Market Segmentation:
Know Your Customer

Market segmentation is about understanding who your specific customers are within a market. Segmentation is just as important for small business as large organization because you cannot serve a customer you have not identified. Your entire sales and marketing program is built around this crucial knowledge and so the more you know about your customer, the more successful you are.

Market Segmentation: Know Thy Customer

The approach I present in this section will allow you to quickly cut through the guff of market segmentation theory so that you can tailor your sales and marketing efforts for success. I will simplify key terms and illustrate how you can establish this process for your target market. Please also visit the Marketing Segmentation section here.

Get help with segmenting your market or share your expertise and experiences!

SWOT AnalysisMarketing SegmentationNiche MarketingWhat Is Positioning?Product DifferentiationDifferentiation StrategyThe BCG MatrixMarket Segmentation Consultant

Basic Market Segmentation

Whether or not you map out a detailed blueprint of exactly who your customers are you nevertheless need to have some basic assumptions about your customer base in order to do business. Every sales and marketing enterprise begins by asking the following questions:

• Who Are My Customers?
• What Are They Like?
• What Do They Want?
• Where Can I Find Them?
• How Can I Reach Them?
• What Should I Say To Them?

The answers to these questions depend on your business and your specific circumstances. Just as you will classify customers according to what makes sense for you so it is when you engage in more detailed market segmentation where you can group customers together in any number of ways.

A key question market segmentation answers is whether there enough demand for your product or service or a new initiative. By familiarizing yourself with your target buyers you can also begin to tune into trends that may take your sales and marketing efforts profitable new directions.

Technical Market Segmentation

There are four categories marketers generally use when collecting information on customers:

Market Segementation: Geographic, Demographic, Psychographic, Behavioral

1. Geographic: This is straightforward and pertains to where your customers live and do business. It is possible that their geographic location plays a role in terms of their cultural makeup and buying habits but these are explored in other categories. For now, suffice it to say that where people are is a basic consideration in doing business with them.

The e-commerce revolution and overnight shipping have made geography less of a concern for many businesses. That being said, it is still useful information to know where your customers reside and do business just as most all information about your customers is potentially valuable.

2. Demographic: This is just a fancy word for statistics like:

Age • Gender • Size Of Family • Education
• Income • Occupation • Economic Class
• Religion • Ethnicity • Language

Anything you can put a “label” on falls into the category of customer demographics and, as mentioned, there are an unlimited number of ways of tracking and correlating this kind of information. Generally speaking all information you can collect about your customer base is positive and can teach you something.

3. Psychographic: This corresponds to the psychological traits of your customers including attributes such as Personality, Beliefs, Values, Lifestyle, Attitudes and so forth. These are those personal marketing segmentation characteristics that you cannot quantity but are nevertheless important.

As your business evolves the idea is to move from simply fulfilling a need or solving a problem towards aligning yourself with the higher attributes of your customer base such as lifestyle and values. A great representation of this is psychologist Abraham Maslow’s famous Hierarchy Of Needs:

Market Segmentation: Hierarchy Of Needs

People’s needs start with basic Physiological and Safety needs such as food, clothing and shelter. After these have been fulfilled people aspire to the traits described in psychographic segmentation such as love, self-esteem and, finally, self-actualization which means fulfilling a life purpose.

The lower needs are the most essential whereas the higher needs are the most valuable and prized. As you attached yourself to higher and higher needs you become more and more invaluable to your customer. The path to getting there starts with knowing your customer and then developing a relationship where you can serve them at ever-higher levels.

4. Behavioral: These set of marketing segmentation traits answer the question, ”How?” How do your customers buy? How do they use your product or service? How loyal are they? How do they evaluate and decide on what to buy? Everything about how your customer behaves and what motives them is included in this category.

It stands to reason that you cannot successfully do business with your target market unless you know how they behave, what they are looking for and so forth. Behavioral traits, moreover, are more likely to change over time as opposed to physical needs and psychological traits. As such, you can and should seek out newer and better ways of connecting with your customer, educating them and motivating them to engage.

Learning about your customer’s behavioral characteristics comes as much through your own interaction with them as anything else. Just like the movie cliche of someone being asked in a restaurant, ”The Usual?” so your level of familiarity with your customer will strengthen your relationship and their loyalty to you. Being tuned into behavioral traits also allows you anticipate changes in the market at large.

Market Segmentation Footnotes

As we come to the end of this section I want to make a few last points as general guidelines in helping you segment your market and analyze your customers. My goal has been to avoid obscure details about segmentation that are of no practical value to most business owners.

• Collecting Data: How you collect customer data depends on your business and situation. What is important is that you do. This can be informal conversing with your customers, asking for basic information when you make a sale, feedback boxes, forms, e-mail lists, online feedback and more. Secondary data sources include magazines and online forums. You can best serve the community your customers represent when you are an active part of it!

• Bottom-Up Vs. Top-Down There are two ways to approach market segmentation and that is either to start with the general public and divide this into smaller and smaller groups or start with an ideal customer and create a picture of your target market based on their characteristics. What usually happens is that you will end up doing both in an ongoing fashion throughout the sales and marketing process.

• Establishing Relationships: Think of a best friend and how you are interested in what is going on in their life and their thoughts about things. Think about how personable your are with a friend and how easy it is to talk to them. Now add a dash of professionalism and a serving mentality and treat your customers in exactly the same way.

• Digging Deeper: Basic market segmentation is as simple as answering a few questions about your customers. Successful companies, however, keep drilling down to get a deeper level of understand about their customer’s needs and attitudes. Qualifying and re-qualifying is an essential sales tool and in marketing this means gathering information and doing research.

• Learn And Grow: The point of trying to figure out how to group your customers according to their common characteristics is about trying to find better ways to connect with your customers by understanding them and being able to serve them at a greater capacity. As you learn and grown with your customers your own attitudes and business will mature over time to the point where you operate out of love and do not need to for the money any more.

Get help with segmenting your market!

SWOT AnalysisMarketing SegmentationNiche MarketingWhat Is Positioning?Product DifferentiationDifferentiation StrategyThe BCG MatrixMarket Segmentation Consultant

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