Market Segmentation Breakdown - Procedure for Segmenting Markets
Small businesses can grow into large companies through the application of marketing concepts, including market segmentation. This strategic approach has been instrumental in the success of numerous businesses, as demonstrated by the growth of established chains like McDonald's and KFC.
Determining Customer Needs
The first step in market segmentation is understanding what customers want or require. This might involve assessing consumption behavior or desires, such as identifying that a region lacks a restaurant serving continental food, which indicates a market opportunity.
Identifying the Segment
The second step is to group customers based on similar characteristics such as demographics, psychographics, behaviors, or geographic factors to form distinct segments. For instance, an Italian restaurant owner might identify middle-aged people and youngsters as his target audience.
Choosing the Most Attractive Segment
The third step is to evaluate and select the segment(s) that are the best fit strategically and have the highest potential profitability and growth. In the case of the Italian restaurant, the owner targets middle-aged people and youngsters in his region, using a combination of demographic and geographic segmentation.
Determining Profitability
The fourth step in market segmentation is to determine the profitability of each segment. This ensures that the chosen segment(s) can sustain a profitable business.
Positioning for the Segment
Positioning communicates why the product is different and valuable to the chosen segment through marketing communications and digital marketing efforts. The Italian restaurant owner positions his fast food chain next to the Italian restaurant to attract both his target audience.
Expanding the Segment
Expanding segments can entail broadening the targeted group or increasing penetration within the segment. The Italian restaurant owner expands his business by looking for other geographic segments where he can establish the same concept.
Incorporating Segmentation into Marketing Strategy
Incorporation into the overall marketing strategy ensures the segmentation guides product development, pricing, distribution, and promotional activities effectively. This alignment with the STP (Segmentation, Targeting, Positioning) model is crucial for any firm, regardless of size.
By following these steps, businesses can simplify their operations by making the target audience clear, attract customers effectively, and expand their reach, as demonstrated by the success stories of numerous companies.
- To effectively target middle-aged people and youngsters in the region, the Italian restaurant owner utilizes both demographic and geographic segmentation in their business finance and marketing strategy.
- As the Italian restaurant expands into new geographic segments, they continue to apply market segmentation principles to ensure the growth of their business and the profitability of their selected target audience.
