The business world is defined by stiff competition between rival companies. For this reason, best managerial skills are crucial for any senior executive who aspires to remain at the top. Market segmentation is one of the business practices that help managers to direct their marketing efforts on a particular category of consumers. The selected group is that whose members are eager to buy and willing to spend.
As such, it improves sales, profits, and saves resources. This article guides you on how to implement market segmentation and how it can help you define your target market.
What Is Market Segmentation?
Market segmentation entails the process of categorizing your market into different customer categories. Factors that are used in categorizing customers include age, needs, gender, household size, marital status, and other demographic factors.
After categorizing the market, a business will choose a particular category that they will be targeting. The chosen category is that whose needs match the products or services provided by a business.
Conventional types of business segmentation include psychographic segmentation that focuses on lifestyle. Behaviouristic segmentation categorizes the market depending on customer loyalty. Geographic segmentation classifies customer depending on localities. Market segmentation is built on the fact that different market segments need different marketing tactics.
How to Implement Market Segmentation
Sound market segmentation passes through three main implementation processes. The initial process involves categorizing customers into common or shared needs. The needs should be relevant to the products that your company provides. To identify some customer characteristics, you may need to use questionnaires to collect data while some, like gender, can be observed.
The second implementation process requires you to pick one or more segments that match your business products or services. After selecting the proper categories, you should tailor your marketing strategy and products to meet the needs of customers in that category.
The third segmentation step entails counter segmentation. This implementation stage involves further segmentation of the large segments.
Why Market Segmentation Is Helpful
Market segmentation is a crucial skill to marketers. The reason why this business practice is helpful is the fact that customers are attracted to products or services that match their needs. Therefore, this marketing tactic provides an advantage of increased competitiveness over rival businesses, which results in increased sales.
The practice helps marketers to understand the needs of their customers. As a result, the company can be able to choose a suitable mode of advertisement and make an appealing brand. The company is also able to customize product pricing and provide offers that outperform competitors.
7 Ways in which Market Segmentation Can Help Your Business
1. Effective Advertising
Segmentation helps you to define your market into manageable segments. With the smaller sections, you can understand the various channels of advertisement that can reach a majority of customers in the segment.
For instance, if your segment is made up of tech-savvy youths, you can use social media to advertise. If the segment is made up of senior citizens, you will probably need more traditional media of advertisements like televisions.
Since you understand the needs of your customers, you will be able to customize your advertisement message to capture the features that your customers like. This results to better brand perception.
2. Gives You a New Focus
Sometimes, selected segments may have needs that slightly differ from the services and goods provided by your company. In this situation, you will redesign the products to meet the interests of your customers. Besides designing a new product, your company will also have to change its marketing objective.
For instance, if yours is a beverage company, you can start manufacturing healthy beverages to alternate the existing drinks. Shifting your focus helps you to provide goods that meet customer needs. Therefore, you will attract more customers and outperform competitor products that do not meet customer needs.
3. Efficient Distribution
Market segmentation helps you to formulate a distribution strategy that eliminates the challenge of ineffective delivery. Therefore, you will be in a position to increase products distribution to areas where customers need the products most.
You will also be in a position to avoid costly mistakes associated with inefficient distribution. In some cases, companies incur losses by supplying their products to markets where customers have no interest in the product. On the contrary, the products may run out of stock in areas where customer traffic is high.
4. Effective Branding
Branding is one of the aspects that amount to improved competitiveness and good brand perception. A good brand serves as a communication channel that aims to convince your customers that your products are better than your competitors’ products. Additionally, branding helps your customers to understand that your products seek to meet their needs.
Branding can only be precise if you understand who your customers are and what they need. The information helps you in packaging, re-designing your promotional materials, setting a reasonable price, and even changing your customer relation skills. These factors make your product stand out from competitor products.
5. Increase Sales
During the initial stages, you will lose part of your customers. This is because you will only focus on customers whose demographics fall within the selected segment. As a result, your sales may drop in the initial stages of market segmentation.
However, a sound plan will gradually attract more customers, boost customer retention, and increase your brand’s competitiveness. All these factors will contribute to a constant increase in sales.
6. Customer Retention
Customers generally have a tendency to look for service providers that meet their needs. It implies that only companies that understand what their customer needs will stay on top. Market segmentation helps you to narrow down and serve clients with the exact quality of product that they want. As a rule, satisfied customers will stick with your company.
The constant customer satisfaction will earn your business a reputation for being a leader in its niche of specialty. For example, if your business specializes in energy drinks and you travel an extra mile to produce a healthy energy drink that has the best flavor and price. Your company is likely to retain a good title forever.
An intelligent plan on market segmentation helps you to select the best category of customers from the rest. It gives you a possibility to design your products for customer needs while improving sales and profitability. If you have a similar opinion regarding market segmentation, we wouldn’t mind if you share it with us.
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