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Market Segmentation for the Small Business

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Market segmentation is one of the steps that goes into defining and targeting specific markets. It is the process of dividing a market into a distinct group of buyers that require different products or marketing mixes.

A key factor to success in today's market place is finding subtle differences to give a business the marketing edge. Businesses that target specialty markets will promote its products and services more effectively than a business aiming at the "average" customer.

Opportunities in marketing increase when segmented groups of clients and customers with varying needs and wants are recognized. Markets can be segmented or targeted using a variety of factor. The bases for segmenting consumer markets include:

  • Demographic bases (age, family size, life cycle, occupation)
  • Geographic bases (states, regions, countries)
  • Behavior bases (product knowledge, usage, attitudes, responses)
  • Psychographic bases (lifestyle, values, personality)
A business must analyze the needs and wants of different market segments before determining their own niche. To be effective in market segmentation keep the following things in mind:
  • Segments or target markets should be accessible to the business.
  • Each segmented group must be large enough to provide a solid customer base.
  • Each segmented group requires a separate marketing plan.
Large companies segment their markets by conducting extensive market research projects. This research is often too expensive for small businesses to invest in, but there are alternative ways for to a small business to segment their markets.

A small business can do the following to gain knowledge and information on how to segment their markets:

  1. Use secondary date resources and qualitative research. You can use the following resources for external secondary data:
    • Trade and association publications and experts
    • Basic research publications
    • External measurement services
  2. Conduct informal factor and cluster analysis by:
    • Watching key competitors marketing efforts and copying them.
    • Talking to key trade buyers about new product introductions
    • Conducting needs analysis from qualitative research with individuals and groups.

There are many reasons for dividing a marketing into smaller segments. Any time you suspect there are significant, measurable differences in your market you should consider market segmentation. By doing so you will make marketing easier, discover niche markets, and become more efficient with your marketing resources.

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