Markets are Made of Smaller and More Focused Segments

The basis idea is as powerful as it is simple. It's easier to serve and sell to a focused market than to a vague indistinct one. If you try to sell to everyone, you'll waste a huge part of your marketing dollar trying to reach people who are not good prospects. Markets are made up of many distinct groups of people who have common characteristics as consumers. Some of those groups may not be immediately obvious. All of them command tremendous buying power. But they direct it to products and services that address them as a highly individual subdivision or segment of the market.

Define Markets Better and You Can Reach Them Better

Define those market segments right and you may even end up dominating those markets. Why? Because the more you know about a market segment:

• The better you can provide a product or service that attracts it.
• The better you can create marketing materials that appeal to it.
• The more cost-effectively you can direct them at the markets that respond the best.

The easier it is to position your company and product and build brand loyalty. It's hard to successfully address a large, vague, undifferentiated market. It's easy to address a tightly focused, highly individualized group of people with clearly defined preferences and needs. Market segmentation isolates those groups, and makes them accessible. It helps your organization understand them and reach them. And profit.

Defining Market Segmentation

Market segmentation divides a market for goods or services into distinct subdivisions. It takes a vague undistinguished group of consumers and uncovers those who have similar needs, those who make purchases or use products or services in the same. A market segment is a subgroup of people sharing similar consumer characteristics. And because each segment shares the same attitudes and behaviors, they generally respond the same to a given marketing strategy.

Really Seeing the Consumer Market

Markets can be divided in many ways. Small segments are sometimes called niche or specialty markets.

One broad distinction is between industrial (business) and consumer markets. Despite overlaps in approach, the segmentation processes for these two separate markets can quite distinct.

Market segmentation also involves helping to choose which segments to focus on (targeting), or designing an appropriate set of ways to approach each market segment (the marketing mix), or planning ways and methods to address the competition (positioning).

Ascending Goals

After identifying similar groups among customers and potential customers, the next goal of market segmentation is to prioritize which groups to address so as to best maximize market results. And then, to craft appropriate marketing strategies that satisfy the different consumer preferences of each segment.

Understanding the Process

The process of market segmentation is to study, define, attract, serve and hold that segment or segments of the market which the company can most effectively and profitably address.

Since the needs of customers, and how they decide between to choose one product or service over another, are shared by similar individuals in a segment, companies can use that to find groups of consumers that share those similar buying habits and criteria and study them in depth and address and satisfy them better. In that way the company can determine which groups of customers it can best and most profitably serve and which of its products and services can outstrip the competition in dominating that target market.

Reality of the Market

Customers segment themselves naturally. Companies can 'create' markets in the sense of seeing and segmenting the needs and aims that are already there. But they can also sense and sometimes even cultivate those trends and forces that help new markets and market needs emerge.

To win market share, a company must provide products and services that meets customer needs better than any other, at a price that the consumer feels is a good bargain. But knowing which customer feels is a good bargain, and why, and how many fellow consumers share that view, is the business of market segmentation research. Understand what characterizes a customer, and the adjoining group of customers whose choices they share, and you will understand the best business approach to take.