Finding Customers with Market Segmentation

A key factor to success in today’s market place is finding subtle differences to give the business a marketing edge. A business that targets specialty markets will promote its products more effectively than a business aiming at the “average” customer.

What makes the business unique? How can these unique features be promoted to “targeted” customers? Undifferentiated Marketing Some businesses treat the market as a whole, focusing on what is common to the needs of customers, rather than on what is different.
Often called undifferentiated marketing, this technique relies on mass advertising and is implemented on the basis of cost savings to the business. Undifferentiated marketing is successful when the competition is scarce or the product has mass appeal.
1. Differentiated Marketing
Differentiated marketing builds greater loyalty and repeat purchasing by considering customer needs and wants. Differentiated marketing creates more total sales with a concentrated marketing effort in selected areas. Concentrated or target marketing gains market position with specialized market segments. Target marketing of products or services reduces the cost of production, distribution, and promotion. With differentiated marketing, there is the risk of the market going sour or a competitor entering the same market.
2. Market Segments
Marketing opportunities increase when customer groups with varying needs and wants are recognized. Markets can be segmented or targeted on a variety of factors including age, gender, location, geographic factors, demographic characteristics, family life cycle, desire for relaxation or time pressures. Segments or target markets should be accessible to the business and large enough to provide a solid customer base.
A business must analyze the needs and wants of different market segments before determining its niche. Market segmentation is dividing a larger market into submarkets based upon different needs or product preferences. A key factor in competitive success is focusing on little differences that give a marketing edge and are important to customers. Market segmentation matches consumer differences with potential or actual buying behavior. It may prove more profitable to develop smaller market segments into a target segment.
3. Profile Customers
Analyze market segments. Where do customers differ? Is it geographic area, demographic characteristics, social class, stage in family life cycle, personality, self-image or benefits sought (such as convenience, time saving, independence from chores or buying behavior)? Also, consider frequency or regularity of purchase, amount of purchase, brand loyalty, attitudes toward the product or brand, use of cash, check or credit card, or customer’s desire for personal friendship with business personnel.
Use a customer profile form to identify potential target markets (see sample form on page 3). A customer profile form might ask age (18-24, 25-35, 36-49, 50-65, over 65), approximate income (less than $20,000, $20,000-$29,999, $30,000-$44,999, more than $45,000), gender (female-male), occupation (clerical, professional, retired, not employed) how the customer learned about the business (newspaper, direct mail, word of mouth, chance), children at home (under 6 years, 6-12, 13-18, over 18), in college, in military, married, employed outside the home and sports enthusiasts. Ask questions important to your business interests. Try to identify types of customers and the benefits they need and want.
4. Profile of Industry
What does the product or service industry look like? Is the trend toward growth or decline? What other businesses are in the industry? If the new business is in the entertainment field, what related businesses exist? Search the reference section of the local library for information on industry trends, including sales figures, size of firms and number of employees.