Episode 101: How to Use Market Segmentation: Developing a Target Market



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How to Segment a Market

The best way to go out of business is to attempt to be all things to all people. Not everyone can or will be your customer, but on a planet of more than 6 billion people, there should still be enough market for you to survive in, if not thrive. Identify which consumers will best fit your business by following these steps to segment a market. (The Disney store, for example, caters to pleasing children, rather than trying to please every age and gender).

Steps

  1. Evaluate which market or markets you want to pursue.Decide which methods you want to define your segments by and which definitions best fit your business model. You can characterize segments by any of the following categories:
    • Geographypertains either to your location or the location of your target customers, where your product or service will be used.
    • Demographicsare the statistical characteristics of your target market, such as age, gender, education level or household size.
    • Psychographicscharacterizes consumers by psychological or emotional traits, based on belief systems or personality types such as risk-taker versus risk-averse, or early adopters versus late-stage buyers.
    • Lifestyleis a behaviorally-based criterion, focusing on the activities your target participates in, from work to hobbies pursued or vacations favored.
    • Life stagecombines some of the demographic and psychographic characteristics that groups have in common to delineate where or when your targets are in their life cycle: college and career, young families, empty nesters and the like.
  2. Qualify your chosen market or markets.Once you’ve evaluated criteria to define your market and selected possible markets to pursue, assess the markets based on their potential for profitability to your business. Answer the following questions:
    • How large is the segment now? Is it large enough to support my business?
    • How easy or difficult will it be to reach the segment?
    • Will the segment grow or expand in the future? How far into the future may it grow?
    • Does this segment really fit with our business model? Can we immediately meet their needs or will it take a significant change in direction to meet demand?
    • How difficult will it be to get the data we need to fully understand this segment, to answer these questions?
  3. Gather and analyze data on your selected market.As time and budget allow, use primary and secondary research sources to build a clear picture of your target market.
    • Review your own sales data. Who purchases how much of what products or services? When do they buy? Where are they located? Who does the actual purchasing and for whom are they purchasing?
    • Cross-reference this sales data to industry-specific databases your trade association may publish or your Chamber of Commerce Book of Lists to get basic business demographic information, or US Census Bureau tables for general population data in your area or near where your area is that you are living
    • Mine information from free or low-cost syndicated reports produced by market research firms to dive more deeply into market segments and glean insights on motivations driving buyer habits.
    • Analyze the data you’ve gathered. Look for key similarities and differences among the general customer base, your overall population. Do certain groups bunch together or break apart from others based on geography, demographic breaks or behavior? This cluster analysis gives you more clearly delineated segments, helps you answer the qualification questions and sparks ideas on how to communicate with the target segments through your promotional efforts.

Community Q&A

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  • Question
    What are market segments?
    wikiHow Contributor
    Community Answer
    Market segmentation is a marketing strategy which involves dividing a broad target market into subsets of consumers, businesses, or countries that have, or are perceived to have, common needs, interests, and priorities, and then designing and implementing strategies to target them.
    Thanks!
  • Question
    How do I minimize the advertising costs for a new business?
    Sachin Dubeer
    Community Answer
    Try using the word of mouth. It's helpful and free. However, you have to give out an extraordinary service. Typically, a satisfied customer tells 10 people about his experience, but a unsatisfied customer tells 100 people about his experience.
    Thanks!
  • Question
    How do I break into an already existing market?
    wikiHow Contributor
    Community Answer
    Come out with unique products and services that are different from what is commonly done in the Market, and this can be better achieved when properly segmenting target markets (Clients or Customers) to understand their needs and find ways of satisfying them better than your competitors in the market.
    Thanks!
  • Question
    How can a business grow when the production is far from where the products are needed?
    wikiHow Contributor
    Community Answer
    When the manufacturing unit is far from the point of sale you should have a nearby warehouse, where you can store the products.
    Thanks!
  • Question
    How should I segment my products in a highly competitive market?
    wikiHow Contributor
    Community Answer
    Apply a competitive profile matrix (CPM) tool to identify the strengths and weaknesses of your competitors on critical success factors. Then, design your winning mechanisms based on the results.
    Thanks!
  • Question
    What are the best methods for marketing our product?
    ADEOYE VICTORIA
    Community Answer
    Hire a marketing research agency to conduct phone surveys among customers, create and use a slogan for your product with a logo or trademarks for greater recognition among customers and non-buying consumers (the ones you are trying to attract); create a website for your products so that consumers can read more about them.
    Thanks!
  • Question
    The idea of knowing a customer, and the market is constrained much with capital. What can be done for most enterpreneurs to enable them with capital at no or very minimal loan interests?
    ADEOYE VICTORIA
    Community Answer
    First of all, advising the enterpreneurs to not start with loan, but they can start by saving some amount of money for three to four months. Then after, they can start with a small amount of money, and keep proper recording in order to increase the business.
    Thanks!
  • Question
    How can I connect to African fashion designers in Europe?
    ADEOYE VICTORIA
    Community Answer
    By creating a website for your fashion designers, so that Europe can read more about you. Offer coupons and special deals, so that people over there can download them.
    Thanks!
  • Question
    How can I get a processing machine at a reasonable rate if I use local fabrication?
    Niyi Adelusola
    Community Answer
    You can purchase a fairly used processing machine. This should come far cheaper, and afterwards you can go for a brand new one from the profit generated by the used machine.
    Thanks!
  • Question
    How could a manufacturer segment a market?
    wikiHow Contributor
    Community Answer
    They could segment a market by age, social class, gender, etc. There are many different possibilities.
    Thanks!
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Olalekan Oladele

