Now that you’ve got your head around how to segment your market, it’s time to figure out which ones to go after. We’re going to evaluate all of them and figure out the segments that will give us lasting returns with the least effort. Let’s start market targeting!
Market targeting is based on the fact that, unless you have a monopoly on your industry, your brand simply cannot satisfy every customer in the market. It’s actually a lot like dating. Sure, you may like someone a lot, but if you don’t have what they’re looking for, you’re doomed. If you don’t want to change, better to move on and find someone who’s a better fit. That’s how you find true love.
Before we continue, I will mention the caveat that good market targeting is easier to talk about than to do. There’s a reason that most companies will either have whole departments or hire outside specialist firms to take care of stuff like market targeting. When you’re market targeting, you need to be rigorous in your analysis of each segment. If you feel a little overwhelmed, that’s okay, we’re here to help you. Get in touch.
With that said, let’s look at how we can tell if we want to invite a segment out for coffee or not.
When we talk about sales potential, we’re asking ‘What is the maximum revenue and market share that my company can achieve for our product/s’. There are a lot of industry specific factors that are cross referenced when calculating sales potential, but the most common are:
- The total sales in the entire market.
- The segments your company could potentially target.
- Total resources allocated by your competitors to marketing.
- How effective your marketing is.
There’s not always a lot of free data out there on these factors, and you may have to conduct your own market research in order to get a proper understanding of each. Of course, even if the industry data is readily available, don’t fall into the trap of thinking it’s always applicable. For example, If your industry has been hit by a recession in the past two years but things are picking up, recent historical data isn’t going to give you a good idea of what’s to come.
Once you start encroaching on their market share, your competitors are going to take steps to stop you. It’s vital that you understand how prepared they are structurally and financially to do this. It’s a topic for a whole other post, but what you must understand is that you may have to increase your promotional budget when you’re waging this type of market warfare. If your competitors can match your promotions, there’s a good chance that you might be driven out of the segment you’re trying to gain through a war of attrition. Tread carefully.
A segment can look good, say the right things and wear some nice clothes, but to paraphrase the poet Kanye West ‘she takes my money, when I’m in need, oh she’s a trifling friend indeed’. All the profits in the world mean nothing if the costs are a dollar higher. Often a segment is just too well served, too competitive, or just not profitable enough to justify targeting it, and that’s okay. We can always come back to it later when our successful target marketing has made us a juggernaut.
Bringing it all together
If you did your segmentation properly, and you truly understand the sales potential of each one, the competitive situation of your industry and the associated costs associated, you’re ready to choose your segments. Better still, you’re going to have a really comprehensive understanding on how to tailor your offering to each segment, because you know it inside and out.
When you’re making your final decisions, keep in mind that the more you differentiate your product to suit a segment, the higher the associated costs. Look for the sweet spot that maximizes simplicity in production, yet allows you to respond to as many segments as possible.