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Effective Market Segmentation

By: Scott Miller

 

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In your quest to grow your business, you must organize your business around your customers. You cannot force growth on customers; ultimately, you can only grow if the customers are there to support a growing business. As you organize your business for growth, however, you can maximize the support you get from customers through effective market segmentation.

The 2012 elections shined a spotlight on the importance of market segmentation. Using impressive data analysis, the campaigns micro-targeted specific segments of voters. The Obama campaign in particular built huge databases based on a wide range of demographic features to find swing voters. The campaign was built on the principle of segmenting the market of voters and targeting those segments that offered the biggest reward.

You don’t need the resources of a presidential campaign to use market segmentation in your business—but the example does prove its effectiveness! You can set your business up for explosive growth by focusing your organization on the right groups of potential customers.

There are different ways you can use market segmentation to help grow your business, including attitudinal segmentation and demographic segmentation.

Attitudinal Segmentation

One option for market segmentation is by attitude. To do this, think of putting everyone into five different categories:

1. Hard Opposition. These are the people who really don’t like you, and realistically speaking there is nothing you could do to win them over to your side.

2. Soft Opposition. These folks might not really dislike you, but they prefer a competitor. That pre-existing loyalty makes it tough to sell them.

3. Undecideds. This category is full of people who don’t have an affiliation with any of the brands or businesses in your market. They might be won over by price promotion, since the Undecided are very sensitive to deals, or pure luck—but you can never hold them very long, because before long they’ll go looking for the next big thing, the next deal from the next guy in your market.

4. Soft Support. Your Soft Support are people who like your business, although they’re not as reliable customers as the next category…

5. Hard Support. This category is for your loyal customers, people who don’t consider other competitors in your market, who come back again and again, and who spread the word about your business to other people they know. They are a true blessing!

At first glance, you might think the Undecideds are the first place to go, but actually, your most productive targeting will be with the people who already support you—the Hard Support and the Soft Support. The more you reward your Hard Supporters, the more they will reward you. Rewards and special offers for your best customers will keep them coming back more than ever, and give them greater motivation to talk to other people about your business. The Hard Support are the ones who have a chance to win over the Undecideds; trying to do it yourself will just wear you out with little to show!

After the Hard Support, focus on your Soft Support. With a little prompting, you can work on getting them to come back to you more and turn them into Hard Support. Organizing your business around reaching those groups will give you a fiercely loyal base. That kind of effective market segmentation will quickly turn into a growing business.


Demographic Market Segmentation

Another, and perhaps more obvious, way to segment your market is by various demographic features. Does your business target a specific age range? Consumers in a particular range of household income? People with a specific level of education? Or perhaps individuals who participate in a certain activity?

Traits like those will help you segment your market by demographics. Doing that can help you figure out which people are most likely to become supporters of your business given the information and opportunity. To borrow categories from attitudinal segmentation, they might look like undecided but they really aren’t.

You have to know who your customers tend to be, and organize your business around serving their needs. Big companies do this all the time. Red Bull targets the adventurous demographic; their advertising and marketing efforts are all geared toward that group, including the decision to own a Formula 1 racing team. Pepsi takes on Coca-Cola, the leader in its market, by age segmentation. They target people under 30 and get endorsements from young celebrities.

There are a lot of potential customers out there in the world, and if you try to target all of them, you’ll end up expending a lot of time, energy, and cash—for an inordinately small reward. But by targeting specific demographics, you can focus your energies on a smaller percentage of the whole—and get a lot more return, too. You can grow as big as your target demographics will let you.

Published: December 19, 2012
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Scott Miller

After graduating from Washington & Lee University in 1967, Scott Miller began a career in advertising and political consulting. As Creative Director of McCann-Erickson in New York, he worked for such clients as Coca-Cola, Miller Brewing and Exxon, and won every major award for creative excellence in the advertising industry, including Clio Awards and a Lion d'Or from the Cannes Film Festival. In 1979 he founded Sawyer/Miller Group with David Sawyer. In 1988, Scott co-founded Core Strategy Group. At Core, he has worked on developing communications, marketing and branding strategies for a number of Fortune 100 clients. In addition, he provides commentary on political and corporate communications on the major television networks, and often lectures on communications, branding and insurgent strategies.

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