Market Segmentation

 

 

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Attracting the largest segments of your market 
   
Conducting market research will give you a firm idea if your products and services are actually needed and the type of community who would be interested in purchasing what you have to offer.  However, your customers are more than a group of people or companies (depending on which you hope to sell to), by examining your research results you will be able to filter your one large group into segments depending on similarities between the groups.
  • Grouped by sex
  • Grouped by age
  • Grouped by income
  • Grouped by value of property

If you are aiming at industry you could:

  • Group by turnover
  • Group by company size
  • Group by produce/service
  • Level of technology

You should now get a clear indication as to the largest segment interested in your products and services.  The largest segment will probably be the group which brings in the most revenue for you and so it goes without saying that it is this group you should be aiming at the most.  Once you have your target group in mind, your next step is to examine this group in greater detail.

What to do with an identifiable group
You can do a lot with an identifiable group.  Firstly you will be able to decide on the best marketing mix to suit the group - i.e. how would this group like the product presented (plain, fancy packaging, large amount, small amount), What price should be set for the product (price skimming, penetrating ...), How best do you reach this segment (mail order, retail ... ), what promotional activity would best inform this segment (vouchers, TV advertising, Internet banner ad).

Once you have identified a segment, you can concentrate more closely on the lifestyle aspirations and desires or if you are aiming at industry you might concentrate on the industry ethos, status or mission statements.  By doing this you will be able to convey the benefits of your products and services to this segment; for example, the benefits of selling life-assurance policies to families with young children is the security that the family are catered for should a key member of the family die.  The segment are families with young children, the desire is for the family to remain secure should a key member of the family die, the benefit is the life assurance policy.


Rules to Market Segmentation

If you are to gain a viable market segment from your overall target group then their are a few rules you need to follow:

  • You must be clear and specific in the segment you have identified. 
  • Don't go off what you think might be the segment group, it must be as a result of hard facts.
  • All your customers will exhibit a multitude of traits and characteristics, but you must only segment ones which are relevant to what you hope to achieve. If you are selling life assurance policies you would not segment by height of person because the height of a person is unhelpful in helping you sell your insurance policies. 
  • Don't over segment as this will make it impossible for you to successfully reach all these groups.  You need to aim for the largest most relevant segment.
  • You must also be able to reach your segment group realistically.  If you have identified that a large segment have Internet access and would like to reach them via the Internet, you must also have the same technology and knowledge at your fingertips. 
  • You must also ensure that you will make a profit from chasing this market segment.  If it costs too much to reach them or if you have to compromise your profitability to reach them, then you need to think whether the segment would be worth perusing
  • Always chase the largest segment first and place the others secondary. trim the smaller segments off your list as you will not make a viable profit from perusing this group.  

 

  
 
   
 

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Last updated: January 07, 2002.