Your market may be large, but your budget, time and service capacity are limited. Segmentation and targeting answer an essential question: for which customers is your offer useful, accessible and profitable enough to become a sales priority?
Segmentation groups customers with similar needs and buying behaviour. Targeting then selects the groups you will serve first. This helps you build a relevant offer, concentrate effort and decline some requests while maintaining a clear direction.
This method for SMEs and startups includes B2B and B2C criteria, a selection framework and a numerical example. The businesses and figures are fictional illustrations, not industry benchmarks.
At a glance
- Segment by needs and buying situations, then choose groups you can serve profitably.
- Assess need, margin, commercial access and capabilities using explicit criteria.
- Validate the target with concrete offers and track results by segment.
Segmentation, targeting and positioning: three different decisions
These concepts follow a logical order. First study differences between customers, then select priorities and describe the place you want your business to occupy in their minds.
| Concept | Question | Expected result |
|---|---|---|
| Segmentation | Which groups share relevant needs or constraints? | Identifiable and sufficiently distinct groups |
| Targeting | Where should we concentrate resources? | A primary and, if appropriate, secondary target |
| Positioning | Why would this target choose us? | A precise, credible promise distinct from alternatives |
| Persona | How can we represent a typical person in this target group? | A profile helping us understand their decisions |
A persona does not replace segmentation. Inventing “Sophie, 38, who enjoys travel” will not help sell invoicing software if age and hobbies do not affect her purchase. Knowing that she manages twenty invoices a week alone, chases late payments in the evenings and sends records to her accountant is more useful.
An ideal customer profile, often called an ICP in B2B, generally describes the business you want to serve. A persona describes a person involved in buying: the owner, finance manager, user or IT manager. One target company may contain several people with different expectations.
Start with the need and buying situation
Good segmentation starts with what the customer wants to achieve. Easily counted characteristics then help define the group.
A meal-delivery business could segment by age. Alternatively, it could distinguish employees wanting a quick lunch, companies organising meetings and households seeking meals for several evenings. These groups buy at different times, order different quantities and assess the service differently.
The second approach directly informs portion sizes, minimum orders, invoicing, delivery times and purchase frequency.
Questions to ask before creating groups
- Which problem is the customer solving, and in what situation?
- How do they currently deal with it, including doing without a purchase?
- What triggers the search for a solution?
- Who uses, recommends, approves and pays?
- Which criteria could immediately rule out your offer?
- What are the consequences of a poor decision?
- What budget and time are actually available?
Ask about recent facts. “Tell me about your last purchase” often reveals more than “Would our idea interest you?” A positive intention is neither an order nor evidence of a budget.
Use information you already have
For an existing business, compare sales, margins, service time, returns, lost-sales reasons and incoming requests. A high-revenue group may consume disproportionate support hours.
For a startup, combine interviews, observation, competing offers and early tests. A few detailed conversations can generate assumptions, but cannot establish reliable market share. Separate observations from assumptions needing validation.
Which segmentation criteria should you use?
B2C: combine needs, usage and constraints
Geographical and demographic criteria may help, but do not automatically explain decisions.
| Category | Examples | Practical use |
|---|---|---|
| Desired outcome | Save time, give a gift, repair something, learn | Define the promise and offer |
| Behaviour | First purchase, repeat purchase, seasonality, quantity | Adapt subscriptions, packaging and follow-up |
| Situation | Moving home, a birth, retirement, a new job | Identify when the need becomes a priority |
| Geography | Delivery area, travel time, language region | Check actual accessibility |
| Constraints | Budget, opening hours, mobility, available equipment | Avoid an offer the customer cannot use |
| Expectations | Independence, support, speed, customisation | Choose the service level |
People of the same age may belong to different segments, while people of very different ages may buy for the same reason. Avoid assumptions based on sex, age or income; check whether these characteristics matter for your offer.
B2B: include the organisation and buying process
Business size and industry are starting points. Existing equipment, process complexity and readiness to address the need are often more decisive.
