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  • Shriram Iyer

Reasons WHY A Small Business Should Segment Their Market!


Have you ever met a business owner and asked, "So, what's your target market?" And have they ever replied saying, "Oh, Everyone!" Well, here's a FREE tip, if that business owner asks you to invest with him / her, all you have to do is run a mile in the opposite direction.

Unlike the chicken and egg situation, there is no such problem with Segmentation and Targeting. In order to choose a target market, you absolutely have to segment the market first!

Many small business owners are happy to take on any amount of work from anywhere. They are happy to operate the entire length of their business lifecycle on 'survival' mode. But here's the thing - they don't have to.

What is Segmentation?

For the sake of example, when the British colonized the world and India specifically, they adopted a principle of 'Divide and Conquer'. Segmentation is a complex word that means just that - 'divide your market'.

A characteristic of a segment is that the group of customers in a segment typically have common needs and are hence grouped together. The biggest barrier to doing segmentation for small business is the 'C' word - COST.

Segmentation relies heavily on market research and a lot of small businesses simply don't have deep enough pockets to be able to afford it. While larger corporates with differentiated product lines can do that, small businesses will typically discover their segments by trial and error - a hugely risky way to segment the market.

Have you walked down the Melbourne CBD recently? If you have, it is almost certain that you have been stopped by someone trying to sell something to you. From charity companies to mobile companies, everyone wants you to buy something. And if you live in the suburbs like I do, you would have noticed a complete absence of roadside sellers. That is because the Melbourne CBD is one of the attractive geographical segments that businesses choose to target!

The concept itself is pretty easy - but actually deciding how to divide up the market can be tricky. And each industry has it's own basis for segmenting the market.

How Do You Segment a Market?

There are generally four accepted types of segmentation as described below:

  1. Geographic (eg: Country, City Region etc)

  2. Demographic (Age group, Occupation, Gender etc)

  3. Psychographic (Lifestyles, values, interests etc)

  4. Behavioural (Buying stage,Loyalty status, Usage rates etc)

But for many small businesses, this hugely crucial first step in getting your marketing efforts right is too complex and too costly. Which is where the need to look at segmentation with a slightly different lens comes in - a more practical and efficient one.

The Existing Customer Base

Segmenting the existing customer base in a way where the mutually exclusive, yet completely exhaustive segments will inform accurate marketing strategies is important. Hidden within this customer base is an army of customers who are so delighted with you that they will take it upon themselves to market you - all they need is a little nudge, a little love and they are good to go. On the same token, there could also be another army of customers who are so discontent that they will tell the world about how you have made their life miserable.

The trick is to identify these segments correctly without blowing your marketing budget.

If you run a small-to-medium business and are keen to see how this could benefit you, give me a call and I would be happy to chat further.


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