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Plucking The Market’s Fruit One Segment At A Time

TRYING to be all things to all people is one of the surest ways to sink a business. We know you want to be a market leader, defined by Jack Welch and others as being in the top three in terms of market share, but what has that got to do with segmentation?

Well, do not sink, shrink. As Geoffrey Moore, author of the technology company marketing bible Crossing the Chasm has famously observed, one of the best ways to grow is to “shrink yourself to greatness”. Part of the shrinking process is defining markets in your own terms.

Once you understand market segmentation, you will be in a better position to concentrate your resources as it enables you to tailor products and services to meet specific requirements.

Market segmentation is a way of dividing a market into smaller, identifiable groups or segments of potential customers that exhibit similar traits or wants. Between mass marketing (selling to everyone) and individual marketing (selling one-to-one), it enables businesses to target specific groups where the likely return (number of sales) is higher.

Once you have segmented your market, you will need to perform a targeting exercise. The characteristics to consider when targeting and prioritising include the following:

• Number of customers in a segment and spending potential;
• Your ability to reach the customers in the segment cost-effectively;
• The intensity of existing competition in the segment;
• The level of customer satisfaction with what your competitors are offering;
• Growth potential and profitability of the segment; and
• Barriers to entry.

Again, especially for small companies, the more narrowly you can define your segments and the more successfully you can pick the “low-hanging fruit” (profitable, sustainable segments), the more effective your sales efforts will be.

The accompanying segmentation model diagram was developed by the Wireless Broadband Organisation in the UK. This particular model is important because it focuses on “who actually pays” or who the end user is.

Gregory Serandos is MD of public relations and digital marketing agency Pure Communications.