If a product fulfills a common need that’s widely seen across an industry then vertical segmenting is used. Ineffective for most consumer markets, vertical segmenting is an effective strategy when working with a niche product geared for a niche industry. Single industries like that and other industries commonly identified by Standard Industrial Classification (SIC) system are often identified as vertical segments. Determining the end function of business customer tells how and at what level in the supply chain a company’s product will be used. And this knowledge drives how the company positions and marketsits product. It’s a simple question – how and by whom will my product be used? A hanger warehouse may only target companies in the retail industry, a graphic software firm may only target design departments or design houses, while a supply chain management developer may count freight companies among his prospects.
While geographic segmenting is often used to leverage characteristics shared by a population living in the same region, small businesses, those with capacity limitations, and consumer-driven companies often use geographic criteria to target prospects. As a Silicon Valley-based company, you may not be able to service prospects west of a designated time zone. Or even more specific, you may segment your prospects to a select number of surrounding zip codes. Very plainly, where are your customers concentrated? Once you understand this data, you’ll no longer want to focus on any other geographic information. These same criteria can (and should) be applied to other geographic factors including population growth rates, economic factors, and isolated spoken language.