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The Importance of Market Segmentation
What is Market Segmentation? And how it may help in my marketing efforts?
Market Segmentation, by definition, is a marketing strategy of sub-dividing a broad market into identifiable smaller group of consumers who share a common need and characteristics, and will respond similarly to a marketing action. By focusing your attention and efforts on this targeted segment of the broad market, it allows you to be able to design your product or service to better match the needs and desires of your prospects, and also to plan out a more effective marketing campaign that can better reach out to your targeted audience.
Factors to Consider when Assessing your Segmented Markets:
- Market Size
- Purchasing Power
Your targeted market segment should be identifiable and has a clear definition to identify your potential customer profile, so as to avoid any possible ambiguity and confusions. The segment as a whole should be behaving homogeneously, and respond similarly and consistently to a certain marketing action. Some common characteristics to identify a market segment include:
- Geographical - Regions, Countries, Cities or Towns
- Demographic - Age, Gender, Education, Social Status
- Behavioural - Purchase pattern, usage rate, brand loyalty, price sensitivity
(2) Market Size
Is the market size of your targeted segment big enough for you to justify your cost of marketing to promote your product to this group of customers? If you are targeting a very niche market, for example, providing tailored costume to cosplay hobbyist (people who dressed and put on accessories to represent a specific character from manga or anime), is the market demand large enough to absorb your product and for you to have an acceptable profit potential?
(3) Purchasing Power
How is the purchasing power of your targeted customer profile? Do they have a stable and regular income? Which income group do they belong to? For example, if you are selling collectible figurines from popular manga or movies, students who are still schooling may not have the budget to purchase the items from you. A better idea would be to promote to young working adults who have the financial ability to support their younger days passions.
How can you reach out to your targeted audience with your marketing message? Are they easily accessible through a certain delivery medium? Is there any magazines or publications that this group of customers will often read? Is there is, putting up a flat advertisement in these publications would be a good idea. Do they frequent a certain location or shops? If that is the case, a signboard advertisement in these area could be a viable option. Are your targeted customers young and tech savvy? If yes, you might probably want to promote your products through internet marketing or social media marketing to reach out to them.
Can the results of your marketing efforts easily measured and quantifiable? It will be good if the results can be measured against the marketing costs incurred, and to check if there is any way you can fine-tune the marketing efforts to make it more effective and more cost efficient. Are your group of customers in an already established market segment and much market information and characteristics are known about them? Or are they a new market niche waiting for you to venture into and there is a general lack of information about them? Is the cost of market research you plan to conduct justifiable?
Is your targeted market segment stable and consistent, and is likely to remain so for the next 10 years or more? Or is there going to be a likely change in the short term due to economical or political changes. For example, low to middle-income group customers in a fast developing country may be getting more affluent quickly, and that might likely change their spending habits and behaviors. Is your targeted customers residing in areas that are prone to political unrest or unexpected natural disasters? These can damage the economic structures adversely and as such affect the inherent behavior of your market segment.
Learning the 4Ps of Marketing Mix
The 4Ps of Marketing Mix is a business tool often used and the most fundamental marketing model to use when you are marketing your product. It is first proposed by E. Jerome McCarthy in the 1960s, and consist of the following:
- Product - The product or service that you are offering, and if they meet the needs and demands of your targeted market segment
- Price - The price that you set for your product or service, and if it fit into the purchasing budget of your targeted market segment
- Promotion - How you are going to promote or advertise your product or service to your targeted market segment, and how can you reach out to them most effectively
- Place - Where are you going to sell your product or service that is the most convenient for your targeted market segment to access. Are you going to sell them through an open shop or store, or would you be distributing them to re-sellers or franchisers?