Segmenting Your Market
It is important to understand what market segmentation is and how it is used to determine a target or audience for goods and services. Markets are segmented to find groups of potential customers that best match your ability to profitably serve.
The type or types of segmentation methods used possess the following characteristics:
- Measurable: Attributes such as buying power and the number of potential customers can be ascertained or measured.
- Substantial: Segments that have sufficient numbers tend to have profit potential. The most attractive segments should be the largest group with similar characteristics to focus target marketing efforts toward. For example, it would not make sense to target a market that was too small to be profitable.
- Accessible: For a market segment to be attractive, a firm must be able to reach or contact that segment. A market that is out of reach or too expensive to reach or distribute to should not be considered.
- Differentiable: Different segments should respond to different offers; if they respond to the same offer, they are not distinct segments.
- Actionable: Effective marketing strategies can be devised to appeal and satisfy the segment or segments chosen.
Markets are segmented in two broad ways. The first is to consider the population of buyers in a descriptive manner. The second is to look at behavioral characteristics of the market. Within these two methods or perspectives, there are four major or general characteristics or variables that are used to segment markets.
The first variable is geographic descriptions of the market. This is a fairly straightforward descriptive segmentation method, utilizing basic geographic measures such as nations, states, cities, regions, and neighborhoods. Other factors that are related to geographic segments include climate, density of populations, and the rate at which populations are growing.
The second basic segmentation variable is demographics, which is another descriptive segmentation method. Demographic segments utilize measurements of the market’s age range, gender, income levels, occupations, ethnicity, family status, and education level. For example, family status refers to whether a household’s members are married, have children, live at one location, and the stage of life of the members.
The third basic segmentation variable is psychographic segmentation. This type of behavioral segmentation attempts to measure and categorize markets based upon what they value or believe to be ethical or desirable. Other psychographic variables include the market’s attitudes specific to a product or service, as well as the lifestyle choices typical of a specific segment (Mariotti & Glackin, 2013).
Be smart and be encouraged,
Mariotti, S. & Glackin, C. (2013). Entrepreneurship: Starting and operating a small business. (3rd ed.). Upper Saddle River, NJ: Prentice Hall.