Market segmentation helps organizations to identify their target market, determine the product’s value proposition, outline the customer journey and improve their experience, leverage new business models, and adopt advanced technology to gain a competitive edge over their competitors. The concept of market segmentation is not based on a ‘one-size-fits-all approach; instead, it is based on gaining an in-depth understanding of the customer. By leveraging market segmentation strategies, organizations can get a detailed understanding of the consumer’s behavior, attitude, preferences, and needs to develop tailored product offerings and devise personalized communication accordingly. Market segmentation helps answer the following questions:
- Who are your customers?
- What are your customer’s preferences and needs?
- What is the unique value proposition offered by the product or service?
The answers to these questions may seem simple at first, but marketers must clearly demarcate the boundaries and create clear-cut homogeneous market segments to avoid overlapping.
Things to Keep in Mind for Effective Segmentation
Marketers must understand various approaches and avoid common mistakes to devise effective market segmentation strategies that drive business profitability and increase operational efficiency. The daunting task of segmentation is identifying the product’s target market and developing necessary marketing campaigns to create a unique and compelling value proposition.
The following tips will help you develop a fool-proof market segmentation strategy:
- There are two segmentation approaches available to every marketer – benefit based and customer based. The marketing function must identify the benefits to develop new product or a market entry strategy and then refine it using customer demographic and psychographic variables.
- Marketers must avoid following pre-defined and large market segments. Identifying smaller target groups and focusing on specific market subset or segment by defining the target market increases the success probability.
- By developing product ideas and concepts based on benefits, businesses can tap the potential in new markets and create new business opportunities. Businesses can leverage business intelligence solutions such as customer intelligence and market intelligence to understand the market landscape.
