Why market segment or target is important – Finding the right market niche for your company

Driven by emerging new technologies, businesses are birthed at a breakneck speed yearly. With the ambition of selling to as many consumers as possible and having a target market like yours, there’s a need to understand the market and invariably the subsets in the market (market segmentation). Since the market size (number of buyers with purchasing power) is probably growing at a lesser rate than the businesses being churned out, smart business owners have devised a means to efficiently target resources and streamline their messaging to a defined audience. This is the essence of market segmentation.

What is market segmentation?

Market segmentation is a marketing term that refers to the analyzing of buyers (and prospective buyers) and segregating them into groups based on common needs and how they perceive/respond to marketing actions. These ensure the optimal use of resources during product development, marketing campaigns, and sales Ad. There are three (3) general criteria for identifying different market segments:

1. Reaction: How consumers respond to the markets
2. Homogeneity: How common/related consumer needs are
3. Distinction: How and what makes them unique from consumers.

Types of market segmentation

The objective of market segmentation is the development of a unique product or message that’s tailored to different consumers group and how they respond in a given situation. These are the types of market segmentation:

• Geographic segmentation: consumers are segmented based on region or geographical boundaries (weather, climate, etc)
• Demographical segmentation: based on education, family size, age, race, occupation, gender, nationality, or life cycle.
• Behavioral segmentation: based on the response, benefits, purchase/buying patterns, use, lifestyle, or consumption.
• Psychographic segmentation: based on personality, social class, values, opinions, or lifestyle/interests.
• Firmographic segmentation: Consumers are represented as organizations rather than as individuals. The market segmentation is then based on, the number of employees, company size, revenue size, market share, or type of business. 

The benefits of market segmentation

Market segmentation helps companies minimize risk by showing them the products likely to be accepted by consumers and the best ways to market and deliver those products to the market. Here are more benefits of market segmentation:

• Enhanced focus: Market segmentation minimizes risk and brings clarity to the marketing and delivery of a product. This helps companies focus their resources/efforts on the most profitable thing.
• Targeted marketing: products will be advertised to interested buyers only saving both time and money.
• Market segmentation can increase a company’s demographic reach. Sometimes, it opens the company up to new products or services they hadn’t previously considered or new ways of serving existing markets.
• Better response rates and lower acquisition costs: since the right audience is identified, communicating with them becomes easier, and converting them will be a walk in the park.
• Attracting and retaining the right customers: having understood the market, a clear and targeted message will easily attract them. Likewise, a uniquely served product will increase brand loyalty since consumers enjoy it.

How to get started with segmentation

• Define the market: type of product, size of the market, current market share, etc
• Segment the market: Geographical, demographical, psychographical, behavioral, and firmographical
• Understand the market: conduct research, surveys, polls, questionnaires, etc
• Create a customer segment for your business: analyze the responses from the research.
• Test the market and your marketing strategy
  

Market segmentation seeks to identify targeted groups of consumers to tailor products and brand messages to them in an attractive way. It is an extension of market research that’s aimed at minimizing risks and increasing productivity by determining which products have the best chances of penetrating the market, acquiring a major share of the said market, and the best way to deliver the products to the market. In all, market segmentation ensures efficient use of limited resources for companies to stay productive and profitable.