Segmentation is (Still) Not a Dirty Word

It's amazing how often segmentation gets brought up during marketing workshops or generally by clients these days. Years ago the question would be along the lines of: 'should we be segmenting our market?' I think people with greater business insight these days know that with ever increasing levels of competition and in an attempt to remain relevant to your preferred audience,the answer is most certainly yes, so the more likely question being raised these days is normally along the lines of: 'how do we know whether to pursue a specific niche or not?'

Much, much better question to be asking. And the key to answering it is to know what the key criteria for evaluating market segments are.

The criteria most commonly used to evaluate whether or not to target selected market segments are:

(1.) Ability to be quantified - A market segment must be quantifiable, e.g., what is the potential number of customers? How much are they willing and able to spend?

(2.) Ability to identify groups with similar needs – For market segmentation and subsequent target marketing to be done successfully, it is vital that you are able to identify and group together people with similar needs that the business can fulfill.

NOTE: These needs can be based on product usage, product attributes, location of business, benefits sought by customer or on any other appropriate dimension.

(3.) Actual size - A market segment must be big enough i.e. are there enough customers? Do they have enough money to spend?

(4.) Ability to communicate with the segment - With few exceptions, most market segments can be reached on both a promotional and distribution level. The critical factor is whether the net cost to achieve and sustain this communication is within acceptable levels, so that your business can effectively communicate with this segment.

When these criteria are used individually and collectively, the business will be able to gain additional insight into the respective viability of different segments.

I'd be interested to know if you have done any evaluation of segments that exist in your market place.

And until next time, good luck and good marketing.

Daniele.