What is small business market segmentation?
Small business owners, who are trying to define who they can sell their product or service to, will need to understand their market segment. Market segmentation is defined one of the steps that goes into defining and targeting, specific markets. It is the process of dividing a market into a distinct group of buyers and understanding, that each group will require different products or marketing mixes. The way to stay competitive in today's market is the ability of any business to find the subtle differences to give a business the marketing edge. Businesses that target specialty markets will promote its products and services, more effectively than a business that is only aiming at the "average" customer. This is especially true for a small business that may possess limited marketing resources.
The bottom line is that opportunities in marketing will dramatically increase when segmented groups of clients and potential customers, with varying needs and wants, are recognized. It should be noted that markets can be segmented or targeted, using a variety of factors. The factors that are most commonly used for segmenting marketing include-
- Demographical bases-This is really the basis of who your customer is. This can include but is not limited to: age, family size, life cycle, occupation or any other personal factor.
- Geographical bases-Where does your potential customer live? This can be defined by: states, regions, and/or countries.
- Behavior bases-This will let you know how much your targeted customer knows about your product or service. This can include: product knowledge, usage, attitudes, and responses to the use of the product or service.
- Psychographic bases-This will include the lifestyle choices, values, and personality of your targeted customer.
- A small business must analyze the needs and wants, of different market segments, before determining their own niche. To simply choose to market to a targeted segment, without doing the research, is just a waste of time and marketing dollars.In order to be effective in market segmentation, small business owners should keep the following things in mind:
- Segments or target markets should be accessible to the business-There be instances that you find that perfect customer, however, if they are not accessible to your business, you won't be making money from selling to them.
- Each segmented group must be large enough to provide a solid customer base-If your customer base is to small to significantly affect your bottom line, your marketing efforts are best put elsewhere.
- You must remember that each segmented group requires a separate marketing plan-Marketing is not a one-size-fits-all proposition. Just because a marketing strategy worked for one target market, does not mean that it will work for another.
- Many small businesses feel that they are unable to compete since; many larger companies segment their markets by conducting extensive market research projects. This research is often too expensive for small businesses to invest in, but the good news is that there are alternative ways, for to a small business to segment their markets.
- A small business can do the following to gain knowledge and information on how to segment their markets:
- Let someone else do the work for you-You can use secondary date resources and qualitative research. There are many different types of resources that can be used for external secondary data. This type of research can be done using: trade and association publications and experts, basic research publications, and external measurement services.
- Take a good look around-You can conduct informal factor and cluster analysis by using several different methods. Some of these methods include: watching key competitors marketing efforts and copying them, talking to key trade buyers about new product introductions and conducting needs analysis from qualitative research, with individuals and groups.