Market segmentation offers companies a clear picture of how lucrative a market can be. It identifies diverse segments within a market and provides vital input on the nature of its target audience, along with their likes and dislikes. This info will allow companies to make informed decisions while preparing their strategy to enter a market.
Market segmentation is a concept that has been around for close to a century. It gained relevance after businesses started flourishing across the world. At first, companies had no clue about the market they were targeting. All they did was launch a company and wait for customers to arrive. They soon realized that this wasn’t the way to do business. There was a need to get quality and reliable customer insight.
By the ‘50s, market segmentation took a more prominent role. Markets were segmented based on demographic data such as age, location and gender.
The ’70s and ’80s added a new dimension to market segmentation. Businesses had access to a whole new world of customer insight. This was made possible through the use of information technology. Crucial consumer data belonging to a particular area could now be stored on databases. With every passing decade, these insights were refined through surveys conducted on a regular basis.
Market segmentation and the processes to arrive at it had evolved completely.
Why is Market Segmentation important?
Not all companies are capable enough to serve the requirements of a market completely. They may not be big enough to produce products or offer services on a large scale. Or they may not have enough financial resources to pursue widespread market share.
This is where market segmentation steps in. It divides a market into identifiable groups that will help you plan a marketing campaign more efficiently. For example, let’s assume you want to launch an automobile company. What kind of cars would you manufacture? Will it be sedans, hatchbacks or station wagons? It’s ideal to find out the customer preferences in the market you seek to make an impact in before taking any further step.
What are the different types of Market Segmentation?
The following are the popular market segments sought by companies:
By Gender: This is an important segmentation for companies that deal with jewelry, cosmetics and apparel products. Men and women have different preferences and require a unique set of products. For a cosmetics company, getting exclusive data on female customers will help businesses reach out to their audience. They could send direct emails or give them a call to bring their attention to a new range of jewelry products.
By Age: Want to launch a store that targets kids? It’s ideal to set up your store in areas where there are lots of families residing. Or places where there are plenty of schools. It guarantees the minimum outreach required to take your business forward.
By Products: Are people living in a particular region more likely to use your products? Find out how products similar to the one you are looking to introduce fare in a region. This will give you an idea about how well your product will be received.
Get data on people who bought similar products to yours. This will provide you with accurate marketing ammunition while launching your products.
By lifestyle: Lifestyle plays a major role in determining the buying power of consumers. Which income groups do the target audience in an area belong to? Do they belong to low income, middle income or high income households? This data will be useful, especially if your products are priced in the higher range.
By Competitors: Do a study to analyze the competitors you will be facing in a market. How well are they performing and what has been their marketing approach so far? How easy will it be to gain a foothold in the market? These are some of the questions you will have answers to after you segment a market by competition.
By Customer Profiles: For any given area, there are a set of customers who will fall under the following categories. Keep the nature of these customers in mind while you plan your marketing strategies.
- Immediate Customers: These people have already performed a thorough research of the market and are willing to experiment with new products. They are will-informed and won’t mind giving your products a try. Their open-mindedness to try something new will be a boon to your business. They will be your first customers.
- Potential Customers: Any customer that already buys products similar to yours from competitors is a potential customer. He will have to be wooed in order to make a purchase from you. Your sales strategies should be devised to convert these potential customers into guaranteed leads.
- Repeat Customers: Never let go of your customers! Make sure you stay in their good graces wherever you expand your business. Having thousands of repeat customers is the reason why big brands continue to excel, year after year.
- Discount Customers: Everybody loves good discounts or deals! Why not provide customers with what they want? Give them appealing discounts that can take your business to a completely new level. These customers are not attracted to your brand but the amazing prices your products are offered at.
- Lucky Customers: At times, some customers get introduced to your brand through sheer luck. They probably had no clue you existed but came across you when they did a search online. They got curious and decide to visit your shop or office to learn more about your offerings.
How to perform Customer Segmentation
- Determine which market or sub-market you would like to focus on: Let’s assume you have awesome market and customer data at your disposal. It’s important that you zero in on a market segment that provides your business with excellent opportunities for revenues.
Here are some questions you should ask yourself:
ü Is this market segment right for my business?
ü How big is the target audience in this segment? Will it ensure profits for my business?
ü Does my business have the potential to launch marketing campaigns that can have an impact?
- Map existing sales data to new ones: It’s important to perform comparative sales studies, especially when you are looking to expand your business. Examining your company’s existing sales data and comparing it with new data pertaining to a market will provide you with vital sales data insights. You will be better prepared to launch your marketing campaigns.
- Ditch one-size-fits-all marketing campaigns: The very purpose of customer segmentation is to ensure you are able to launch a campaign that meets the specific likes and preferences of a particular target group. Make sure this is reflected in your marketing communication, whether it’s through social media, print ads or emails. Personalized marketing is the future and the only way you can create long-term business relationships! So make full use of the marketing data at your disposal!
Do you have any thoughts on Market Segmentation? Do let us know in the comments box below. We would appreciate it if you could have a look through our range of personalized duffle bags as well. They are spacious and offer valuable imprint areas to feature your logo and brand’s details. They will serve you well as marketing giveaways while launching a product or service!