Are your sales efforts focused on mass marketing? Do you send the same marketing messages to everyone? Have you taken the time to better understand the unique requirements of your market segments? Marketing to everyone with the same message and using the same vehicle to deliver your message is sub-optimal to taking a segmented approach.
Segmenting the marketplace is the first step in providing a foundation to build your marketing program. The number of different segments you identify will dictate the number of unique marketing messages you’ll need to develop. Most small businesses that specialize in a specific product or service will look at their market the same way. In other words, all potential customers have identical requirements. Those that take the time to better understand unique needs will produce better results.
So how do you segment the marketplace? While there may theoretically be “ideal” market segments for your small business, in reality, every organization in a market will develop different ways of determining market segments. The ideal market segment needs to pass certain tests in order to be viable. Understanding the number of potential customers, the stability of the segment, the ability to reach prospects, the size of the segment and ability to produce the revenue are top items to consider.
Then there are a number of ways you can divide up the market. Taking a geographical approach is sometimes a good place to start. For example, if you are selling gloves and hats to stay warm, Florida and Hawaii may be segments you avoid. Demographic segmentation is used to divide the market into groups. For businesses that sell to consumers, this could include variables such as age, gender, income, occupation and family size. For businesses that sell to other businesses, this could include items such as type of industry, size of the company, annual revenue, or specific issues that may affect one segment but not all.
More specific segmentation could include psychographics, something that has become increasingly common as companies look to identify consumers based on their interests and activities. Identifying consumers with specific interests, such as biking or running, allows companies to provide products and services specifically to those groups.
There are many benefits to segmenting the marketplace. First and foremost, you will have a much higher likelihood of better matching the needs of potential customers. Market segments, if they are selected the right way, can build sales. Focusing in on growing segments and avoiding those that are declining allow you to spend your time more productively. Focusing on the right segments can net you a higher market share, including becoming a market leader.