We spend a lot of time discussing how to select your target audience as part of creating an inbound marketing plan. Hopefully you know who your target audience is for your small business. But have you taken the time to further divide that target audience into smaller market segments?
It is important to understand the makeup of your target audience in order to select the right marketing activities and messages. Sending the same message through the same channel may not be as effective as sending more targeted messages through the appropriate channels for each segment.
Why? Because your target audience is made up of people or businesses with different characteristics based on many factors. Dividing your target market into further slices with common interests enables you to speak to them in terms that will get their attention and help them decide to do business with you.
What is market segmentation?
Market segmentation is dividing your customers into smaller groups based on various characteristics and needs. There are many ways to divide your target audience so learn as much about your customers as you possibly can.
You create these segments to make it easier for you to be more focused when communicating with your target. People in the same group are more likely to respond similarly to your communications.
And by doing this exercise, you will be able to easily classify your best customers and find more like them.
Why is market segmentation important?
You segment a market when different groups perceive a different value for your product or service. This helps you develop your marketing activities and messages so that you are not perceived as being all things to all people.
Analyzing your target market and dividing it into individual segments can:
- Provide insight into which segments you can more successfully service based on your current resources and skills
- Alert you to a market segment that is losing money or one you are not capable of servicing effectively
- Help you understand what you need to do to expand your business to include a particular segment.
This analysis may also help you determine that there is one particular segment that you want to exclusively work with even though there are others that you could effectively service. In other words, this segment contains your ideal client. Finding this segment of ideal clients is priceless.
Benefits of market segmentation
Breaking your target audience into groups based on their specific needs helps you better understand your customers, increasing effectiveness of your marketing.
Market segmentation allows you to:
- Focus on the right market for your business. Don’t try to market your products and services to those in your target who don’t want or need them.
- Save you time and money. Rather than using one generic strategy for all customers, you can be more precise in how you communicate to individual prospects. This helps you spend your marketing dollars more wisely.
- Clarify how your products and services apply to these different segments of the market. You will be able to better communicate the benefits to that particular segment.
- Potentially find a segment that is willing to pay a premium for your products and services. Identifying a segment that has more discretionary spending may allow you to raise prices for your products and services.
Selecting your market segments
To segment a market, there are various attributes that you can use to paint the picture of your ideal client. For consumer markets, market segmentation has four distinct categories.
Demographic segments are based on age, gender, education, income, occupation, marital status, ethnic or religious background.
Homeowners that are first time buyers in the 25 to 35 age segment may have different needs than those of homeowners in the 60+ age range.
For example, if you offer handyman services, senior homeowners may have more of a need for your services. However, they may have more price sensitivity.
The younger homeowner may try to do the work themselves. If they have family and work obligations, they may be more likely to want a handyman service to take care of regular maintenance.
Although the services you offer may be exactly the same, your message, price and packaging may differ depending on the segment you are communicating with.
Behavioral segmentation targets users based on behavior and decision-making patterns such as consumption, loyalty and lifestyle. Understanding purchasing behaviors of your target audience will enable you to time your marketing to hit when they are most likely to purchase.
Homeowners that only call their landscaping company in the spring for cleanup and mulch are considered a light user. Those that have your company come every week to mow the lawn are more frequent buyers.
You can decide market to your light users to turn them into medium or heavy buyers. Or you can also spend more on your frequent, loyal buyers, providing more services for them to choose from. Your strategy will be based on whether you want more customers or more loyal customers.
Psychographic segmentation uses personality, interests, values, spending patterns, buying behavior, brand consciousness, lifestyle (conservative, trendy, economical), activities and interests (fitness, shopping, sports, etc.), attitudes and beliefs (health conscious, environmentalist, security conscious, etc.)
Homeowners that are environmentally conscious or have children and pets may want a cleaning service that uses organic products to clean rather than those with chemicals or bleach. If you are marketing to those homeowners, you need to be clear that you use all natural or green products in your cleaning.
As the name implies, geographic segments are used to target the needs of a particular audience living in a specific area. Again if you target homeowners, those living in an urban area may have different needs than one who is living in a rural location or near the water.
By researching the needs of these homeowners, you may find that your message needs to be changed in order to appeal to these three segments.
What if you service businesses not consumers?
For business markets, segmentation is still important and consumer segments can apply to businesses. Remember you are selling to people.
Other variables to consider include industry, business size, number of employees, location, private or public, revenue, independently owned, franchise or chain.
Businesses are less likely to purchase something they don’t need. By segmenting your business buyers based on needs, you can figure out which businesses would need your products or services.
As a small business, it likely you will target other smaller businesses because you may not have the resources to service a large company.
So although it may be a bit more complicated, it’s still possible for a small business to segment their market.
Is the segment worth it?
Once you have selected a segment or segments to target, you then need to determine if the segment is worth going after.
- Is the segment large enough?
- How difficult will it be to reach this segment with your marketing activities?
- Does this segment have the need and the money to satisfy the need?
- Is the segment viable – i.e. is this segment growing? A stable or declining segment would need to be evaluated based on the number of competitors already servicing that segment.
- Does your business have the necessary skills, knowledge and expertise to service the segment?
- Does the segment align with the values of the company?
How to segment
Some business owners have difficulty getting started with segmentation. Start by looking at your current client base and see if there is a pattern. Sometimes businesses just naturally attract a particular type of client. Take a look at those clients you just love to work with. What characteristics do they all have in common that you could turn into a segment?
Let’s take a look at another example:
A massage therapist would start by picking their target market based on geographic location. It is more likely that their client base will come from within a 10 mile radius of their office. After a relaxing massage, most people don’t really want to drive more than 20 minutes to get home.
However, within that target market, you could segment even more in order to offer specific services based on physical need.
- When would athletes more likely get a regular massage?
- Would corporate executives benefit from a massage as a way of relieving the stress of the job?
- What would attract stay-at-home moms more often?
- Is there a type of massage that is beneficial to seniors?
Understand what motivates these segments into booking an appointment for a massage. Then you can develop marketing programs that speak directly to these people.
This does not mean you would exclude the general person who calls to book a massage. But you may find that marketing your business exclusively to seniors to relieve arthritis pain or athletes who need to be in top condition for their events maybe more financially successful.
The key is to explain why your service caters to their needs. This is important if they make your service a regular part of their health and wellness activities.
Successful marketing usually occurs when you speak precisely to your target audience. Market segmentation helps you achieve that precision.
Once you go through the exercise, you may choose to market to one segment at any one time. Or you may choose to reach multiple segments simultaneously. In either case, you now can develop
- Marketing messages that speak to your target segments
- Activities that are geared towards these segments, and
- Clarity around your business that attracts clients like a magnet
So rather than use the “spray and pray” method of marketing, take some time to segment your market. Effective market segmentation will result in more of your target audience turning into a customer.