Segmenting Your Markets

Dear M & M: People keep telling me I need to segment my markets. What are they talking about? – Lee

Dear Lee: 

Segmenting markets is great way to determine who your customers are and helps you narrow down how you can best serve them. Imagine you are breaking an orange into different segments. As a whole you are still selling an orange. Each section is who you are trying to sell to. I am certain the makers of orange juice might want your oranges (Tropicana, Dole, and Minute Maid).

One section could be selling to institutions (prisons, school districts, hospitals, nursing homes etc.) Another section could be to sell to grocery chains (Fry’s, Food City and Safeway). Another section could be selling to individual consumers (farmers markets, produce stands, selling individual bags on the corner out of your pick-up).

One can see each segment needs oranges, but what you tell them to sell oranges in your marketing message from pricing, to delivery times, to quantities available each buyer’s needs are different.  What are your core competencies?  Do you have connections or personal contacts already in place in a particular market? Who are your competitors in each market? What are they currently paying and can I make any money and still compete?

One must analyze several factors to determine your company’s ability to sell to the various segments identified. Whether we are selling oranges to cars we have market segments that need to be considered. Subway Sandwiches is a good example of how market segmentation increased company wide sales using market segmentation. They were competing in the fast food industry with other stores from Taco Bell to Burger King.

They decided to redraw the lines and position themselves as the healthy choice in the fast food industry. Marketing campaigns were launched telling consumers you have a choice. They were better able to gain market share from people looking for a healthier choice. I am not making any claims that they are a healthier choice, but I am recognizing they took advantage of a position in the market by using market segmentation to fill what they felt was an unsatisfied need in the marketplace.

Just about every fast food franchise offers a healthy choice today. Understanding market segmentation and how you can compete is one of the vital components necessary in every business. Four ways to segment a market include industry, product, area, and customer. Industry sectors can be broken or segmented further (example: restaurant – sit down, fast food and family owned).

In conclusion, market segmentation is all about dividing a target market into smaller or other subcategories to design strategies more in alignment to the specific needs of that particular group or segment. It is a great way to further identify and implement a plan to fulfill needs to deliver what each particular group or segment wants.

-M&M

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