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A Practitioner's Guide to Custom Industry Segmentation

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Industry Segmentation Enables Better Understanding of Customers

Every marketing organization—every business, really—needs to segment its customer and prospect base in order to design go-to-market plans, measure the success of these actions, and report results. It’s no wonder that executives have found segmentation to be a crucial strategy for growth.

One of the key dimensions for customer segmentation is industry vertical. This sounds simple enough, right? All you need is a solid source of SIC or NAICS codes and you’re off and running, but soon you’re looking at bar charts with more than 80 bars—one for each 2-digit SIC code. It’s nearly impossible to read and you struggle to draw meaningful insights. This is the point where most analysts realize they need to group these standard codes into more meaningful categories. Luckily, they also remember that their business already has focus verticals. But what sets of industry codes belong in each of these verticals?

While some groupings are natural, others are open for interpretation. For example, where does Apple Inc. belong? Are they a retailer? They do have stores, but they also sell software. Does that make them part of “Tech”? And since they produce electronic devices, aren’t they also a manufacturer?

The answer to these questions will depend on who is asking the question, as it should be based on the relationship they have with Apple. A specialty chemical supplier will likely target the entire conglomerate as a subset of manufacturing while a utility company may rightfully categorize each location based on its primary line of business knowing that the location’s specific activity will drive its own power consumption patterns.

These examples highlight the need for industry categories to be designed in a way that reflects how the business serves and approaches each of these industry categories with tailored products, marketing content, and sales strategies . “A Practitioner’s Guide to Custom Industry Segmentation” begins with this principle, then breaks down the process of grouping raw industry codes into meaningful categories using clear, simple steps.

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