A lot of people think about marketing, and they think about selling to a niche, and to me that’s not really a very specific way of thinking about marketing. Market segmentation is really a science, and you seriously have to do your homework.
Unless you define your market specifically to meet your needs, develop complete products for your customers, and then market specifically to the target market customers’ needs, wants, and desires, you’re just not going to be successful.
Step 1: Define Your Market
How Big Is It?
First of all, you have to divide up a big market and you have to look at the size of the segment. If it’s too small, it needs to be economically interesting, especially to your investors. But it’s too big, you’re not going to be able to address it. So you have to really do some research on the size of the market, and also you have to look at whether or not you can address that market.
If you look at a market for which you don’t have the core competencies or you don’t have the skill set needed to address it, you’re not going to be successful – or you’re going to have to invest a lot more money to be able to get into that particular market.
What’s Your Competition?
You also want to look at what the competition is in those markets. If there is somebody there that already owns the market, you really have to calculate whether or not you’re bringing something new to the party; whether or not you’re bringing an innovation that’s going to disrupt that market.
So the kind of characteristics that you look at in order to create a segment would be things like demographics (gender, lifestyle, etc…).
You might also look at age. I did a project once with the PGA, and they were looking to sell something to the golf market. It really has a wide variety of people. You would develop something that was quite different for retirees than you might develop for millennials. So you want to look at the characteristics of each age groups. What are their buying patterns?
Identify Specific Technologies
You could also look at technologies. You can look at it in terms of an industrial or B2B play. You might be looking at the kind of technologies that are specific to that area.
Look at Geography
You can also look at geographic markets. Often, companies that are large or are working on an international or national level might look at geographical characteristics.
Particularly in an industrial setting, you might wondering what the supply chain constraints are? It’s very difficult to get people in industrial production to change what they’re doing currently, or the kinds of products that they’re buying. They face huge expenses if they change from one product to another, so there has to be a real reason for them to do so. Those might be real barriers to market entry.
Step 2: Define the Product
Once you define what your market is going to be, and decide on going into a particular market segment, the first step is always to define the product.
Bill Davidow, who was the VP of marketing at Intel many years ago, wrote a book called Marketing High Technology. It’s still in my mind one of the best marketing books for technology companies I’ve ever read. One of the things that Bill says is that the definition of marketing is: “creating complete products and driving them to commanding positions in defensible market segments.” When you think about a product, it has to answer all the needs, wants and desires of the customer in that particular market segment.
Once you have your product and you know what your product is for that specific market segment; only then can you really decide on the price, place, and promotion.
Price will fall into line once you have the products designed, as will your marketing and distribution channels.
Step 3: Promote the Product
Lastly promotion, which is funny to me because many people start with promotion, but you can’t promote until you know the other three elements.
Promotion has to be really specific to your market segment, but this also saves you a lot of money if you’re doing a good segmentation plan. You don’t have to advertise in Time magazine, where single pages cost $90,000-$100,000 dollars, or on the front page of USA Today. You can now advertise in the areas that are specific to your market segments.
Customize Your Promotion to Your Market Segment
A really great example of this again is the work we did with the PGA, where they really wanted us to do a lot of viral marketing and they really wanted us to do a lot of Social Media. They were saying, “oh, it’ll go viral.” When you’re marketing to retirees, who are in their 70s or 80s, these people aren’t spending all their time online. Some of them are on Facebook, maybe, to see what their grandkids are doing, but they’re typically not checking it the way that young people do. So we found it was much more effective to work on radio. They all listened to oldies stations, they all went to all these oldies concerts; they had a lifestyle that was quite different from the mass market.
Understanding Targeted Marketing
When you know your target market, and you understand their psychographics, how they think about things, and what holds them emotionally; once you really have all those key elements in place you will be able to nail market shares.