Using Market Segmentation to better Target Customers, Differentiate Your Business, and Make More Money


One of the first issues entrepreneurs and small business startups need to tackle is the issue of who their potential customers are, and what will drive them to purchase their product.   Startups can fail because owners fail to identify potential customers who are willing to purchase their product straight away, and take a one size fits all approach to marketing.   However, not everyone who is in the market for your product or service would be willing to purchase from you or will respond to your unique selling proposition.   However there will be some that will respond to your offering, and your message.  Segmentation is one way of identifying these customers quickly, and understand how to target them.

Segmentation is a market research technique that will allow you to differentiate yourself from your competitors, and target your most profitable customers or potential customers.  Essentially segmentation is about putting customers or consumers into “like” groups based on common characteristics and who will react to the same marketing messages.

There are two types of segmentation:

Market Segmentation – This is a technique where you segment the entire market in your product category with the goal of finding new opportunities to exploit.   If you are just starting out in business market segmentation will help you find customers who would be interested in your product, and help you understand the best way to communicate with them.    Even if you have been in business for a while you may choose this technique to tap into new segments that are not being targeted by your competitors. 

Customer Segmentation – This is a technique that divides your own customer base into segments such as products or usage levels. This will allow you to better communicate or tailor your offers for each segment.

There are a number of ways for segmenting a market some of the most common are as follows:

      Geographic Segments – Which may use         

              City versus metropolitan regions
              Urban vs. suburban
              Size of city or town

      Demographics such as
              Age Group
              Household size etc

      Psychographics such as

              Benefits sought
              Brand Loyalty
              Usage level
              Readiness to buy

It’s important in any segmentation study to truly know your segments inside and out.  For example, what are their urgent pains, or needs?  What advertising messages do they respond to?   What drives their purchase behaviours?

There are several rules around segmentation:

  1. Your groups should be mutually exclusive, that means your segments cannot be overlapping and your target market should not be a member of more than one segment.
  2. Your segments should be large enough that marketing communications will be profitable.
  3. The target segments need to behave in a similar way in terms of their values, beliefs and needs and of course the way they interact with your products or service. 

These are just some of the benefits of segmenting your market, regardless of whether you are already in business or just starting out.   Market segmentation will help you narrow your focus and communications to one or two profitable segments, rather than a more costly one size fits all approach.  In my next post I will discuss the how to carry out your on Market Segmentation Study.

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