What is target market segmentation
The fundamental principle when breaking and entering a new product into the market is by first focusing all resources on dominating a specific niche. That means breaking down the broader market into several smaller segments; each segment then evaluated for its attractiveness, and eventually settling on the one that has passed the tests. That process constitutes target market segmentation.
The introduction of a new and innovative product to the market is a very risky endeavor. Key decisions have to be made with little or no useful information regarding the realities of the market. Statistics that exist are often based on assumptions and cannot entirely be counted upon as accurate information. Conducting a large scale feasibility study is expensive and time consuming.
The process of target market segmentation must start by focusing on the customers within the segments, and not by looking at the market as an entity of its own.
‘Markets’ and ‘segments’ are very abstract words describing groups of people, what we care about are the individual customers of a certain demographic. And since we may not have accurate data about them – given that the product is a new entrant to the market, we shall have to create the data ourselves.
Once we have their images in mind, we then let them guide us into developing the appropriate marketing approach to their needs.
Target Customer Profile
Target customer profiling is the process of making up fictional customer profiles based on real human characteristics. The profiles give critical information about the idealized customers, where none existed.
The data will be used to help make some key business decisions such marketing strategies, locations, operating hours, etc. The idea is to create as many profiles as possible, one for each type of customer that the product is potentially applicable to.
Once you have a library of up to 20 realistic customer profiles, you then filter the data to a smaller list of the most attractive profiles, and eventually to one (only one) which represents the most ideal customer.
Creating the customer profiles will require coming up with information through common sense, research and intuition. What we are essentially creating is a customer – complete with behavioral traits, based on what we know about people.
As explained below, each target customer must have a basic profile, and a scenario whereby they are stuck, then get unstuck with the help of the product. Once the profiles have been compiled, the data will be assessed against several factors in order to help determine the most realistic and desirable target.
The Profile
This section is further divided into 3 categories that help understand the customer:
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Demographics:
Age, gender, location, income bracket, marital status, occupation and education.
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Psychographics:
Personality, interests and lifestyle. This includes the customer’s hobbies, favorite sports, the activities that they enjoying doing in their free time, etc.
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Behavior:
The customer’s behavior when it comes to buying products and services. How does price, convenience, promotions, customer services and advertising affect them?
A Real Life Situation
This section describes a situation whereby the user is stuck, and how they get unstuck with the help of the product. The following details should be captured:
- The situation:
A description of the moment of frustration.
- The desired outcome:
What the customer would ideally like to accomplish.
- Introduction of the product:
How they about with solving the problem with the help of thee product.
- Economic benefits:
What were the costs avoided and benefits gained by using the product to solve the problem?
Processing the Information
In order to select the ideal target, the established profiles will be scored against each other; the highest ranking scenario being the niche to be used as the base for creating the marketing strategies. The scenarios should be tested against these factors, and given a score of between 1 – 10 (10 being the highest).
- Target customer:
On a score of 1 – 10, is there an identifiable buyer for this product who is readily available to the sales channel that will be used?
- The compelling reason to buy:
On a scale of 1 – 10, how strong is the reason for the customer to buy the product? Are the effects of not having it great enough to entice them to make the purchase, in order to fix the problem explained in the scenario?
- Advantage over competition:
On a scale of 1 – 10, how much more attractive is the product relative to the competition? (Look at the features, benefits and the overall user experience)
- Pricing:
On a scale of 1 – 10, how attractive is the product’s pricing, relative to the profiled customer’s budget, and the competition’s price points?
- Next target customer:
If the acquisition of the segment is successful, how well positioned is the profiled customer to facilitate entry for customers in the next niche? (Remember that the end goal is not just to dominate this one particular niche, but several others, and ideally the entire market.)
For the sake of keeping this post to short, here is an example that illustrates how you can use the information above to create a target customer profile.
