It is very important that you define the target market to whom you would like to sell your product or service. Market research is the instrument which can provide important information about the market and how it is best served. The aim of this type of market research is market segmentation.
What Is A Market Segment?
A market segment is a subsection of a market which is made up of individuals or organisations with one or more characteristics which cause them to demand similar products and/or services based on qualities of those products for example price or function.
The purpose of segmenting a market (in other words, dividing it into subgroups) is to allow your marketing/sales programme the opportunity to focus on the subset of prospects who are ‘most likely’ to purchase your offering. If done properly, segmenting the market – and then focusing on your most likely prospects – will assist with ensuring the highest return for your marketing and sales expenditure.
Dependent on whether you are selling your offering to individual consumers or businesses, there are obvious differences in what you will consider when you are defining market segments.
What Methods And Techniques Can You Use To Determine Market Segmentation?
The concept of market segmentation has assisted marketing decision-making since the evolution of marketing. The aim of market segmentation is to divide the total market for a product or service into smaller groups of customer segments according to:
- Their characteristics,
- Their potential as customers for the particular product or service in question, as well as
- Their differential reactions to marketing programmes.