Key Steps For Market Segmentation
- Thomas Eid, @thomasgeid1
- Jan 31, 2018
- 3 min read
Market segmentation delivers strategic value. It is used to identify groups of customers, prioritize which groups to address, and craft buyer profiles from which to create positioning statements and marketing programs.
Traditional segmentation models are primarily quantitative in nature and focus on geographic and demographic data. A more comprehensive approach to market segmentation is to start with a traditional model and then include behavioral and functional analyses.
This two-stage approach provides a more comprehensive view of unique buyer groups to create value propositions, tailor positioning and messaging, and establish a customer-centric strategy for product development, business planning, and go-to-market initiatives.
Market Segmentation
Customer segmentation analysis requires planning. It involves designing a framework, choosing the appropriate factors to analyze, and researching them. Further, it means developing a comparative model and then conducting the analysis, which may require further refinement with both quantitative and qualitative data and content.
Defining the target audience(s), understanding behaviors and responding with appropriate strategies and tactics to satisfy the different preferences of each customer group, is one definition for segmentation.
Personas can be thought of as a deeper step of customer segmentation, creating a more robust profile that includes mindsets, motivations, perceptions, actions, desires, measurable attributes, and more. A popular definition of a persona is: a semi-fictional representation of the ideal customer based upon real data and some educated speculation about demographics, behaviors, motivations, and goals. For more information and a step-by-step process for creating personas, refer to my report: Key Steps to Create and Use Buyer Persona Profiles.
Use a Two-Stage Segmentation Approach to Refine Customer Targeting
An important factor is to determine how much customer segmentation is required. Too little and the benefits of shortening the sales cycle, strengthening the brand, and improving market position, are not realized. Too much and resources are wasted that could be used elsewhere, because segmentation can be neither easy nor inexpensive. As with other types of market analyses, a best practice is to establish objectives, goals, and limits on time and money to get the best benefit from segmentation activities.
Traditional segmentation practices identify and categorize current or potential audiences based upon characteristics such as market size and growth, demographics, vertical industry, size and location, and other factors. These types of segments are quantitatively based and can be created using reports and data from governmental organizations, analysts firms, and other 3rd party groups.
Best Practices and Steps: Market Segments and Segmentation Analysis
Segmentation is the process of dividing a large unit/group/element into smaller units which have similar characteristics. A market segment consists of like-minded buyers with similar physical attributes and related interests and preferences.
Segmentation models provide many benefits to marketing, sales, and product development processes and their respective teams, including:
Establishing a specific, consistent understanding of various audience groups; groups can be put in a context and can be more readily understood and remembered
Developing solutions tailored to the segments; product features and associated services offerings can be prioritized based on how well they address the segment’s needs.
The major uses marketing groups can make of market segments are to:
Reach and attract the right buyers, with the right content, at the right time
Structure all content creation
Aid in creating targeted customer loyalty programs
Design more focused demand generation programs, with stronger product value propositions, associated messaging and channels to market
Support sales when communicating with likely prospects.
Recommendations
Business that can establish go-to-market strategies aligned to one or more customer segments can improve their overall success because products, service offerings, value propositions, positioning, and proof-points (such as return on investment) can be tailored for each group.
To enhance the overall acceptance with your target audience(s), follow these recommendations:
Establish some type of physical and functional segmentation that establishes differentiation across the audiences
Determine the appropriate features, benefits, and value as aligned to the specific segment’s needs and willingness to purchase
Identify which groups to target and invest in and which ones not to approach
Implement your market and positioning initiatives aligned to the target segment(s)
Align value propositions and ROI metrics to the segment’s business requirements, such as:
Internally focused: operational efficiencies, cost savings, infrastructure support, and improved security
Externally focused: revenue growth, improved customer service, increased employee effectiveness, innovation, information sharing, and creation of intellectual assets.
For a more information on the go-to-market and planning processes, see my report: Use Market Segmentation to Establish a Customer-Centric Strategy.
Please contact me if you have any questions or comments: thomasgeid@comcast.net.
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