Market Segmentation Is Key To Success

With new competing products coming to the market daily in many product categories, the key to business success often boils down to effective market segmentation.

Since businesses and consumers have multiple choices to meet very specific needs, starting entrepreneurs and established businesses would benefit enormously from investing in this type of research.

Why?

Market segmentation research can answer questions such as:

• Which market segments have unmet needs that our products or services could meet?
• Which customer segments have the highest revenue and profit potential?
• How should we position our products or services in order to reach target segments?
• How can we communicate with target segments?
• Which segment would give us the highest ROI for our marketing and media investment?
• Which new products should be developed to reach potentially profitable target segments?
• Should we adopt a different pricing strategy for different target segments?
• What customer segments exist in our customer base?
• What retention programs should we develop for the different customer segments?

Depending on the objectives of the segmentation and how the results will be used, this research may include different types of variables specific to an industry or consumer market.

Overall, most consumer market segmentation studies have questions aimed at capturing needs, values, attitudes, behaviors, and demographics. For business-to-business markets in addition to needs and behaviors, we often also include firmographics (e.g. company size, revenues, product category, etc.) that are relevant to the industry in question.

It Is Valuable If…

Market segmentation studies can be of great value as long as they reveal information about a market segment that is:

• Actionable: Segments can be identified through defined metrics (e.g. buyers of a certain product/brand) and can be reached through different distribution and communication channels.
• Sizable: Segments should be large enough to make the investment of resources worthwhile
• Unique: Segments should reflect different needs, attitudes, and behaviors in order to develop tailored offerings and effective communication strategies
• Stable: Although some industries experience changes faster than others, segments should be based on core differentiators that have a relatively long shelf-life to avoid constant changes in strategy and its associated cost

Market segmentation allows businesses to be more effective and efficient in their marketing efforts. A company that thinks that their products are for “everybody” is out of touch with the market. Without market segmentation companies are shooting in the dark and wasting valuable bullets. They may hit a customer by accident, but they surely would miss a lot of others.

To learn more about our market segmentation service visit Market Segmentation and Customer Research.

As published on December 31, 2010 by the Dallas Business Journal