To make your business grow and reach the right target customers, you need to segment the market. This is because market segmentation will affect many things, such as the implementation of marketing strategies and other efforts aimed at increasing sales. For that, you need well-structured market research and segmentation. Come on, find out more important things that need to be considered in segmenting the market in the following article.
What is Market Segmentation?
Market segmentation is a strategy of grouping target customers based on characteristics, needs, purchasing power, and interests. The variables that determine the target market are location, time, price, demographics, psychographics, socio-culture, and behavior. Determining market segmentation will help companies create products, services, and business services according to customer needs.
The characteristics of effective market segmentation, among others:
- Measurable (measurable), affordable, influential, differentiable (has distinctive and differentiating characteristics compared to similar products), and realistic.
- The grouping of target markets can be homogeneous, i.e. customers can have several choices of almost similar products.
- Following a scattered pattern, meaning that customers are more attracted to a wide selection of products.
- Market segmentation based on a grouping pattern means that customers with similar product tastes are included in the same group.
With market grouping (in this case customer grouping), you will find it easier when doing promotions, implementing marketing strategies, even when doing email marketing.
The Purpose of Market SegmentationThe purpose of segmenting the market will certainly make it easier for you to carry out various strategies that are most relevant to the conditions and characteristics of each customer group. In full, the following are the objectives of market segmentation:
- Easy for businesses to categorize markets based on consumer interests, tastes and needs.
- Provide the best service to consumers and can increase customer loyalty.
- Making business and marketing strategies more focused, so that they can get potential customers and generate maximum profits. That way, no resources are wasted during the production or promotion process.
- So it’s easier to identify competitors in the same target market. This will encourage you to develop strategies that can make your product superior and win the attention of customers.
- To help the effectiveness of the evaluation process and analysis of the results of the implementation of marketing and promotion strategies.
Benefits of Market Segmentation
In addition to the various purposes of segmenting the market, you as a businessman can also enjoy various benefits from making market segmentation on a regular basis. This means that doing market segmentation is not only at the beginning of starting a business, but it would be nice if you keep doing it for a certain period, for example every 6 months or once a year. Here are some of the benefits of market segmentation:
- Businesses are better able to meet market demands through better product planning.
- Maximizing planning and determining the right way of promotion, including choosing a platform to place advertisements and organize marketing campaigns. This way, you can save a lot of advertising budget.
- Helping companies earn profits through the allocation of venture capital to more potential markets.
- Become a reference in business evaluation and encourage businesses to have an effective communication strategy.
- Easy to analyze and evaluate competitors’ movements in the same market.
Important Things to Pay Attention to in Conducting Market Segmentation
In determining market segmentation, you need to collect data, perform analysis, classify products according to the target market. In full, here are some important things to consider when segmenting the market:
1. Target Market Must Be Clear
Determining the target market must be tailored to the needs of the business. There are three things you need to pay attention to, namely new consumers, focused consumers, and supported consumers.
- New consumer: finding new customers.
- Focused consumer: retaining existing customers to support business continuity.
- Supported consumer: find customers who can become supporting products (loyal users of certain products).
After selecting a target market, you can group it based on demographic segmentation, price, social status, time of day, to the products offered.
2. Finding Out Consumer Needs
Identifying consumer needs will help you tailor the product to be sold. You can do this by giving samples or product samples or conducting customer surveys. After that, classify customer needs according to the target group that has been set. Customer grouping can be useful as a business strategy road map and product evaluation.
3. Complete Data Collection on Consumer Behavior and Trends in Society
Analyzing consumer behavior means that you need to observe all consumer activities related to the product. Pay attention to the way customers use the product, the conditions before and after using the product, to the product trend patterns in society. In addition, find out whether customers will be happy to share the product with their network of friends, how satisfied the customer is with the product, and so on.
4. Data Processing Analysis to Find Opportunities
You can analyze and process consumer behavior observations to find product opportunities to be sold. Data analysis serves as a reference in formulating product marketing strategies.
Now, to facilitate the data collection process in order to be able to perform analysis, you need an application, for example by downloading the POS application. This application can help show which products are sold the most, who buys them, and can even find out how many times customers buy these products.
5. Marketing Strategy Used
Each target market group with its diverse needs, of course requires a different marketing strategy. You need to adjust the implementation of the marketing strategy with the segmentation data that has been analyzed previously.
For example, demographic segmentation by customer age, where your product targets teenagers. Teenage consumers are certainly more literate about the use of technology, including social media. So, you need to take advantage of social media that many teenagers use to promote products.
6. Evaluation of Marketing Strategy Implementation Results
Once you have implemented your marketing strategy and successfully sold your product, you need to find out what consumers think. Compared to product advantages, customer opinions about product shortcomings are much more important so that you can make improvements. To that end, record all customer feedback and suggestions.
7 Important Points to Analyze in Market SegmentationTo determine the right market segmentation, there are 7 important points that you also need to analyze:
- Location: where the customer is located, for example a certain area/city, national or international scale, provincial scale, and so on. Including finding out if the customer’s location is in mountainous areas, lowlands, and so on. The goal is to help determine product distribution strategies.
- Time: segmentation based on time can be done by dividing the market based on certain periods when product sales increase, or when there is a trend. The hope, the product has the potential to sell a lot. For example: holiday moments, fasting month, and so on.
- Price: related to people’s ability and purchasing power.
- Demography: age, gender, income, background needs, expenses, and so on.
- Psychographic: analysis based on consumer behavior, starting from their response to advertisements and promotions, discounts, other psychological conditions that influence customer decisions to make purchases.
- Socio-cultural: social and cultural variables of each customer, including trends that take place in society.
- Behavioral or habits are related to the behavior, patterns, to the nature of the target market you are targeting.
After knowing what market segmentation is, its goals, benefits, and how to segment a market, you should be able to implement the right marketing strategy for business development. Let’s find out about marketing strategies and examples.