For small business growth, when you first put your marketing or sales function into gear, you’re usually faced with a blank slate – and that can be scary.
Where do you get started? How do you reach out to people and say “hey, check out our product!”?
Setting up social media accounts, getting a website ready, running advertising campaigns, and planning sales activities – these are what are seen as functions of marketing & sales, but that’s where most people get it wrong. These activities are simply the outcome of marketing & sales strategies.
To achieve business growth, knowing your audience is essential. With Kylas CRM, track your leads through different stages of their buying journey and convert them into your potential customers.
The Need for Market Segmentation for Small Business Growth
Small business growth requires an effective marketing and sales strategy. And to get your marketing & sales off the ground, you first need to get a few answers in place – the million-dollar answer being to the question:
“Who is Our Customer?”
With today’s complex consumer aspirations, needs, and buying patterns, answering that question is no longer as easy as it used to be.
Your target customer today won’t just be mothers! It will be working mothers striving for that work-home balance. They are likely to stay conscious about the brands they buy, spending time on LinkedIn and Instagram, with little to no digital exposure outside of working hours.
It will also be the stay-at-home moms who’re online in the afternoon. They are constantly worried about their children and extremely focused on family life. These two types of mothers will buy your product in different ways. Perhaps, even for different reasons, most likely at different times of the day.
This is important to know when most of your brand or product information is being sought online.
Now, the responsibility is for you to reach out to them and introduce them to your product. This means you need to know exactly who you want to reach out to.
So, Market Segmentation is Essential Because…
…in today’s world of consumer-led marketing & sales, you’re going to need to personalize how you talk to your customers and the experience they have with you. Without personalization, you won’t stand out from the sea of brands everyone is exposed to every day. Also, you won’t be able to get them to relate with you more than they do with other brands. And you can’t create personalization without market segmentation! According to a study by Bain & Company, 81% of executives found that segmentation was crucial for growing profits.
4 Benefits of Market Segmentation for Small Business Growth
1. A Better Understanding of Your Customers
As we’ve outlined above, the biggest base-level benefit of segmenting your market is that you get a deep understanding of your customers.
Not every brand has a niche market. But, even those that deal with just one type of customer, still need to segment for varied preferences and buying patterns.
For brands with wider target audiences (like department stores, grocery stores, or some of those in manufacturing/consumer goods/FMCG), segmenting the market becomes of utmost importance to be able to target customers of every kind, and present a unique experience yet cohesive brand experience tailored to each of them.
Essentially, segmenting the market and conducting adequate research into each segment of customers helps you understand who is likely to buy your product, why, when and how. It helps you market and sell to them much more effectively, and boosts your small business growth.
2. A Better Connect with Your Customers
Once you have a deeper understanding of your various customers, the idea is to use that understanding to build a deeper brand connection with all of them. We specify all to stress that not everyone is interested in/looking for the same thing from your brand. In fact, many of them are not looking for your brand.
But when you understand them, you can use that insight to build relatable content. For that, you use platforms that each of them frequents at the right time. This way you can draw them into what you have to offer.
3. Higher Revenue + Higher Returns on Marketing Spends
Once you are able to streamline your marketing strategy, communication and collaterals based on what each of your customer needs, you’ll see a direct increase in response.
Right from the clicks you get on your ads to the engagement you see on your social media, the open rates for your emails, and the attendance for your events – you’ll see a decided increase in the number of people interacting with your brand and buying from your brand.
What’s more, because you’re reaching the right people in the right way, you’re saving yourself the wasted marketing budget of reaching people less likely to buy from you…thus increasing your return on marketing spends and creating a good digital presence for your brand/product!
4. Increased Brand Loyalty
Every brand has its own personality, its own way of connecting with potential customers. And when you’re connecting with the right people in the right way, they tend to relate with your brand more than the others they see as alternatives – to put it poetically, you form the starting of a sort of bond.
Combine that with great customer experience and customer service. You will continue to build on what makes you special to each of these customers. This will eventually result in brand loyalty that will bring you the most coveted customer of all: a brand advocate.
Building a brand from scratch requires a lot of hard work. Learn how to plan and develop your brand elements from Kylas’ blog.
Types of Market Segmentation
You might wonder how one begins to segment your target customers. If you go by basic logic, any segmentation must occur on the basis of certain basic common traits or factors. There are a few such established factors that have been in use since just about forever in marketing:
1. Geographic Segmentation
As the name goes, this segmentation is done based on the location of your target customers. Local small businesses will usually target their immediate localities, or localities within a certain radius, but national and global businesses have their work cut out for them with a target location that spans an entire country or the world.
This depends on a number of factors, starting with what you produce/offer, the people that will benefit from it, and how you can get it to them. A lot of companies start small and expand to the national or international level, but that’s not always a necessity!
Some of the most successful companies go global to be able to capture the market right away.
Geographic segmentation involves segmenting your customers by:
- Neighborhood/Zip code (for boutique/hyperlocal businesses)
2. Demographic Segmentation
In general, demographic information refers to details/data such as age, gender, education, employment, income, marital status, familial structure, ethnicity, etc. Demographic segmentation is done on the basis of these traits – one of them, or a combination of multiple.
For example, Brand XYZ may choose to target 30–45-year-old unmarried women with a master’s degree and income of over $100,000 per year.
Based on this information alone, you could guess that Brand XYZ’s product or service is targeted to busy, career-minded women with fast-paced lives – that’s the power of a demographic segmentation done well. It’s a niche market, but when they reach women that fall into this demographic category, they’re most likely to see their highest conversions.
