What is best for your visitors? What makes most sense for them?
As someone pointed out to me recently, googlbot never bought anything on anybody's web site. So maybe designing the site primarily for googlebot is not always the best advice.
Now, I will admit that I was in a similar situation and had one web site that two definitely distinct market segments. It was an ecommerce site with very little crossover - those who bought products in market segment A did not buy products in market segment B, and vice versa.
I ended up getting a new site / new domain for market segment B, splitting off the content with proper 301 redirects, and it has really grown. When I look at the COMBINED traffic of Site A and Site B, it is at least twice what it was before when it was all on one site.
Is there another way to separate them seo wise instead of using different domain names?
You could put them on subdomains, which would separate them out more, but again, it is probably best to do what is right by your visitors / customers.
Some big chemical companies make both women's make up AND rat poison. They usually try to keep things like that separated, for obvious reason.