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Market Segmentation

Do You Need Market Segmentation to Define Your Target Market?

Posted On  January 11, 2021
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Consumer behaviors, beliefs, and needs have been radically altered over the past year. And if the first two weeks of 2021 are any indication, this year promises to be as unpredictable as the last. As you look at the market and your business, it’s important to ask yourself: do you still understand who your best target segments are?

As a marketer, your job is to position your brand to sell as much of your product or service as possible. But smart marketers know their chances of doing this increase if they paradoxically focus their efforts against just part of the market. It is a rare brand (typically a first mover in a new category) that can be all things to all people and succeed without a differentiated offering or position.

Most brands compete in existing categories and do so by carving out their own niche ― the portion of the market that wants (or can be encouraged to want) their brand or offering more than the alternatives.

Market segmentation research is the most common way to identify and understand the types of customers within your target market. They’re the portion of the total addressable market you plan to focus your efforts against, in comparison to other market segments you choose not to focus on. For smaller brands, or those with a new product to launch, identifying just a single target market segment can offer a smart way to focus time, energy, and resources to quickly drive impact.  For larger established brands, having multiple targets may be required to meet revenue goals.

Do you need a market segmentation or just a target segment?

A market segmentation study is a foundational piece of research that lets you understand the full lay of the land in which your product or service is operating. It sub-divides your market into a set of mutually exclusive groups that are different from each other in actionable ways that help you set strategies, drive innovation and messaging, and deliver targeted or personalized messages.

Some segmentations are defined by concrete traits such as demographics or business characteristics. Others are defined by less tangible metrics such as attitudes toward the category and the needs it is used to fulfill.

Most segmentations generate four to eight mutually exclusive groups from which marketers typically pick one to three target segments for their brand. They do this since they want to devote more of their resources against those groups that represent the greatest economic potential and where they believe their brand has the greatest chance of winning.

  • Some marketers choose a “North Star” with the goal of retaining and strengthening their position where their brand is already strong, coupled with another segment or two that represent growth or innovation targets.
  • Other marketers manage product or brand portfolios and use their market segmentation to set disparate targets for each in order to maximize reach and avoid cannibalizing each other.

In either case, the richness of a full market segmentation is helpful since it offers multiple priority targets, and lets you set aside the lower priority groups that will not receive precious resources.

How do you define a target segment without a market segmentation?

Some marketers really only need to understand one group of consumers, a singular target segment.

As an alternative to a full-scale market segmentation, an existing brand with a clear positioning and a set of loyal consumers might choose to do a Prime Prospect study. In this approach, we create predictive models to identify a common attitude and needs profile of current core consumers. We then size and profile the group of people who display these traits; they are the target segment. Within this group, those who are not yet embracing the brand are considered “Prime Prospects” for acquisition and conversion efforts.

By comparing the Core Consumers to the Prime Prospects within the target segment, we can glean insights about how to overcome barriers and increase penetration or frequency. In contrast to a traditional market segmentation study, we identify a single target segment and make no attempt to understand the several different types of non-targets that exist in the market.

Alternatively, a new brand from an engineering- or creative-driven company may have a muse in mind for whom they have developed a product or service. But they need quantitative research to find out how large that segment actually is, how much market potential it offers the new product, and what other needs and traits they possess. A Design Target study can quantitatively identify and profile this target segment.

How to use your target market to better personalize your digital marketing

Unlike simply profiling core consumers on their attitudes, needs or other traits, executing a Prime Prospect or Design Target study can also set you up for future research. By providing a typing tool or set of “golden questions,” you can use this type of study to classify future research participants into the target vs. non-target segments.

You can then do additional research ― around positioning, messaging, pricing or feature optimization ― among just the target segment, increasing your chances of success.

Further, once you’ve quantitatively defined the target segment, you can then build a custom audience to activate in market by targeting advertising to those most likely to belong to the target segment. Not only do you get to know your customers better, you can focus your limited marketing resources where they’ll create the greatest impact.

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