All businesses talk a lot about markets and as humans, we sometimes throw a lot of big words, slang and jargon around that can make it tough for others to know what we’re talking about! Sometimes, we get so used to a word, we don’t realise that we don’t quite understand what it means. So, let’s go back to basics.
What’s a Market?
A market, by definition, is a group of people that want something. A service, a product — whatever it may be. When there is a ‘market’ for something, it means there are people willing to buy it.
Within a market, there are usually tons of market providers. Some of which will be most successful — we refer to these as market leaders. Think Pepsi and Adidas. These brands are trailblasers in their respective industries.
Remember that just because there is a market doesn’t automatically mean it’s worthwhile to pursue every aspect of that market. To be successful, brands need to understand their own market. To do so, they need to break it down into smaller groups and identify what each one wants. Then, they need to decide which is most valuable to their business.
What is the target market?
The market for a product is usually vast. Marketers need to divide them into groups that share similarities. Segmenting consumer markets will make things more personal!
There are lots of ways to segment a market. Behavioural segmentation, demographic segmentation, psychographic segmentation, and geographic segmentation are the most popular.
Once you have defined your groups — or segments — you need to decide which one you’re going to focus on. This is your target market.
Marketers will usually base this on how much revenue they drive. Or, how well they fit with wider business goals. Your marketing strategy will then focus on this group, making it a priority for your sales team too.
- Targeting smaller, engaged audiences are cost-effective.
- It makes personalization easier.
- Personalization improves return on investment.
- It helps give a greater insight into customer wants and needs and guides content and messaging.
So, about Segmentation and your Market Strategy
Without formal segmentation, marketers (you) have no good way of understanding their customers other than gut feel and years of experience. The marketplace is full of customers with a variety of wants and needs, practical and emotional, that relate to your offerings.
Start by segmenting your audience — there is no exact right or wrong way to do this! Every business is different, so decide which approach works best for you, or be guided by our target market brainstorming worksheet. Once complete, you’ll have several smaller audiences that make up your wider audience. Each of these segments will have something in common. Their buyer behaviour, their age, their values; it all depends on how you decide to split them.
One or two of these segments will stand out to you. This could be because of the number of purchases, revenue, loyalty, or even how easy it is to market to them. These become your target audiences.
To Recap Why Market Segmentation is Important?
Market segmentation is essential to personalisation. With so many products available, customers expecting and demand a tailored service. It is no longer about hoping customers will like your services or products. Instead, you must tailor offerings and messaging to meet an already engaged audience.
- Segmentation enables marketing and salespeople to rank customers by importance.
- It helps you decide where to focus your efforts, and where not to!
- It enhances opportunities to expand locations, products or services.
- Increasing the ability to up-sell and cross-sell drives revenue.
- It is a necessary step towards a personalised marketing approach.