Managing a profitable business is all about understanding your customer’s behaviors and needs and providing services or products that rightly fulfil those needs. As an entrepreneur it is important to notice the essence of valued customers and their different types. Having a holistic view of the business objective is important, but knowing your customers and how they form a buyer’s market is also important. Market segmentation helps us define this customer base in a market scenario. It refers to the division of a set of consumers into people with similar needs and wants. Market segmentation allows for a better allocation of a firm’s finite resources and offerings.
How are markets divided?
In a typical business set-up, markets may be divided into several sub-markets or categories based on several sources. For example, any market segmented into sub-markets on the basis of geographic location is known as Geographic Segmentation. Examples of such division are nations, states, regions, provinces, districts, counties, cities or even neighborhoods. Similarly, a market split into sub-segments on the basis of variables such as age, gender, sex, family, income, education, religion, culture, occupation, profession, ethnicity etc is known as demographic segmentation. There are many other categories and sub-categories that a market can be divided into, based on your business or marketing needs.
While segmenting markets it is also important to keep in mind that your customer are just not numbers, but are humans and have specific needs and behaviors. For example, as you analyze your potential market you would notice that some users may be classed as heavy users of your product or service while others as light users. Some may be just first time user while other are occasional users only. So it is also important to keep the behavioral aspect in mind.
Segmentation with the help of big data
Technology has made market segmentation easier; however with the advent of the big data phenomena, businesses are finding it difficult to keep pace with the huge amount of varied information available. The big data technology is changing the way consumers comprehend brands, increasingly through multiple channels and in multiple ways. This, in turn is changing the way consumers interact with brands, and the way they share their experiences. Business owners have understood the importance of this new technology and are finding innovative ways of funneling out relevant customer information that will help them easily compartmentalize customers into different segments. It has now become easier to make detailed categories and sub-categories within a given market and segment the customer data into more detailed sections.
Segmentation is the first critical step in marketing, and the basis towards satisfying needs of your customer and gaining overall market profitably. It is often the mix of where-what-who and why (the benefit or need) which is driving the segmentation. The grouping together of customers with common needs makes it possible to select target customers of interest and set marketing objectives for each of those segments. Once the objectives have been set, strategies can be developed to meet the objectives using the tactical blend of product, price, promotion and place.