Market Segmentation – To Help You Gain And-Or Grow Market Share (Part 1 of 2)

You don’t need to buy market share, you need to learn how to earn market share. Market segmentation is one of the functions within the overall marketing plan that will help you earn your share of the market. By segmenting your market into more targeted buyers or groups of buyers you will be able to grow existing sales and build new sales; and grow them without cutting price. The goal for market segmentation is to target the ‘most likely to buy’ and understand your target market enough to focus in on what it needs.

There are a number of different levels of market segmentation: mass marketing, segment marketing, niche marketing, local marketing, one-to-one or direct marketing – each level has different attributes.

In mass marketing, you produce one product that serves all markets and that can be produced in mass and distributed in mass. For example, paper clips, which can be mass produced, mass distributed and can serve all its markets (business, financial, school, etc.).
In segment marketing, your product can appeal to buyers in different groups or segments. These buyer segments have similar needs and wants. Segments are determined by assessing certain criteria. For example, product-usage patterns, demographics, psychographics, and geographics and more. The benefit of segment marketing over mass marketing is that you can narrow the product offering to specifically address the needs of the market segment you have defined as your primary, or secondary, or tertiary market. The other elements of marketing mix; price, promotion and distribution can also be more focused to deliver the needs of the market segment.
In niche marketing, you will narrow the market segments even further to find smaller markets that are less populated by competitors and that are under-served by others. To find your niche market, assess the market segment for similar needs and wants and divide the segment into smaller niches. To do well in niche marketing you must understand your customers extremely well and you must be able to understand their business, or their needs and wants well enough to provide solutions. Specializing in niche markets often results in higher costs (not the economies of scale that you find in mass marketing, and even to some degree, in segment marketing), and also higher profits if customers recognize and accept the value your product brings.
In local marketing, you will focus on a local area or region to market your product. This does not mean that your product is not sold globally, it means that you focus on building marketing programs or tactics that address the local area needs and wants for your product. For example, shopping in Vancouver, British Columbia typically is at street level so storefront displays are large and dramatic; while shopping in Calgary, Alberta often happens inside malls because of weather conditions, resulting in smaller storefronts inside the mall and smaller scale displays.
One-to-one or direct marketing is the latest marketing segmentation strategy and it comes from a segmentation approach called individual marketing. One-to-one marketing is a segment of one, compared to a segment of many. Building your marketing concept is focused on how to identify the needs of one individual and how to target that one in your marketing plans. To be successful in direct marketing you must be able to either collect or acquire data on individual buyer behaviour, habits, and attitudes (many loyalty card programs collect that type of data). Computer technology has enabled this type of market segmentation.
To best identify your market segments you will need to conduct research surveys, perhaps by using focus groups or other exploratory interview techniques; you will need to analyze the data you gather; and then you will need to develop a profile of each segment that you identify. Be aware that consumer and business market segmentations use somewhat different approaches to reflect the differences in consumer and business markets.

Once you have identified your market segments, you must evaluate and select the target marketing segment and approach best suited to your product, and to your business’ objectives, strategies and resources. Your small business growth objectives can be supported by a strong market segmentation approach.

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