Do you have a business idea and are thinking about how to launch it on the market? Or do you work in a large company in a marketing department and want to increase sales? In both cases, market segmentation will come in handy. If you want to find out what you can achieve with it and how, read on.
Market segmentation example
Have you heard the term market segmentation before? It is often used in marketing. It expresses the same thing as customer segmentation. What exactly does it mean? It involves dividing the market into homogeneous or uniform groups of customers. That is, those that share certain common features. Why is this important? Imagine that you want to sell sports shoes, for example. What will you achieve using market segmentation?
If you decide to carry out market segmentation, you will first need to analyse various criteria about your customers. Such as their age, lifestyle or interests. For example, you will find out that your highest sales are generated by young people aged 18 to 25 who like to play sports in their free time, and then older people aged 25 to 35 who play sports professionally. You will therefore identify your main segments and focus on them.
Then you start thinking… How to reach young recreational athletes? Probably best through social networks. So you organise a discount event or a competition for them in this way. And professional athletes? Here, for example, cooperation with a trade magazine or even a specific sporting event would pay off. So you already know which customers to target and where. And so you start thinking further… How to increase sales?
It probably needs offering something that these specific customer segments will appreciate. Something that the competition does not have. What will young athletes be happy about? Probably a nice, modern design for their sports shoes. They will certainly also appreciate affordability. And older professionals? Price does not matter as much to them. They will happily pay extra for quality. Therefore, they will focus mainly on the durability of the footwear, technological innovations and its performance.
Because you really want to increase your sales, you will focus on the described attributes of the sports footwear directly in production. You will find a skilled designer. You will plan production so that you can offer this type of footwear at a lower price. At the same time, you will also find experts on sports footwear and let them explore the possibilities of durability, performance and technological innovations of the footwear you offer. And you will launch sales. Now your sales will soar steeply upwards!
Results of market segmentation
What are the main market segmentation results? It helps you better understand your customers’ needs and preferences. You can also tailor the product to them more effectively. In addition, it helps you target your marketing activities. So it will increase your competitiveness. The market segmentation process is already slightly suggested by the previous text. But just to be sure, read the following one as well. Because as the following quote expresses…
“It sounds simple, but marketing is not a game for amateurs.“
Al Ries
Market segmentation, how to do it?
The whole process consists of three steps. Segment analysis and selection of suitable criteria for segmentation. Selection of the target market. And choice of segmentation strategy. Although this looks like three simple steps, in reality they are quite extensive.
Segment analysis and selection of suitable criteria for segmentation
As you have already read in the previous text, right at the beginning you should carry out an analysis of customer criteria. The most practical way is probably to use the option of questionnaires. Focus on criteria in them that you think are the most important. So you will probably include age, lifestyle and interests. Using this procedure, you will find out what criteria to choose for market segmentation. As the previous example shows, a criterion represents, for example, an age from 18 to 25 and an interest in sports.
Selection of the target market (targeting)
As a target segment, you will probably want to choose the group of recreational athletes aged 18 to 25. But watch out for certain characteristics of the segment. It should be large enough, attractive and have growth potential. If the segment is smaller for now, but has great growth potential, you will probably succeed in it quite easily as well. And what to imagine under attractiveness? Here this concerns, for example, the level of competition or the threat of a new one arriving.
Choice of segmentation strategy
Companies usually choose one of three basic strategies – differentiated, undifferentiated marketing or the concentration strategy. What do they express? Differentiated marketing represents an effort to distinguish the product from the competitor’s. That is, for example, precisely the creation of an original design and the offer of a low price. In such a case, a differentiated product is created. Undifferentiated marketing is based on the assumption that all customers have the same wishes and needs. The business therefore does not have to adapt its product in any way. This strategy occurs rather rarely today. The last option is the concentration strategy. In such a case, companies try to focus on a specific small segment that the competition has no interest in.
In connection with this topic, the term positioning is also often mentioned. What does it express? An effort to “settle” your brand or company in the customer’s mind. This is an effort to define what is unique about your offer and how it differs from the competition. Simply put, you want to determine how you will specifically present yourself to customers and how they will remember you.