Market segmentation is to segment or divide the total market that exists for a homogeneous product in different submarkets composed of consumers with similar characteristics, and then select from all the resulting sub-markets, the market or markets more attractive to venture.
The reason to segment the market today is that the total market that exists for a product is so wide and varied that it is not profitable to adapt a product for every type of consumer who formed, but it is reasonable to identify types of consumers with similar characteristics, and focus only on one of these.
Focusing on a segmented but attractive market and direct our products or services only to it, allows us to specialize in it and thus achieve greater efficiency because, for example, we can better understand the needs and consumer preferences that shape it, and to care for the best possible way.
Let’s look at what are the steps to perform market segmentation, along with a simple example that will help us gain a better understanding:
1. Segment the total market
The first step is to identify the total market that exists for our product and segment or divide it into different homogeneous submarkets composed of consumers with similar features.
To do this segmentation we use different variables; for example, we can segment or divide markets by:
- location (country, region, city).
- age group (children, adolescents, adults).
- gender (men and women).
- socioeconomic level (Level A, Level B, C level).
- income (monthly income range).
- degree of (primary, secondary, university) education.
- social status (high, medium, low).
- lifestyle (activities, interests, hobbies).
Example: for a business engaged in the manufacture and sale of clothing we decided to segment the market into men and women, ages 0-15, 15-35 and 35-60 years and monthly income of 0-500, 500 1500, and 1500 to $ 3000.
2. Select the target market
Once you have segmented the total market that exists for our product, the next step is to select among all resulting submarkets, the most suitable or attractive to venture, given our resources, capacity, expertise and experience; but considering also that is sufficiently broad and has sufficient financial capacity.
The submarket chosen would become in our target market, target market, niche or target audience; market to which we will direct and upon which we design our marketing strategies.
Example: once we have segmented the market we decided that the submarket which will direct our clothing and, therefore, our target market, will consist of women 15 to 35 years with monthly incomes of 500 to $ 1,500.
3. Define the consumer profile
Once we have selected our target market, to make a better analysis, we define the consumer profile that conforms; i.e. we describe what are its main characteristics, based mainly on the variables that have previously been used to segment the market.
The definition of the consumer that makes up our target market might include where it is, what is your age range, what their socioeconomic status, what their preferences are, what their habits profile, what their habits, what their interests, etc.
Example: Once you have selected our target market and we have analyzed, we determined that the consumer profile that shape it is striking women seeking models for garment that will provide, pay for it usually average 30 dollars, usually acquire primarily in shopping centers, and often have as main pastime surf the Internet.
4. Develop marketing strategies
Once you have clearly defined the consumer profile that makes up our target market, based on that profile, we design the marketing strategies that we will use to assist you.
The design of marketing strategies could include designing products that seek to meet their tastes and preferences, pricing commensurate with their economic capacity, choosing sales channels that are accessible, selecting advertising media available to them scope, copy-writing messages that cause impact, etc.
Example: Once you have defined the consumer profile that makes up our target market, striking design models for our garments, we put a price of $ 30, we sell primarily in shopping centers, and we promoted mainly through Internet.
5. Select new markets
When starting a business it is advisable to target small but attractive markets, but as we increase our sales and experience, can choose to turn to broader markets.
So the final step is to make new segmentation’s and select new markets to which venture that allow us to launch new products, create new brands, establishing new sales channels, open new stores and perform other actions that allow us to grow as a company.
Example: once we have grown as a company and gained sufficient experience, and we have established in the market of women, we also decided to enter the market of men and, therefore, launch a new line of clothing for men.