Last week, we took a closer look at the importance of finding your target market. This is the first step in being able to execute marketing plans effectively. Now we are going to take this concept one step further and talk about market segmentation: what it is, how to do it, and why it is so crucial for your small business’s success.

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What Is Market Segmentation?

Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics. Commonly used characteristics include demographic information such as age, location, and gender. Additionally, market segmentation may also consider psychographic characteristics such as attitudes, values, and interests.

Segmenting your market provides abundant benefits to your small business. Good segmentation can help you improve sales, gain market share, increase customer retention, improve your return on advertising spending, and even make your branding more relevant. Any of these benefits alone would be a good enough reason to segment your audience.

The main purpose of segmenting your market is to narrow down your target market into smaller groups. That way, you can pitch specific products or services and tailor specific messages for that particular market segment.

Long story short: market segmentation is another way to give people what they care about!

4 Examples Of Market Segmentation

Before we talk about how you can break down your target market into smaller segments, we’re going to show you what that looks like. That way, you can get an intuitive sense for market segments look like.

1. Health and Beauty Stores

Investopedia has a great example of how healthy and beauty stores lay out and segment their products.

Walk into any drugstore, and you quickly notice that women’s skincare, haircare, and grooming products are packaged in soft, gentle colors. Most often, the packaging is pink. The messaging used often refers to freshness, softness, or a carefree lifestyle. The women featured on the packaging are generally laughing or playfully smiling, embodying the effortless beauty to which many women aspire.

Conversely, the packaging for men’s products is predominated by blacks, grays, reds, and oranges. The messaging focuses on strength, durability, and ruggedness. If a photograph is included, the subject is often a close-up of a granite-featured model with the perfect amount of stubble, looking fiercely independent and brooding.

Investopedia
2. Law Offices

Law offices do a great job of segmenting their audience. Offices may have multiple specialties, segmenting based on their clientele’s needs. Market segments for law offices include victims of automobile accidents, single dads, athletes, and so on.

Law offices often segment to try and narrow their market to help effectively reach more people.

3. Clothing

You can go into almost any mall or department store and see a dozen examples of how manufacturers try to target different groups of people. Everything from bridal shops to sports clothing stores targets a different market segment. The department store may have a wide target market, but each area will appeal to a different market segment.

4. Real Estate

Real estate will be around for a very long time. People will ALWAYS need a place to live.

That in mind, much of real estate market segmentation comes from different variables that come with homeownership (or commercial leases). These include the price of the home, location, the view, number of rooms, and so on.

An individual real estate agent may serve a wide target market, but when making sales, they have to focus on individuals and what someone in their market segment would need.

First, Understand Your Small Business & What it Has to Offer

We talk about this so often, because it is one of the most important things you can do from a strategic perspective to help your business succeed.

Make time to evaluate your small business. The evaluation process will look different for each business because the particulars of your situation will always be a little bit different than they are for others. No matter what, though, performing a SWOT analysis is a good place to start.

SWOT stands for strengths, weaknesses, opportunities, and threats. You can read more about that here.

After you think about your small business itself, think about your target market. If you need help defining your target market, here is another article you can read to help you get started.

Once you can clearly define your target market, you can break it down into segments. When you want to break your target market down into segments, think about who currently comprises your target market. Ask yourself:

  • Who is my target market?
  • Are there natural categories of people who make up my target market?
  • If not, how can I sensibly categorize people in my market by common qualities such as age, gender, interests, or attitudes?

Why Evaluating Your Business is Vital For Market Segmentation

Evaluate your business to see which products and services are performing best. Odds are good that you have some standout products or services that overshadow others. That is just a part of business.

Through evaluating which products or services are doing the best, you can get a feel for how your overall target market can be broken into smaller segments. You can also see what kind of people read your emails, respond to your social media messages the most, and so on.

After evaluation, you know where and on whom to invest your time and your money. This lets you properly plan and schedule your time to be the most effective as you can possibly be.

What Is A Niche?

As we’ve said, a market segment is a segment of a larger market that can be defined by its own unique needs, preferences, or identity that makes it different than the market at large. Some people also use the term “niche market.” They’re interchangeable.

Having a niche means finding a unique way to meet the needs of a particular market. Breaking your target market down into smaller market segments can help you find yours.

