EFFECTIVE MARKETING STRATEGY Part 1:

 

What is Market Segmentation? By Anne-Marie Watson Please refer to our Marketing Glossaryat http://www.sthside.com.au/, for any terms underlined or other unfamiliar concepts. This useful resource is constantly being updated every week with new explanations added to assist small business owners with understanding the ‘jargon’ often used in marketing. One of the most critical things you can do in marketing is defining your target market, namely “who is it you will be selling your service or products to?” The first step in determining this involves looking at the market you are planning to launch into and doing what is called a segmentation of the market. Don’t be frightened by this term – it simply means sorting customers within a market into groups of similar needs or wants. Market segmentation can be done using a number of bases to sort customers or buyers into groups. One way they can be grouped is to sort customers based on their characteristics, independent of what the product or service is. These characteristics can be split into several broad groups called demographics, geographic or psychographic as shown in the examples below: Demographic Age: Under 6, 6-11, 12-17, 18-34, 35-49, 50-65, 65+ Sex: Male, female Family size: 1, 1-2, 3-4, 4-6, 6-8, 8+ Family situation (single, married, defacto, children < 5yrs age etc) Income: <$7,000, $7,000-$13,000, $13,000-$25,000, $25,000-$50,000, $50,000-$75,000, $75,000-$100,000, $100-$150,000, $150,000+ Occupation: blue collar, white collar, professional, managerial (junior, middle, senior), clerical, tradesmen, retail, farmer/agriculture, housewife, unemployed Education: School Certificate, Higher School certificate, tertiary, post-graduate Ethnic or cultural group: Caucasian, Indigenous, Asian influence etc Business Size: Small, medium large business; Business turnover: $0-$500k, $500k-$1M, $1M-$5M etc; No. of employees: 1-5, 5-10, 10-20, 20-50, 50-100, 100-200, >200 etc. Industry: retail, light manufacturing, heavy manufacturing, professions, trades, services These are just some criteria that can be used to split the population into groups. There are other terms that can also be used. Additionally, some bodies such as the Australian Bureau of Statistics (ABS), have their own set criteria or descriptors for which they gather data. There are several places available where you can easily source this type of data, including the ABS. Geographic Country State residing in urban or country City Northern, Western, Eastern or Southern part of city Shire or council area Suburb Psychographic Social Class: upper class , middle class, working class Personality Lifestyle Another way of dividing customers into groups is by their responses to the product or service – this can be defined as behavioural segmentation, with examples below. Behavioural Usage Status: user, non-user, previous user Loyalty: brand loyal, brand switcher Purchase occasion: regular, special, one-off Level Usage: Heavy user, medium user, light user Benefits: Value, Quality, Service, Economical Profiling You can use a number of characteristics to try and describe your target audience as accurately as possible, and it helps to use market research to define this in as much detail as possible. For small businesses, who can’t always afford reams of customized formal market research, you will need to define the target audiences who best fit your product through a mixture of desk work, personal market research with existing or future customers, competitors, industry associations, and some intuitive deduction. Using all of these sources, you can now begin to profile your segments. For example, assume you wanted to open a craft & giftware retail shop which sold knick-knacks, craft items etc. You may find that your target audience(s) could be profiled as below: Primary Segments Females Age: 40-55, 55+ Lifestyle: craft hobbyists; Giftware purchasers Behavioural: Occasion purchasers (regular) – craft materials; occasion purchasers (special) – giftware. Geographic: Southern Sydney catchment (St George, Sutherland Shire, Liverpool, Wollongong) Secondary Segments Females Age: 40+ Lifestyle: collectors (specialty giftware such as Lladro, Dalton, Wedgwood) Behavioural: Occasion purchasers (regular) Geographic: Sydney You may also find it useful to review other segments related to this such as ceramics, ceramic crafts, scrap-booking etc., to ensure you look at all the logical options that fit within the craft and/or giftware market. This is particularly useful if you find that your initial choice of segments is not really viable. It may be that other segments are more viable and are a better option as they fit well together in terms of customer audience overlap, cross promotion or on selling. Another example might be someone setting up a profession or service business. Let’s assume you are a new dentist, wanting to open a practice that offers cosmetic work as its major focus as well as standard dental services. You are trying to work out who would be the best targets and what locality options exist to access this audience. You may find that the market could be best split into groups that include the following categories: sex, age, occupation, lifestyle, socioeconomic status. The target audience groups that you may find that fit best with your goals, business approach and own suitability may be described as below: Sex: females (primary), males (secondary), age: young, middle-aged, Occupation: professionals; white collar, business owners; Lifestyle: image conscious; self health managers, socioeconomic status: (middle - high income, > $75,000), You would then need to look at the geographic options available to see whether the market you desire is available in a locality that is practical. Once this type of profiling is completed, it will be necessary to choose the target segments you think are right for your business. This step will be covered in the next article - Part 2: Choosing the Right Segments for your Business. © Copyright 2006 – Anne-Marie Watson – Southside Marketing Solutions Anne-Marie Watson is an experienced marketing consultant, small business owner and Principal of Southside Marketing Solutions. Her company is a specialised marketing consultancy business that provides practical marketing help to small and micro businesses, to help get more clients and increase sales. Anne-Marie can be contacted on Ph: 0432 929 181; email: amwatson@sthside.com.au; or via their website at http://www.sthside.com.au/. print this page