May 24, 2019

"This article gave me deeper insight into how to analyze the target market for my fashion business idea of producingAfrocentric, ready-to-wear shirts and tunics for the Nigerian and African markets. Thank you very much!"

Divine Tembon

3 days ago

"Opens my mind to see how identifying the right place and customers can contribute greatly to the success and growthof your business."

Honour Otaigbe

Jun 16

"This article helped me see the need to take my time to look into the type of business I will love to run. It gaveme fore knowledge about marketing a product."

Anthony Isanga

May 21

"This article was really hands-on for me especially when it came to segmenting my customers. I have been thinkingthat everyone in my operational area is a customer for my product. But now I know that it is important to segment who exactly are my actual customers."

Adamu Idris

May 18

"The article is marvelous. It really bored me thinking on what are the best ways to segment the markets we are into.This left us with a specific target audience, saving a lot of our marketing and advertisement budget."

Jacob Mucheyi

May 17

"Very informative and educative"

Roger Paul Kamugasha

Jun 9, 2019

"This article was so guiding in my business growth strategies. Its likened to a gap analysis tool one would use toalign priorities and avoid haphazard approaches. It combines the qualitative and quantitative aspects in a nutshell for appropriate forecasting. At the end of it you are able to apply the relevant determinants of the right business pathway in a professional fashion."

Adeoye Victoria

May 24, 2019

"I should have in mind that not everyone can or will be my customer, but rather I should try to have enoughcustomers that will survive and identify customers who will best fit my business, then I should decide on methods I will design my segment by in order to suit their tastes and to patronize my business."

Joachim Chinaedu Nwachukwu

May 17, 2019

"This article has given me a better insight on how to segment the market and has me wanting to believe that allproducts produced would have a good opportunity to gain market, but it's based on the decision ability of the entrepreneurs."

Christian Udengwu

May 15, 2019

"I appreciate the writer of this piece. It gave me more insight into entrepreneurship start-ups as relating tomarket segmentation and streamlined definite market targets for better results."

Luoiro koyiro

May 26, 2019

"I used to consider anyone in a target industry as a potential client. Reading this story, however, got merethinking about my marketing strategies."
Rated this article:

Royd Makuba

Jun 6, 2019

"I learned how to focus on the market and to understand that customers are different and should be segmented tosatisfy their conditions."

Bamidele Jinadu

May 17, 2019

"Knowing that I most likely can't satisfy the whole world, but rather using segmentation to identify my immediatecustomers is appealing."

Faith T.

Jun 7, 2019

"I got to know that it's always not about you and your products. You have to learn to look at your competitors to beable to do better."

Elizabeth Olateru

May 17, 2019

"The most helpful part of the article explains location/geographical area as a major factor to consider whenchoosing a business."

Ephraim Audu

May 27, 2019

"It is fantastically interesting. I have been wowed by the content! It has expanded my scope of reasoning on marketsegmentation."

Bongani Sibanda

Jun 4, 2019

"It has helped me to identify the proper qualified markets and to focus on the customers who already need myservice."
Rated this article:

Raoudath Bouraima

Jul 30, 2019

"It helped me know how to segment my market and reach the customers I need for my business. Thank you."

ADEOYE VICTORIA

May 24, 2019

"It helps in terms of proper recording and feedback of products and customers. "

Henry Iwuchukwu

May 27, 2019

"Wow, this article is so inspiring. It has taught me how to segment my market."

Charles Udekwe

May 20, 2019

"Gives a summary of what I really need to know about how to segment a market."

Samuel Sevi G.






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Date: 06.12.2018, 17:27 / Views: 34585