How to do market segmentation
Segmentation can be helpful for companies that want to be more responsive to the needs of their target audience and improve customer relationships. Here are some steps to follow when using market segmentation:
Define your overall market
Your overall market is the total number of potential buyers for a product or service in a given geographic area. The first step in developing a target market is to define your overall market. If you are selling to the general public, then your overall market is everyone who can afford and wants to buy your product or service.
If you are selling to businesses, your overall market is all businesses with similar needs and resources to your prospective customers. For example, if you’re selling accounting software for small businesses, your general market includes all small businesses in any industry, e.g., restaurants and retail stores.
Set market segmentation objectives
Once you know who you want to sell to, it’s time to outline your goals for each target audience segment. These goals must be realistic and achievable. If they’re not, measuring success or failure at the end of each quarter or year will be difficult for you to measure sales results against objectives.
Set market segmentation variables
The first step in market segmentation is identifying the variables used to segment your market. The variables can be demographic, geographic, psychographic, or behavioral characteristics. For example, you might decide to segment your market by geographic area, age group, and gender; these variables can be used in most businesses.
Assign variables to market segments
Once you’ve identified the relevant variables for your market segmentation analysis, you’ll need to assign those variables to each segment. For example, if you’re targeting middle-aged women living in Chicago with incomes above $100,000 who attend yoga classes regularly and love travel writing as much as they love food blogs. Then this would be an appropriate target audience for an online cooking school website or magazine subscription service that focuses on healthy recipes that don’t require too much time in the kitchen.
Make sure each segment is viable.
To create a viable target market, you must ensure each segment is large enough to support your business. If you’re planning on selling to consumers, then the most critical factor is their income level. The higher the income level, the more likely they will buy your product or service.
If you’re working with a business clientele, consider factors such as company size, number of employees, annual revenue for each company, and industry trends when considering viability for your target market.
Create a profile for your segments
Once you’ve identified your target market segments and determined they are viable, it’s time to create profiles. These profiles will help you understand what motivates consumers in each segment and what drives their behavior to better tailor your marketing efforts towards them.
Conclusion
In marketing, targeting a specific market can be a powerful strategy. You can reach your consumers more directly and effectively, increasing the possibility that they’ll buy your product or service. Targeting a particular market is also less intimidating than trying to grab a large chunk of the consumer population. While defining who you want to target may take a bit of time, it’s worth it when you find that one group that virtually guarantees success for your company.
