Market Segmentation for Fun and Profit

If you have been in business for a while, you’ve likely made discoveries about your industry, customers, and market. Hopefully, you’ve uncovered new opportunities and have a strong understanding of how to prosper and grow. Naturally, marketing plays a role in any growth plan. What follows are tools, especially market segmentation, you can begin using right away to make the most of your promotional efforts. A fundamental technique expert marketers use is to segment your market into groups based on interests and shared motivators. Broad segments like industry, income, and location are obvious. You can imagine how the messaging would be different for each of these, however, depending on the goal, these are too broad. The key is to address motivators of individuals that comprise each segment. The more specific the better. Before getting into specific examples, let’s explore another concept; positioning.

segmentation segmentingPositioning

Positioning is the sales and marketing process/technique of matching interests, activities, lifestyle, personal goals, location, income and other attributes to the products and services individual consumers care about. Get started by asking questions. Business books teach you to ask, “who cares?” Let’s take that up a level by listing everything you sell, then asking the following for each product or service you offer. Who cares about this product or service? Why do they care? How much do they care? What problem does this product or service solve? Is this product or service the best solution on the market? Why? How much does the consumer care about this product or service? Why? What is the most important reason consumers want this product or service? What is the most important reason consumers would not want this product or service? How does this product or service make your consumer’s life better? Come up with as many questions as you can and answer them thoughtfully and completely. Try to build a profile and mental picture of individuals that share common motivators. The idea is to match the right consumer with whatever you sell. It can be tricky, but the ones that do care probably care a lot.

Positioning Example

Imagine a leaky pipe. It is natural to assume someone with a leaky pipe needs a plumber. However, a different consumer might resolve the problem with a trip to the hardware store and fix the leak himself. It’s a problem with two very different solutions, which is why positioning is critical. If you are a plumber, it is important to position your service for the “call a plumber” group. Likewise, if you own a hardware store, it is pointless to market plumbing supplies to those that have no interest in fixing their own leaky pipes. As suggested, segmentation is the process of organizing consumers into similarly motivated groups. This allows you to position your products or services to the groups that are most likely to be interested, by matching your messaging with their goals. You can to this several ways. The most rudimentary would be to simply list them. Somewhat more advanced would be to use a spreadsheet. One challenge with these and similar solutions is they require manual action to keep up to date. A bigger problem is they make it difficult to work with more than one attribute at a time. Segments are typically built from several attributes (income, interests, special needs, etc.) that add up to form a complete consumer profile. The best tool for this is CRM (client relationship management) software.

Client Relationship Managementcrm client relationship

You’re probably familiar with client relationship management (CRM). You might even use a CRM in your business. If not, CRM provides a means for storing customer/client information including simple stuff like contact information and purchase history, along with anything else you find relevant. However, storing information is just the beginning. Most CRMs provide tools to manage your sales pipeline, contact clients and colleagues, send emails and even automate tasks. CRM is a dream for managing customer/client segments. Usually, this is accomplished by creating groups by filtering attributes that are stored as fields. For example, you might know from experience that customers that purchase product X, frequently also purchase product Y. With a few keystrokes, your CRM will provide a list of customers that purchased product X, but did not purchase product Y. Now you have a segment for a future campaign to market product Y. Segmenting this way makes it possible to focus your message on those who will be most likely to make a purchase.

Buyer Personas

Once you have developed consumer segments, create personas to represent individuals in each segment. Personas serve as real people that have a reason to be interested in your services. They help you develop a relatable, personalized understanding of what motivates individual consumers to make buying decisions. This will be especially useful when deciding on the marketing mix and to develop messaging. Personas will help you avoid talking about yourself by focusing on the needs of individuals rather than you and what you sell. Imagine a friend coming to you for advice. The first thing you’re likely to do is listen and make sure you understand the problem or need. You’ll ask clarifying questions and think about similar experiences of your own or others before offering ideas.

Why Use Buyer Personas

Personas not only make your market segments human, they make you human. No one wants to be sold, but we all want to learn from someone we trust. Try to imagine how you will earn the role of trusted advisor to each of your personas. As mentioned, each persona represents a larger group of similarly motivated individuals, but be careful not to simply give your market segments names. Give them context, challenges, goals and even objections. Here is an example persona for a real company that arranges educational group travel for students. These support an effort to increase bookings for performance tours, like band festivals, parades, and other playing opportunities.

Persona Example

Bob the High School Band Director Bob is a 30-something band director in his 5th year teaching 9th through 12th grades. His predecessor had grown complacent in the years leading up to retirement and the band program was suffering. Bob’s first struggle was to reignite student interest in music. A decade of attrition and neglect had taken a toll on the program. He’s worked very hard to build an excellent program and wishes to reward students with opportunities to perform and compete outside their hometown. He has minimal support from school administrators but has successfully grown a network of active parents. He has never traveled with a band but would like to and is being approached by competing tour companies.

Persona Analysis

The reason this persona works is it provides context. Even though his persona is fictional, scores of high school band directors share the same motivators and challenges. Using Bob as the model, we can build a market segment that includes band directors that share similar attributes. This allows us to focus the marketing mix and messaging on the things these specific individuals care about. In Bob’s case, he also has an active group of supportive parents. It makes sense to build personas, messaging and a marketing mix aimed at garnering their support. Their motivators are related but their frame of reference (context) is not. To reach them, we need to address the needs and goals of parents, not band directors.

Growth Tools for Small Businesses

Market segmentation is not a new concept. Same with buyer personas. The challenge for most small business owners is limited time and budget constraints. However, taking time to define and address groups of customers as individuals can mean the difference between thriving and merely surviving. The good news is your competitors probably won’t put in the effort. Advantage: You.