Market Segmentation
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Market segmentation skills refer to the ability of an individual to divide an overall market or prospective buyers into two or more groups/segments based on certain characteristics that they have in common. As a result, each group has similar needs and wants which are distinct from those of other segments. Also, they all have varying responses to any particular marketing efforts.
Very simply, having market segmentation skills mean having the ability to categorize prospective buyers into different segments, each having a distinct perception of the full value of any product or service being offered. This means that each segment will require a different offering in order to have their needs satisfied.
Why is market segmentation important
Market segmentation is crucial for anyone who wishes to pursue a targeted marketing plan, which is the most effective approach to adopt. Dividing a large, heterogeneous market into smaller, homogenous segments enable firms to benefit in the following ways:
- Customers are served better. Market segmentation allows you to understand the needs and wants of the target segment well in depth, as a result of which, the marketing mix can be tailored to better satisfy the individual customer needs. To a large extent, it helps in mitigating risks associated with several decisions regarding when, where, how, and to whom a particular offer is marketed.
- Efficiency is increased. Market segmentation increases the efficiency to a great extent by directing all efforts, as well as the finite resources that a marketing department might have, towards the target segment in a manner which is consistent with their particular characteristics.
How to improve market segmentation skills
According to a research conducted by Harvard Business in the US, out of a total of 30,000 new product launches, 85% have failed due to the poor implementation of market segmentation. Therefore, following are some tips that shall prove helpful in improving your market segmentation skills and, thus, avoiding such failures:
- Begin with the end in mind. Before you begin your segmentation efforts, you must know who is going to use the results and for what purposes. This will help you determine the kind of data that needs to be gathered and consequently, the various subdivisions of the overall market. However, you must remember that quality of data has a greater significance over quantity.
- Start small. There is no sufficient or insufficient number of segments. Therefore, you can create and target as many as you need. However, ideally you should start small by creating, let’s say, three solid segments. The smaller the number initially; the better your focus. Then move on to the next level and divide them further into more narrow groups, without going so narrow that segments begin to overlap.
- Test your hypothesis. Once you are done with your segmentation efforts based on the defined criteria, it is time to make certain that your intuition is grounded in reality. Testing your segmentation at this level is neither too costly nor difficult, but it does reduce the chances of a great failure ahead. The best way is to compare the results of your segmented campaigns against those of the attempts prior to segmentation.