Having a niche is vital for the growth of your small business. By segmenting your target market, you make it easier to reach a specific group of people, with a specific product, in a way that appeals the most to them.

As a thought exercise, think of any subgroup of people. This could be anything from people who work from home, cat owners, or even those whose work has been affected by COVID-19. In fact, for the sake of this exercise, let’s say these three qualities define your target market.

You already make pet toys, so you’re in a unique position to create something for cat owners who are now working from home because of COVID-19. You can find people like this online and find out what they want. If you found out that they wanted, for example, a quieter scratching post so they can focus on working from home during quarantine, you can make that.

Thus, this becomes your niche because it’s where your abilities (to make cat toys) and your target market (cat owners who are working from home because of COVID-19) meet.

How to Find a Target Market for Your Small Business
First time marketing your small business?
We know marketing can be confusing. Download our free marketing checklist for advice.

Demographics & Psychographics

Demographics are how we are able to break down a group into smaller subgroups. We have touched on some examples of demographics, but to refresh your memory, demographics can be anything from age, location, gender, and even income.

Demographics break down groups into sub-groups by quantitative information. Psychographics do the same thing by using qualitative information, which allows us to predict consumer behavior. Psychographics include opinions, interests, personality, and so on. These are your own thoughts and beliefs that make up your opinion on a product.

Through demographics and psychographics, you are able to more accurately segment your audience. There are many tools to segment your audience. One of our favorite platforms to use is Facebook Ads, where you can get as nitty-gritty with details as you would like to narrow down by both demographic and psychographic traits.

Why Should You Segment – All In All?

By focusing on narrow market segments, you increase your overall chances of success. We have walked you through many examples of how successful segmentation helps your business.

To really drive the point home, think about it like this: if you are selling a product or service that appeals to first-time homebuyers, you aren’t going to market it to every homeowner. By excluding everyone who isn’t a first-time home buyer from your market segment, you increase your odds of success.

3 Steps To Start Segmenting Today

As we wrap up, we would like to give you three quick steps you can use to start segmenting your market today.

  1. Tap into Facebook Ads. You don’t even have to run an ad. Just create an audience in their ad system.
  2. Find your niche.
  3. Choose who you are trying to reach and create a plan.

Final Thoughts

Market segmentation is really important to growing your business. With more businesses popping up every day, knowing who you are trying to reach will help you craft marketing messages that work. Segmenting your target market might take some effort, but it’s well worth it!

First time marketing your small business?
We know marketing can be confusing. Download our free marketing checklist for advice.

15 Comments

Javier Vallejo · April 20, 2020 at 9:26 am

Thank you very much, I did not know so many ways of market segmentation

Paulo Oliveira · April 20, 2020 at 9:41 am

Thank you very much for the information …

Gadi · April 20, 2020 at 10:03 am

Thank you very much. I learned a lot about market segmentation.

Maria Teresa Fernandez Ferreira · April 20, 2020 at 10:35 am

I love the information, thanks

Marek Starnes · April 20, 2020 at 4:36 pm

This is a great way to start segmenting.

Linda A · April 20, 2020 at 4:40 pm

Food for thought

Vadim Lingo · April 20, 2020 at 5:23 pm

I think that in the process one may even discover some previously not so obvious fields for own product

Binay Kumar Singh · April 21, 2020 at 3:24 am

Segmenting is important cause it will focus your marketing on potential customers and that way you can get more clients.

Kakhaber Khmelidze · April 21, 2020 at 11:19 am

You used just incredibel photos. LOve that one of pencils.

André Mendes · April 21, 2020 at 6:43 pm

Very insightful article, thanks for these great info

Shellie Clark · April 21, 2020 at 7:30 pm

Thanks for the good info

Hemant · April 26, 2020 at 7:48 am

This is an absolutely stellar article regarding market segmentation. It made me understand the true importance of targeting a particular audience and making products accordingly.

Loretta E · April 30, 2020 at 1:34 am

Wow from reading this now I need to go back to the drawing board to regroup some things I’ve learned by reading this article.

Jon C.F. · April 30, 2020 at 12:25 pm

Great information. Demographics and psycographics are simply narrative yet effective.

Patrick H · April 30, 2020 at 3:02 pm

This is good advice for someone starting their own business looking to market their brand.

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