3. Psychographic Segmentation
Psychographic traits are those that define the personality or character of a person – they tell you how that person thinks, what they want to achieve in life, and the kind of problems or needs they have.
In today’s world where two customers rarely think alike, proper insight into psychographic traits gives you all the data you need to be able to connect to anyone and everyone.
Psychographic segmentation is done on the basis of:
- Personality traits
As you can imagine, this sort of data is harder to come by and much more difficult to dissect. If you conduct thorough consumer research and use psychographic segmentation, however, you’ll be able to establish a much deeper connection on a personal level with each potential customer.
Let’s take the popular example of Airbnb. It targets customers that want to go beyond the tourist experience of hotels in new places, to get the true feel of the city/town they’re visiting.
These customers don’t want to simply see the attractions. They want to visit the same restaurants as locals, take in the attractions, live in local neighborhoods, visit local stores and travel like locals, so they feel part of the fabric of the place they’re visiting.
Hotels, on the other hand, target the other half of travelers – those who want to be waited on, who want the convenience and luxury of ready meals and service, and so on.
4. Behavioral Segmentation
As the name suggests, behavioral segmentation is done based on certain behavioral traits or habits of consumers in regard to purchases.
Everyone has a different way in which they approach their buying patterns. It depends on where they shop online and how they discover new brands. Whether they like to splurge or save, whether they tend to stay loyal to brands or keep looking for newer/better alternatives, whether they’re well-versed with online shopping or still getting there, etc.
Essentially, behavioral segmentation is done on the basis of-
- Spending habits
- Online browsing habits
- Common purchasing patterns
- Relationships with brands
- Product/technology use
Behavioral segmentation is often used as a supplementary form of segmentation, to identify cohorts based on certain behaviors. What that means is not many brands will use behavioral segmentation in the first place. They’ll rather identify cohorts among their segments.
5 Steps to Segmenting your Market
1. Know What You Want to Achieve
Like any step in a marketing or sales strategy, you have to know what you hope to gain by segmenting your market.
Do you want to just better understand your customers? Do you want to create more relatable communication? Choose the right marketing channels for small business growth. Do you perhaps want to create a sales strategy that handles each segment differently? Or perhaps you want to inform a larger business growth strategy.
Whatever your reasons may be, it helps to know what you expect to get from segmenting your customers. This helps you in measuring up the process against what you expect as the ultimate output. If you need to plan your Go-To-Market strategy, for example, knowing where your potential customers are located will influence the process.
2. Identify the Parameters for Segmentation
Once you know what you expect to achieve from your market segmentation, you can choose the segmentation type accordingly. A Go-To-Market strategy, as we mentioned, will require you to look at where your customers are located physically. This means their geographic segmentation as well as who they are (demographic segmentation).
Essentially, you will most likely – though not always – need to layer two types of market segmentation to arrive at the most accurate representation of your prospective customers. We recommend using the most distinct type of segmentation first, and then adding to it with supplementary types to lend more focus to the outcome.
At the same time, you don’t want to narrow down your audience too much. Leave a bit of grey area for potential customers who you may not have identified as your ideal customers, but may be interested in your product/service anyway! When it comes to predicting consumer behavior and planning your audiences, you need to leave a bit of leeway.
3. Identify How to Target Each Segment
Segmenting your market is only useful when you have a strategy to be able to target/leverage each of those segments. In essence, when segmenting your market, there’s no point in getting caught up in the possibilities and theory of it. If it doesn’t simplify how you will reach and convert each market segment.
Firstly, ensure you’re productively segmenting your market is to pick up each segment one by one. Secondly, run through how you can best reach and connect with them. This involves which marketing channels you would use, how it can help streamline your sales strategy, how it will elevate the effectiveness of your advertising, etc.
If you have a clear enough picture of how that will be done – and how it will benefit your end goal of reaching more people/making more revenue/improving your ROI – you know that you’ve correctly segmented your market.
4. Test Each Market Segment
Putting a theory and strategy into motion is always a dicey game in marketing and sales. You might start out with 3 market segments and a clear idea of how to target them, only to run campaigns and find out that certain segments aren’t reacting the way you’d expect them to at all.
In the end, successful market segmentation comes down to the actual response of each segment to your brand, and you might be in for some surprises there. Many a brand has discovered that their ideal customers didn’t prefer their product over competitors, while an unexpected segment of customers became brand loyalists.
We recommend starting slow by testing out each segment against the outcome you’re looking for, before scaling your strategies and trying to conquer all of them.
5. Revise and Revisit
Once you’ve tested each market segment, you’re in a good place to make revisions to any that need reconsideration. Perhaps one segment just didn’t respond the way you expected them to. Or, perhaps, you discovered a new segment along the way.
Either way, market segmentation isn’t always a done-and-dusted deal; you can always make certain changes, loosen up on your parameters to expand the segment, and so on.
Even after you’ve finalized your segments, a change in small business growth strategy or product development may dictate that you relook at the entire market segmentation just a few months down the line. So, when it comes to market segmentation, the more agile you can be within the parameters the better it will work out for you in the long run!
Are you ready to conduct your own market segmentation exercise? As we said earlier, it’s one of the best places to get started on marketing and sales strategies for small business growth! In most cases, you’ll find that it even adds clarity to some high-level business strategies.
And the best way to conduct your own market segmentation exercises will need sales CRM software doing what it does best – helping small businesses grow with ease.
With Kylas’ workflow automation, businesses can automate a variety of routine tasks and minimize manual errors.
If there are any questions, we can answer for you to better segment your market, let us know! Simply drop a line in the comments section below and we’d be happy to help you along your way.