The best way to make your business fail is to try to sell everything to everyone. In fact, not all people can be your customers, but in a world with more than 7 billion people there will surely be a slice of the market that will allow you to make your company survive, or even better, to make it thrive. Identify the type of consumer that best suits your product / service by following these simple steps to segment a market. (Disney stores, for example, try to only appeal to children, rather than targeting consumers of all ages.)
Steps
Step 1. Evaluate the market or markets you want to target
Decide what methods to use to define your market segment and business model. You can characterize a segment by following one of the following categories:
- Geography refers to your location or the location of your target consumers, i.e. where the product or service will be used.
- Demographics refers to the characteristics of the target market such as age, gender, education or size of the home.
- Psychography, or the psychological characteristics or emotional traits of consumers, based on a belief system or personality. An example may be risk-takers versus tranquility-seekers.
- Lifestyle refers to behavior-based criteria. You have to analyze the activities of your ideal consumer, from hobbies to favorite vacation spots.
- Life stage, a category that combines the demographic and psychographic characteristics that the various groups have in common in order to outline at what stage of life your target consumer is: university or worker, young couples, parents with adult children, etc.
Step 2. Qualify the chosen market or markets
Once you have evaluated the criteria to define the market you want to aim for, estimate its value based on the possible profits that can be obtained from your company. Answer the following questions:
- How big is the segment now? Is it big enough to support my business?
- How difficult / easy is it to address this segment?
- How likely are my competitors to target the same segment?
- Will the segment grow or expand in the future? How long will it take before any growth occurs?
- Does the segment really fit my business model? Can I meet customer needs immediately or should I fundamentally change the foundation of my business?
- How difficult will it be to get the data I need to fully understand the segment and answer all these questions?
Step 3. Collect and analyze target market data
If time and budget allow, it uses primary and secondary resources to build a clear image of the market.
- Review your sales data. Who buys your product or service the most? When is the purchase made? Where are the customers located? Who buys and for whom?
- Cross-reference this data with other companies operating in the same industry as you. You can consult the public data of companies or contact the Chamber of Commerce to obtain basic information.
- Research information from published reports from market research companies to understand what are the real reasons driving consumers' buying habits.
- Analyze the collected data. Look for similarities and differences between the general population. Do some groups have similar behaviors or do they differ greatly based on location or age? This group analysis will help you delineate the various segments more clearly and answer the previous questions. You can also begin to get your first ideas on communication and marketing strategies for your segment.
