Market segmentation is a business exercise that chunks the total marketplace for a product into smaller segments, and pulls together groups of consumers with similar characteristics, needs and wants. It enables the organisation to identify those parts of the market that they can best serve.
As a small business or start-up it can feel quite scary to segment and target only a portion of the market. After all, we need to generate as much business as we can right? Right. But let me tell you, it is more effective to dominate a larger share of a small market than a smaller share of a large market. It's natural to worry about missing opportunities if you dismiss a portion of the market. But you can’t be all things to all people. If you try to be, you could weaken your messaging and branding, and end up merely a ‘me too’ company.
Beside the efficiency of it all, there are many other benefits to be had from segmenting the market. Take a look at these:
Benefits of Segmentation and Targeting for Small Businesses
So let me finish with an example. Let's say we're a travel company. Our primary market is the travel sector. But the travel sector as a whole is way too broad to be workable as far as targeting is concerned. So we need to segment a little further. Let's say we come up with these segments:
There are some highly complex models you can use to map attractiveness and ability to compete (and I will be blogging about them soon) but for now, I would say make it simple and follow your hunches.
If you need any help with segmenting or targeting, please contact me. Happy to help.