Market Segmentation Template for Product Strategy

For a startup (pre-$5M ARR), target one primary segment and validate it before expanding. For growth-stage ($5-50M ARR), two or three segments is manageable. More than three and you risk diluting product focus, messaging clarity, and team attention. The [Product Strategy Handbook](/strategy-guide) covers the trade-offs between focus and diversification.

Both, layered. Firmographic segmentation (company size, industry) gives you targeting criteria for marketing and sales. Needs-based segmentation gives you product and messaging differentiation. The most useful segment definition combines both: "Mid-market SaaS companies that prioritize speed-to-value" is more actionable than either dimension alone.

Three signals: (1) You can find and reach 100+ companies that match the segment definition. (2) At least 5 of your current customers fit the profile and are successful. (3) In interviews, prospects in the segment describe the same problems in the same language. If prospects in a "segment" describe different problems, it is not a real segment. The [Product Discovery Handbook](/discovery-guide) covers customer interview techniques for segment validation.

Re-evaluate segmentation annually or when you see these signals: a fast-growing customer cohort does not fit any existing segment, win rates diverge significantly between sub-groups within a segment, or a new competitor is winning a slice of your market that you have not defined. Segmentation is a model, and models need updating.

Directly. Each segment has different feature priorities. If your top segment is "compliance-first," SOC 2 and audit logs move up the roadmap. If it is "speed-first," onboarding experience and pre-built templates take priority. The roadmap should reflect segment priorities, not feature request volume. Use the [RICE framework](/frameworks/rice-framework) to score initiatives with segment revenue opportunity as the "Reach" input. ---