Market Segmentation – Getting Back to Basics
Technology has made it easier than ever to reach consumers and get your products and services directly in front of those who need them. With such a large global audience out there, the problem isn’t getting the message out. It’s getting the message out to the right people who are looking for what you have to offer. One way to identify and cater to a target group is by using market segmentation.
What is market segmentation? It is the process of putting potential customers into groups or segments who have similar characteristics and common aspects. First identified as early as 1956 by Wendell R. Smith, market segmentation’s primary goal is to convert as many potential customers into buyers through personalized marketing and communication strategies based on their particular needs and preferences.
What are the bases of market segmentation? There are many groups and subgroups you can use to filter your target group.
These bases can include:
Here are some examples of gender and age market segmentation. Think about television commercials for a moment. While women comprise 47 percent of the total US workforce, many daytime television commercials are aimed at young mothers who are more likely to be home during the day. Television stations that specialize in programs from the 1960s to 1980s focus on products geared toward older populations, such as Medicare supplemental policies and medical emergency alarms.
How much money someone makes, where he or she lives, and what people do for a living also impact how marketers look at segments. A product that sells well in one area may do poorly in another area, depending on many factors from the weather to the income level of the residents. A single, working woman may have little interest in disposable diapers, while a lawyer may not be very interested in buying medical equipment.
Lifestyle factors also contribute to the way marketers approach potential customers.
This is a broad range including:
- Marital status
- Decision-making factors
How do you determine the basics of using market segmentation in your own business? First, start by describing your ideal client. Be as specific as possible, and remember not all segments are the same, even if they share common qualities. Don’t put limits on who you will market to, remembering a well-done approach will help people to remember your product even if they are not your target audience.
Next, use the STP model. STP stands for Segmentation – Targeting – Positioning.
You have already divided your target customers using the four types of market segmentation:
How do you find these people? One way is to use surveys, particularly online surveys. Design an online survey using concise questions to more closely identify those you want to include in your target group.
Once you have your target group, break it into segments and concentrate your marketing efforts on those groups that most closely match what you are selling. Think of your customers as the target, and the segments as filters. The more specific the filters, the more closely aligned your strategy will be with what your customers want. Other tools are customer data from loyalty cards, feedback information or even in-depth interviews.
Positioning is choosing the right advertising and imagery to appeal to your different segments. For example, if your target segment includes Baby Boomers, choosing music from the 1960s and 1970s will catch their attention more than music favored by Generation Z members.
Everyone is using market segmentation, so how can you get ahead of the pack and make your strategy more competitive?
Consider these ideas:
- Create a personal experience. Identify particular segments and create newsletters, product care and information, or upcoming release dates for particular products.
- Customize offers. Reward loyal customers by using vouchers and promotions, especially for different group and locations.
- Improve products and services. Ask for feedback from customers about new features, prices and problems. Then use that information to make a better product.
Market segmentation requires planning, forethought and a desire to find the right customers for your business. When it’s done well, it results in a win-win for both you and your customers.