Blog · Territory, capacity and quota planning
Segmentation defines groups, targeting chooses priorities, and positioning sets the offer's meaning. Use a worked contribution comparison to see how customer evidence supports a target-market decision.
Customer segmentation, targeting and positioning defines customer groups, chooses which groups to prioritize, and states the offer those customers should choose. Revenue and contribution help support the target choice; customer research is still needed to understand needs and test the positioning.
The sequence matters because a profitable historical group is evidence, not a complete strategy. The business must also know whether it can reach more suitable customers, deliver the promised service, and afford the effort required.
OpenStax's marketing text describes the sequence as segmenting a market, selecting target markets, and deciding how customers should perceive the offer. Each step has a different output and owner.
| Decision | Question | Evidence | Accountable team |
|---|---|---|---|
| Segmentation | Which meaningful groups exist? | Customer attributes and observed purchasing patterns | Marketing with sales and analytics |
| Targeting | Where should limited effort go? | Group size, contribution, access, capacity, and acquisition assumptions | Commercial leadership with finance |
| Positioning | What relevant promise can we make and support? | Customer needs, competitive context, and proof of delivery | Marketing with product and operations |
Segmentation should use a rule that another person can apply. For example, an account's approved channel classification can define a reporting group; its revenue then measures the group's economics. If the group is defined as high revenue, discovering that it has high revenue adds little.
For the mechanics of repeatable groups, see B2B customer segmentation from the ledger. Behavioral segmentation covers groups based on purchasing activity. Here the question is what the business does with those groups once the definitions are settled.
An illustrative Ohio distributor sells replacement parts to independent shops, regional chains, and specialist repair businesses. The commercial team is reviewing a quarter of net sales and the variable costs of serving those sales.
Its customer register assigns each account to one primary group. Sales records carry customer ID, net revenue after credits, and product cost. The service file adds variable delivery and handling costs on the same period basis. Shared corporate overhead is outside this contribution measure.
Segment contribution = Segment net revenue − Variable product cost − Variable service cost
Contribution margin = Segment contribution / Segment net revenue
The following table contains the complete inputs for the comparison. Customer counts are distinct active accounts from the customer register, rather than counts of invoices.
| Segment | Active customers | Revenue (USD) | Product cost (USD) | Service cost (USD) | Contribution (USD) | Contribution margin |
|---|---|---|---|---|---|---|
| Independent shops | 80 | 240,000 | 156,000 | 24,000 | 60,000 | 25.0% |
| Regional chains | 30 | 300,000 | 195,000 | 60,000 | 45,000 | 15.0% |
| Specialists | 40 | 200,000 | 110,000 | 20,000 | 70,000 | 35.0% |
| Total | 150 | 740,000 | 461,000 | 104,000 | 175,000 | 23.6% |
Regional chains lead revenue. Specialists lead both contribution dollars and contribution margin. Independent shops sit between them on margin but have the smallest contribution per customer.
To reproduce the table in a spreadsheet, place the input columns in A:E, contribution in F, and margin in G. In row 2, use:
F2 =C2-D2-E2
G2 =F2/C2
Fill down through row 4. Total contribution is 740,000 − 461,000 − 104,000 = $175,000. Total margin is 175,000 / 740,000 = 23.6%, rounded to one decimal place. The total must also equal the sum of the three segment contributions.
The formulas use subtraction and division, following Microsoft's documented Excel arithmetic operators. Covirage is not affiliated with Microsoft or Google.
Revenue share alone would prioritize chains. Dividing contribution by customers changes the discussion:
| Segment | Revenue share | Contribution share | Contribution per customer (USD) |
|---|---|---|---|
| Independent shops | 32.4% | 34.3% | 750 |
| Regional chains | 40.5% | 25.7% | 1,500 |
| Specialists | 27.0% | 40.0% | 1,750 |
Each revenue share divides segment revenue by $740,000; each contribution share divides segment contribution by $175,000. Contribution per customer divides that segment's contribution by its customer count. Percentages are rounded independently to one decimal place, so displayed shares may not sum exactly to the full total.
Specialists are a reasonable candidate for a focused acquisition test. They are not automatically the best expansion market. The existing specialist accounts may be unusually loyal, close to the warehouse, or easier to serve than the prospects still available.
The SBA's market research guidance distinguishes questions about demand, market size, location, saturation, and pricing, and describes direct research through methods such as interviews and surveys. Use that evidence to challenge the assumption that today's customer mix represents tomorrow's opportunity.
Suppose the team proposes a specialist campaign. The following planning inputs assume the existing specialist product and service cost proportions continue. They are assumptions to validate, not measured future results.
| Pilot input or result | Amount (USD) |
|---|---|
| Expected incremental revenue | 50,000 |
| Expected product cost | 27,500 |
| Expected service cost | 5,000 |
| Contribution before campaign cost | 17,500 |
| Campaign cost | 6,000 |
| Contribution after campaign cost | 11,500 |
Product cost is 50,000 × 110,000 / 200,000 = $27,500. Service cost is 50,000 × 20,000 / 200,000 = $5,000. After campaign cost, 50,000 − 27,500 − 5,000 − 6,000 = $11,500 remains.
Change only campaign cost to $12,000 and the result becomes $5,500. That sensitivity gives the target decision a concrete condition: validate acquisition spending and fulfillment costs before expanding the effort. Finance owns the cost definition; commercial leadership owns the choice.
After selecting a target for testing, interview customers about the job they need done and the alternatives they consider. A possible specialist positioning promise might emphasize reliable availability for urgent repairs. The sales table cannot prove that urgency is what customers value.
Operations must confirm that the promise is deliverable, and marketing must test whether buyers understand and value it. Keep supporting research distinct from the customer profile and segment definition. A useful positioning statement needs evidence of both relevance and delivery.
Upload a customer and sales workbook or Google Sheet with supplied segment labels, revenue, and attributed costs. Covirage maps the columns; its tools compute and check the comparisons, and the external AI model explains the figures with every figure traced to its rows. Create a free Covirage account and bring a sample of your own export to support your target review.
See sales insights for the supporting commercial context.
Segmentation creates groups using explicit shared characteristics or behavior. Targeting decides which groups receive priority given their needs, economics, reachability, and the company's capabilities. A segment can remain useful for reporting even when it is not selected for a new campaign.
Not automatically. High revenue can carry high fulfillment or service costs. Compare contribution, retention, realistic acquisition costs, and available capacity. Historical customers also do not establish the size or economics of the remaining market.
Sales records reveal purchases, prices, and measured economics. They do not directly reveal why customers chose the offer or how they perceive alternatives. Use customer research to test positioning, then assess whether the proposed promise can be delivered profitably.