“Know Thyself” may have been a popular aphorism for ancient Greeks, but for modern marketing professionals, the maxim is “Know Thy Customers.” Great marketers are aware of their customers’ needs and desires, and know how to hit that perfect combination of the right message to the right audience. But doing so is not something a great marketer does by chance or leaves purely in the hands of the creative or PR team – it requires real market knowledge and proper market segmentation.
Segmentation helps you identify the needs of different customers and gauge whether your offering resonates with that segment. It’s essential because you can only build and improve upon that which you are able to measure using specific metrics.
How to Segment Your Markets Properly
For a market segment to be valuable, consider these three factors:
1) Size– Is the segment large enough to warrant a separate marketing effort? If not, can you combine one segment with another that has similar needs?
2) Growth – Is the segment you’re targeting growing in size and purchasing power? If not, do you really want to include that group in your marketing strategy? (A shrinking segment among entrenched competitors will likely result in a bloody battle.)
3) Competition– Is the segment one in which you can compete profitably? Can you differentiate your offering? As a new entrant can you overcome barriers to entry? As an incumbent can you erect barriers to entry? How powerful are buyers and suppliers relative to you? (Learn more about assessing the competitive field in this famous article from Harvard Professor Michael Porter, “How Competitive Forces Shape Strategy.”)
If you are not able to identify segments that adequately address these criteria, take the time to find ones that do. While time consuming, it’s much less costly than investing in the wrong segment. Be sure to understand your customer’s true business needs and examine key behavioral, demographic, firmographic, psychological and geographic attributes. You can start your research with reports and win-loss data from your CRM database. Validate your assumptions—not just with your sales reps, but also directly with customers and prospects.
Eric Weiss is vice president of marketing at Axcient.
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