When all is said and done, creating a business plan is not a straight shot down the rabbit hole. You’re likely going to bump into a lamp or two before you reach where you’re trying to go. Market segmentation or customer segmentation is a tool that can act as your flashlight in the dark.
Keep the following market segmentation tips in mind to help you and your business stay on track.
1. Understand Your Company and What it’s Offering
Take another look at your company’s values and mission statement. If that’s not good enough, try to assess and take a deeper look at what you are trying to achieve.
What is it that the company is trying to achieve? What needs is the company trying to fulfill? Where do you see the company in 2-3 years time?
Remember, this is one of the reasons why companies fail to succeed in the market.
Take a look at Microsoft Zune for example. The company lost focus on their objectives as a result of heavy competition with Apple.
Now you are in the right state of mind to think about who you want your customers to be.
2. Estimate Value of Segments
Once you determine all potential segments, now you have to place a value on them.
Which is most profitable or worth spending time and effort on?
This is when you find where most of your customers are versus your valuable customers.
Think back to the 80/20 rule that states 80% of sales come from 20% of customers.
If most of your customers are in urban areas but most of the sales come from suburban areas, what does this tell you?
This tells you that your most valuable customers are in suburban areas. They are more likely to convert to loyal customers and worth focusing on in the future.
3. Find Relationships Between Segments
Cross-correlate commonalities between segments to find what works best.
Again, the more you know your customers the easier it will be to develop a relevant message they care about.
Say you managed to identify a demographic segment of women in their early twenties. You could stop there and call it a day.
OR, you can segment them further according to behavior or hobbies.
If you find that some segments are not as responsive as others, then try other combinations. Take some time to experiment with what works and what doesn’t.
4. Don’t Make Segmentation a One-time Thing
Test eligible customers on a regular basis to better predict needs.
If you’ve managed to segment your customers and are now thinking, “Great! I’m done, I can relax now,” then you’re mistaken.
Customers are always changing which is why it’s important to keep up in a dynamic market. What might be of interest to them today might not even elicit a second thought the following year.
Conduct audits of the company’s intellectual resources on a regular basis to stay up to date.
Also, do regular audits on current segments to ensure they’re getting something valuable.