Why you should segment your market
Your market usually includes primary, secondary and sometime even tertiary audiences, whose needs and preferred communication channels vary. Segmentation allows you to focus your marketing on each of these needs.
Segmented marketing is generally more cost-effective than mass marketing and offers better return on investment.
While mass marketing aims at a very broad group of people, many of whom might not fall within your target market, segmentation allows you to reach more of your ideal customers more often and at a lower cost.
Bear in mind that customer circumstances change as time passes, which affects their consumer patterns (for example, buying property, changing jobs, starting a family, retiring, and so forth).
By being sensitive to these changes you can expand your reach and retain customers who might otherwise switch to competing brands.
How to segment your market
There are a number of ways of categorising your target audiences, depending on their particular behaviours, needs and preferred means of communication.
The most common segmentation tools are:
- Demographics (age, family size, life cycle, occupation).
- Geography (regions, provinces).
- Behaviour (product knowledge, usage, attitudes, responses).
- Psychographics (lifestyle, values, personality).
Also consider the following:
- You must be able to reach these segments or target markets.
- Each group must be large enough to provide a solid customer base.
- Each group requires a separate marketing plan.
Large companies segment their markets by conducting extensive market research. While cost puts this out of reach for most small businesses, there are other ways of finding out what you need to know.
Scour trade publications, basic research publications and general newspapers for trends and statistics. Swap information with trade buyers, monitor your competitors and always, always talk to your customers.
Transactional vs relational marketing
Transactional customers are usually those who are buying a product and who want the highest value at the lowest price.
They like to shop around and compare your products and services with your competitors'. They look for bargains and generally think of your product as a commodity rather than as a solution leading to a long-term relationship.
This type of customer is a great source of word-of-mouth advertising - when they find a good deal, they tell everyone about it. Your marketing should therefore focus on low prices, value-add and special offers.
Relational customers, on the other hand, look for reliability and long-term relationships. This type of customer typically considers a business transaction to be one in a series of future transactions, and they are the best kind of customer to have.
If you take care of them, they can be excellent sources of referral business from their friends and business associates. Marketing to this type of customer should focus on your service levels, expertise, values, trust and long-term commitment.
Interestingly, transactional customers account for an estimated 80% of all store visits, but only 40% of sales. Relational customers account for just 20% of store traffic but 60% of sales.