It is easy to let your customers choose your business. However, what if it was the other way around? As entrepreneurs, we can choose our customers, cater to different market segments, and target specific types of customers.
What is Segmentation?
One way of identifying potential types of customers is segmentation. Segmentation is the process of dividing the market into similar categories (i.e., segments) and then tailoring your marketing and sales efforts to each segment.
Benefits of Segmentation
Segmentation can be beneficial when it:
- Uncovers overlooked customers
- Allows you to prioritize your best customers
- Enables you to customize your products/services
- Tailors your marketing to speak to specific customers
- Reduces expenses and saves resources
Types of Segments
There are many ways to segment our customer including:
- Location (i.e., urban vs. rural)
- Markets: (i.e., US vs. international)
- Trade (i.e., type of industry)
- Sector (i.e., Business to consumer, business to business, etc.)
- Age/Life Stage
- Criteria for Purchase
- Time of Purchase
- Size of Purchase
- Price Sensitivity
Perhaps, you tailor your products and marketing to speak to a specific life stage such as a teenager vs. young married couple vs. a family. Alternatively, you may tailor your marketing based on buying behavior knowing that the earlier adopters will pay full price for the new and latest item while the discount shopper will wait for a sale.
When it comes to segmentation, you can use the different factors in various combinations. Perhaps, you start by segmenting your audience geographically (ex: US market vs. international) and then further segment your audience based on demographics or buying behavior.
Find Your Favorite Customers
Once you have outlined the various customer segments, you can determine which to prioritize. Perhaps, you prioritize the customers who place the largest orders or the customer who provides the greatest long-term value with many repeat purchases over time. You can always serve all customers but perhaps you want to spend more of your marketing budget targeting specific segments. You can decide which customers you approach proactively vs. which customer you wait to come to you.
How to Use Segmentation
Segmentation can help you determine which products and services to offer. Perhaps, you offer the ability to customize aspects to cater to different segments. Alternatively, you can offer add-ons and supplemental products that appeal to various customers.
Segmentation also helps you to better personalize your marketing and sales strategy to specific customers. Perhaps, you leverage social media to target one segment, email for another, and direct mail for another. By knowing who you are trying to reach, you can develop a better understanding of how to reach them. Often, you can find savings when you target a smaller segment than a mass market to a larger number.
Segmentation can also help with pricing. You could have a good, better, and best product to cater to three different segments with different price sensitivities.
Segmentation may sound overwhelming, but it can be broken down into 3 steps:
- Brainstorm the possible customer segments.
- Define your customer portfolio and prioritize the segments.
- Customize your products, services, and marketing for each segment.
Getting Started with GrowthWheel
If you need help with segmentation, the first step is connecting with a GrowthWheel Advisor. Mark Johnson, the Executive Director of the Technology Innovation Center, is a Certified GrowthWheel® Business Advisor.
Once you have connected with an advisor, he/she will send you a 360 screening. After completing the screening, your GrowthWheel Advisor will recommend decision sheets to help guide decision making and create a 30-60-90 action plan that outlines the decisions and timeline.
Send us a message today to get started!
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