An accounting firm might distinguish self-employed people without staff, SMEs with payroll and VAT, and groups with several companies. Work, responsibilities, deadlines and fee-setting differ substantially.
| B2B criterion | What to specify |
|---|---|
| Activity and organisation | Industry, locations, workforce and relevant legal structure |
| Operational problem | Manual tasks, errors, delays and missing expertise |
| Existing equipment | Software, machinery, integrations and compatibility constraints |
| Trigger | Growth, a new contract, recruitment or supplier replacement |
| Purchasing | Decision-maker, budget, approval, any tender and cycle length |
| Service capacity | Language, hours, travel and support requirements |
In Switzerland, working language can affect acquisition and delivery costs. A business able to provide support only in French does not yet offer an equivalent service to every Swiss SME. Accessible market size should reflect that reality.
Build segments you can actually use
A segment is useful if it changes a decision. If two groups receive exactly the same offer, message, price and service, separating them may add little.
You need to recognise the group, understand its need, reach it and serve it economically. A small segment may be attractive if its value is high. A huge market may be unusable if you cannot identify buyers.
A simple description
Describe each segment in one sentence: “We group [customer types] experiencing [problem] in [situation], who mainly choose according to [criteria].”
For example: “Small service businesses in French-speaking Switzerland without an internal IT manager, needing secure remote working and a responsive contact with predictable monthly costs.”
Add exclusions. A company requiring all-night technical cover may fall outside this segment if your team cannot provide it. The exclusion protects quality and prevents an unrealistic promise.
Avoid too many small segments too early
Three to five well-explained groups often provide a reasonable starting point. This is a practical choice, not a statistical rule. Refine them when sales reveal repeated differences.
Keep an allocation rule. If a business fits several groups, which main need, contract or usage determines its classification? Without a rule, comparisons become difficult and you may count the same potential twice.
Choose your target using a decision framework
The primary target is not necessarily the largest group or the highest-paying one. Look for the best balance between the value of the need, sales access, profitability and your ability to deliver.
Start with disqualifying criteria: a clearly insufficient budget, unmet regulatory requirement, inaccessible area or incompatible delivery schedule. Strong scores elsewhere cannot compensate for an actual impossibility.
Then score the remaining groups from 1 to 5, explaining each rating. Weight criteria for your situation and check whether small changes in weights alter the ranking.
| Criterion | Illustrative weight | Check |
|---|---|---|
| Importance of the need | 25% | Does the problem justify spending now? |
| Margin and recurrence | 25% | What remains after production, sales and service? |
| Ease of access | 20% | Can we reach the right people? |
| Fit with our capabilities | 20% | Can we deliver without disrupting the team? |
| Growth potential | 10% | Are there prospects beyond the first sales? |
Weighted score = the sum of each rating multiplied by its weight. A rating of 4 weighted at 25% contributes 1 point. The final score remains between 1 and 5.
The score structures discussion; it does not turn impressions into certainty. If an important rating depends on an assumption, test it next.
Example: choosing customers for an IT support SME
A three-person Lausanne business is considering self-employed customers, service SMEs with 10 to 40 employees and shops open at weekends. It offers maintenance, support and workstation management.
The following ratings are fictional. The company does not yet provide Sunday cover, reducing its fit with some shops.
| Criterion | Weight | Self-employed | Service SMEs | Shops |
|---|---|---|---|---|
| Importance of the need | 25% | 3 | 5 | 4 |
| Margin and recurrence | 25% | 2 | 4 | 3 |
| Ease of access | 20% | 4 | 3 | 4 |
| Fit with the team | 20% | 4 | 5 | 2 |
| Growth potential | 10% | 3 | 4 | 3 |
| Weighted score | 100% | 3.15 | 4.25 | 3.25 |
Service SMEs become the primary target. That choice implies a monthly offer, a stated response time, an onboarding procedure for new employees and a contact able to work with management.
Self-employed customers can remain a secondary target for a standardised service. Shops requiring Sunday cover are excluded until a credible service arrangement exists.
Check that the accessible market is large enough
Suppose the company identifies 300 businesses actually meeting its criteria within its service area. At a hypothetical average annual contract of CHF 7,200, that represents CHF 2.16 million in potential annual spending if every business bought this offer at this price. This is neither a forecast nor an estimate of likely revenue.
