size, and never ordered again.
On the dashboard they're both “customers.” They aren't the same customer.
Lena and Sam export the 3,900 customers from the past year and sort them by what they did, not who they are. Three groups fall out. Sale-only buyers are 38% of customers: they bought only with a discount code, returned 31% of their orders, and just 9% bought again. Heat-dressers are 34%: they live in hot-climate metros, paid full price at least once, returned 14%, and 41% came back. Occasion buyers are the other 28%: a gift, a wedding, a vacation.
Then the four tests. Can Lena measure each group? Yes, it's in the order data. Reach them? Heat-dressers cluster in places an ad platform can find, and they talk about the weather in their reviews. Substantial? A third of her customers, and most of her repeat revenue. Actionable? Only if she stops running the sales that keep recruiting the first group.
That last answer is the uncomfortable one. Lena has been paying ads to find the customers least likely to stay.
Artifact added
Segment table: three customer groups from the order data, with the four tests applied
Industry Case
Bajada Plumbing & Drain
Local home service · Demand capture
Case update 2.1
Module 2 of 8 in this case
Sixty percent are in a hurry
Carmen sorts a year of Bajada's jobs and finds three groups that behave differently enough to market to differently.
Emergency homeowners are about half the jobs. They decide in minutes and care about who answers and who shows up. Planned upgraders are about 35%: water heaters, softeners, repiping. They decide over days and care about trust and price clarity. Property managers are the last 15%, but they call again and again, mostly for emergencies in someone else's house. Count their jobs in, and emergencies are the 60% Carmen found in 1.2.
Geography sharpens it. Six zip codes produce 70% of the jobs, almost all of them neighborhoods of homes built between 1980 and 2005, with original water heaters and hard water.
Ray had always said Bajada's market was “anybody with pipes.” Now he can see who actually calls.
Artifact added
Segment table: emergency homeowners, planned upgraders and property managers
Industry Case
Tepary Kitchen
Local restaurant · Local and offline
Case update 2.1
Module 2 of 8 in this case
The guest you can't see
Rosa and Miguel list the people who eat at Tepary: weekend families, weeknight neighbors who live within three miles, delivery-only customers, winter residents, and the university crowd.
Then the tests, and one result changes their thinking. Winter residents are substantial from November to April and gone all summer, so they can't fill an August Tuesday. Delivery-only customers are measurable, but the app owns the data, so they aren't reachable. The weeknight neighbors are the group that could fill the slow nights. They're close, they're reachable with a radius ad or a neighborhood group, and they don't need a special occasion.
And they're the one group Tepary can't measure. Nobody knows how many there are, or how often they come.
The segment that could save Tuesday is invisible. That's the next problem to solve.
Artifact added
Segment table: five guest groups, and the one that fails the measurability test
B2C vs. B2B
Placeholder for the B2C vs. B2B callout: how segmentation changes when the buyer is a business (firmographics such as industry, company size, location and need, in place of consumer demographics and lifestyle).
Listen
Podcast · Move at the Speed of Culture
The Rise of Cultural Micro-Audiences
Listen for why a small, well-understood segment can outperform a broad one.
More from Move at the Speed of Culture →
Listen online: moveatthespeedofculture.com/rise-of-cultural-micro-audiences
Key terms
- Actionable: A test of a useful segment: you can design an offer and messages that fit it and that you can deliver.
- Audience: In ad platforms such as Google and Meta, the group of people a campaign is set to reach, built from data on their location, demographics, interests and behavior.
- B2B (business-to-business): Marketing and selling to companies and organizations that buy for business use.
- B2C (business-to-consumer): Marketing and selling to individual people who buy for themselves or their households.
- Behavioral segmentation: Grouping people by what they do: how often they buy, how much they spend, how they use a product, their loyalty or the benefit they seek.
- Demographic segmentation: Grouping people by measurable traits such as age, gender, income, education, occupation or family stage.
- Firmographic segmentation: The B2B version of demographics: grouping companies by industry, company size, revenue, location and business need.
- Geographic segmentation: Grouping people by where they live or work: country, region, city, neighborhood, climate or distance from a store.
- Market segmentation: Dividing a market into groups of people who share needs, characteristics or behaviors, so each group can be marketed to differently.
- Mass marketing: Sending the same message to everyone in a market, regardless of who they are or what they need. It is simple but usually wastes money on people who will never buy.
- Measurable: A test of a useful segment: you can estimate how many people are in it and what they spend.
- Psychographic segmentation: Grouping people by lifestyle, values, interests, attitudes and personality.
- Reachable: A test of a useful segment: you can actually get a message in front of them through channels you can use.
- Segment: One of the groups created by segmentation: people who are similar to each other and different from people in other groups in ways that matter to marketing.
- Substantial: A test of a useful segment: it is big or valuable enough to be worth marketing to.