The object of a market segmentation strategy, where you target a narrow group of customers, is to be the best company for that specific customer and become the top seller in that particular segment.
The way it’s done, is by looking at your current customers and trying to isolate a particular type that seems most profitable at any particular moment in time. Sometimes, it happens that a subset of your customers is growing faster than the rest, in which case you must consider further analysis.
Market segmentation is an integral part of a company’s marketing strategy. It is the process of breaking down a larger target market into smaller, more homogeneous groups of customers. One of the few approaches to segmentation are: demographic – segmented by age, race, gender, marital status, occupation, education and income; geographic – segmented by community, state, region, country or group of countries; psychographic – segmented by the interests and activities of the customer and; behavioral – segmented by patterns of use, price sensitivity, brand loyalty and benefits sought. The type of segmentation depends on the goals of the business.
The good thing about this strategy is that it lets you tailor your product and marketing strategy to a defined group of people with similar characteristics. As an example, a consulting firm that targets the finance industry, knows that potential clients can be found at finance conferences and that they have some common concerns. Some small consulting firms specialize on an even smaller group of people in order to compete with the sharks. If you sell office furniture for instance, you can chose to focus on corporate sales, small businesses, schools etc. Each segment has different needs and at any time, some of these segments are growing more than others, which means you have an opportunity to thrive . Below you can see how you can divide a market into segments.
But how can a business know if a market segmentation strategy is the right one for them? Specializing in a specific market can give you the momentum you need to overthrow your competition, but its not always the right approach. You should consider segmentation if: you think your business can be more profitable by specializing in a niche segment, if there are too many competitors in your market, or, you are too small to be one of the leaders in your market.
If you find that your business is running out of customers and you need to expand, one way to do it is to target a new segment. Using the example we used before, a consulting firm specializing in finance can start offering a certain service to non-profits. A different marketing approach may be needed for that, since the two industries may be different and overlap only partially. Specializing in two segments rather than one, will allow you to grow sales while maintaining a grasp in your niche market which gives you an edge over your competition.
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