Successful CPA firms are typically open to approaches known to yield positive growth. So why are they so reluctant (dare I say occasionally impossibly stubborn) when it comes to embracing the concept of market segmentation?
It’s often perceived as complex, difficult to understand, and therefore optional. However, it is so fundamental to strategy development that bypassing market segmentation can result in years of wasted effort and disappointing growth results.
Market segmentation is the foundation of specialization, a natural outgrowth of mature markets like ours. CPA firms no longer have the luxury of being all things to all clients. Today’s market conditions require that we hone in on the needs of focused buyer groups with similar attributes. But first we need to know what those groups are and what they need.
It’s a lot like fish. Not all fish are the same and they certainly don’t all need audits. Some trout need tax work. Bass require business consulting. And flounder, well, they “flounder” and need help with everything!
Segmenting your market means breaking down a species/buyer group according to its purpose and habits. What follows is studying and learning everything you can about the type of fish you want to catch, like where they swim, what they eat and what fish they hang out with.
Defining segments has traditionally been difficult for CPAs largely because we tend to address markets “from the inside out.” That is, we think in terms of our offerings and expertise, first and foremost, rather than the specific buyer groups.
No boots. No seaweed.
Imagine casting a large net behind a fishing boat. Without a specific vision of what you wish to catch you’re likely to haul in all kinds of unwanted stuff—from a rubber boot to a fat catfish to a hunk of seaweed. Segmentation helps you clarify which fish you want to reel in, which is the first step to identifying where they reside and what they want to eat.
The result? No rubber boots and no seaweed if catfish is what you’re after.
All this talk about fish somehow reminds me of the birds that frequent our backyard feeder. We feed them a special mix intended to attract Carolina chickadees—not blue jays, warblers, mockingbirds or cardinals. That’s because we segmented our market and decided we wanted to specifically attract Carolina chickadees. If we do not regularly provide the feed, or if we offer the wrong feed, our beloved Carolina chickadees will not find us. The same can be said for buyer groups.
The process of segmentation forces you to define the parameters of your search. And it will lead to revealing whether the market you’re going after even makes sense to pursue. For example, if you want perch and discover only a handful of them in the lake where you’re fishing, you may want to target a more populous species.
Shift your perspective
Zeroing in on market segments also requires that you think about buyer categories the way buyers think of themselves. For example, your firm might be considering specializing in health care providers including doctors, dentists and chiropractors. But here’s the problem. Dentists have about as much in common with chiropractors as pigeons have with pelicans.
Chiropractors and medical doctors do not read the same publications. And doctors and chiropractors do not attend the same conferences or belong to the same professional organizations.
I was recently advising a firm whose leaders informed me that their target market was high net worth individuals. I knew I had my work cut out for me, as the firm believed that this vast category represented a monolithic, single-minded buyer. We worked through the process of drilling down into segments including widows, retirees, corporate executives, trust fund babies, working entrepreneurs and more. With solid segmentation the firm could zero in on precise buyer groups.
Only once you’ve performed focused segmentation can you begin to specialize, strategically reaching out to groups of like-minded buyers in a systematic way in the places where they swim and fly.