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Millionaire Mindset series 17: Segment Your Market

Segmentation is a common strategy used in marketing to break down a large target audience into smaller, more homogenous groups of customers. The point is to make marketing efforts more efficient by investing in communication that connects with customers most likely to buy your product, while minimizing wasted spending on those who won’t. Several common techniques are used to segment markets.

Before developing any new product, Product Managers should determine which market their new product is targeting and the size of that market. Without these 2 inputs, the business case is flaky. Of course once it has been determined that the market size can sufficiently support the new product, it’s also important to determine if that market has a need for your product and the presence of competitors in that market.

Demographic segmentation is common. Gender, age, educational levels are some demographic inputs that can be used to segment your market. You may choose to use a combination of these inputs. For example, your product may be pitched at women aged 22 to 28 years of age in full time employment with an annual income of a certain range or more per annum. Demographic segmentation is almost always used when strategizing but it may not provide the detail that is required to create differentiation in your product.

Pyschographic segmentation sub-divides the market based on customer values, attitudes and lifestyle. To apply this type of market segmentation, you may decide to create a statement or use an image that best represents your customer. For example, you may say that your product is targeted at consumers that “are busy travelers demanding up to date news regardless of cost”. This can subsequently be qualified through research asking consumers if they agree or disagree with the statement.

Behavioural segmentation is based on consumer actions. For example, you may segment the market for an Internet product based on consumer Internet usage habits. Once you have determined that you want to target consumers that use the Internet in a particular way, you may choose to develop a specific product based on that habit. This method of segmentation is potentially the most useful to identify common customer needs and will ultimately lead to products that best address those needs.

Geographical segmentation divides people on the basis of geography. Your potential customers will have different needs based on the geography they are located in. This type of segmentation is the easiest but it was actually used in the last decade where the industries were new and the reach was less. Today, the reach is high but still geographic segmentation principles are used when you are expanding the business in more local areas as well as international territories.

It’s not enough to segment the market and define your target market or persona, you need to clearly position your product in the minds of your target audience as something designed “for them”.

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