If the team can onboard twelve customers in year one, capacity corresponds to CHF 86,400 of annual contract value once all are active. First-year receipts will be lower if contracts start progressively. Estimate the meetings, proposals and signed contracts needed to achieve this objective.
This check connects the market with delivery capacity and sales activity. It also provides a basis for planning how to acquire customers.
Turn targeting into an offer, message and buying journey
Segmentation must lead to operational decisions. For each selected target, define:
- Offer: included services, options, exclusions and expected result.
- Evidence: demonstrations, relevant references, samples or trials.
- Message: a specific problem, concrete benefit and verifiable difference.
- Access: places, partners or channels where customers look for solutions.
- Purchase: whom to convince, required documents and the next step.
- Service: resources, timing and support needed after the sale.
The IT provider’s positioning might become: “An outsourced IT service for service SMEs in French-speaking Switzerland seeking French-language support and predictable monthly costs.” This gives clearer direction than “Innovative solutions for every business”.
The promise is only valid if contracts, resources and processes support it. Segmentation can reveal what you must build before promoting the offer.
Which targeting strategy should you choose?
Concentrated targeting prioritises one segment. It supports specialisation but increases dependence on a customer type. Differentiated targeting serves several groups with adapted offers and requires more resources. A broadly standardised offer may suit a widely shared need where the business model and market access are coherent.
Starting with one priority segment makes learning clearer for a small business. You can still accept other suitable sales while distinguishing them from customers around whom you actively build growth.
Translate the target into distribution channels that fit how customers buy, and a communication plan that explains the offer consistently.
Test, measure and adjust the target
Set limits on test duration and cost. A service business could offer a paid assessment or initial job. A retailer could test a limited range. A digital product could be demonstrated, followed by a specific proposal.
Decide what to learn beforehand: available budget, decision-maker, main objection, buying delay or actual delivery workload. Measuring clicks alone says little about your ability to sell and serve.
| Observed signal | Interpretation to check | Possible decision |
|---|---|---|
| Strong interest, few accepted proposals | Insufficient budget, trust or urgency | Revisit target, offer or evidence |
| Easy sales, low margins | Underestimated service costs | Standardise, change price or exclude certain cases |
| Few contacts, strong conversion to contracts | Limited commercial access | Build partnerships or an additional channel |
| Satisfied customers, occasional purchases | Naturally low purchase frequency | Adapt recurrence and acquisition objectives |
Track qualified enquiries, proposals, signed contracts, margins, service time, repeat purchases and departure reasons by segment. Compare periods long enough for the buying cycle: three weeks cannot fairly assess a sale normally taking three months.
Conclusion: set a priority the whole team can apply
Your final output fits on one page: primary target, need, trigger, decision-maker, plausible budget, promise, exclusions, access channel and next test. Another team member should be able to use it to decide whether an enquiry fits the sales priority.
Review it when costs change, you launch a new offer or sales contradict assumptions. The aim is to make choices explicit, measurable and consistent with available resources, while allowing the market definition to evolve.
Frequently asked questions
What is the difference between segmentation and targeting?
Segmentation identifies customer groups sharing relevant needs or behaviour. Targeting selects the groups receiving priority resources. You might identify five segments while actively targeting only one.
How can you segment a market before having customers?
Start with usage situations, ask potential buyers about recent practices and observe alternatives. Form a few segment hypotheses, then test a concrete offer. Treat results as learning without claiming statistical representativeness they do not have.
Should you choose a very narrow niche?
A niche is attractive if it is accessible, sufficiently rewarding and compatible with your capabilities. It becomes problematic if buyer numbers or purchase frequency cannot cover costs. Check accessible commercial potential and service capacity before specialising.
Can you have several ideal customers?
Yes. Several segments may be viable, but they must justify the required adaptations in offer, communication and service. Set a priority so every enquiry does not receive the same investment.
How often should you review segmentation?
Use a rhythm suited to the activity, such as a quarterly sales review, and reassess more deeply when evidence shows a lasting change. Do not change targets after each isolated rejection.
Romain Prieur is a Swiss certified public accountant and the founder of Entreprendre.ch. With more than ten years of experience in auditing and supporting businesses in Switzerland, he advises entrepreneurs on company formation, accounting and taxation.
