Getting Started With Segmentation

Your ultimate goal in constructing segmentation is to develop an appropriate marketing mix offering. Starting to build segmentation should follow some deep thinking and analysis. The process will help you split your market into smaller groups with similar product needs or identifiable characteristics for the purpose of selecting appropriate target markets.


There are five primary steps to create your segmentation strategy:


Define Your Target Market

The first step in creating market segments is to clearly define the market of interest. It is important not to define a market too broadly, and define them in sub-markets. Questions: Is there a need for your products and services? Is the market large or small? Where does your brand sit in the current marketplace?




Problem You Solve

What problems does your brand solve?

What problems can you solve better than your competitors?

What do you know a lot about or excel at?

Who do you and your team like to serve?

Who Suffers With This Problem?

With understanding the customer problems that you solve, who is most likely to suffer from these problems? Once done, you can start to build up a picture of these customers. Group them by location - for example, high-net-worth individuals tend to live in certain postcodes. Group them by market sector - are they manufacturers, recruitment agents, and so on.

Benefits To Your Customer

Which specific customers will benefit from your offer?

To whom will these problems be most troublesome?

Who will have the most to lose by not dealing with these issues?

Can you define any niche markets that can benefit from your solution?

Your Value Proposition

What company expertise can you offer?

Do you have particular areas of expertise?

Do you have unique knowledge of a specific geographical area?

Are you better at getting on with certain types of people?

Your Differentiation

What differentiates you from your competitors?

Why are you uniquely placed to solve the problem?


Create Your Market Segments


Understand your market & evaluate the proposed market segments for viability. Start looking for market segment opportunities. A market segment opportunity is a trend that can drive new marketing tactics or offerings. To find them, first, ask questions about your brand.


You do this by conducting preliminary research surveys, focus groups, polls, etc. Ask questions that relate to the segments you have chosen, and use a combination of quantitative (tickable/selectable boxes) and qualitative (open-ended for open text responses) questions.


Decide which of the five criteria (demographic/firmographic, psychographic, geographic, or behavior) you want to use to segment your market. Choose two or three of these variables from your market research.





Segmenting by country, region, city, or another geographic basis.


Segmenting is based on identifiable population characteristics, such as age, occupation, marital status, and so on.


This segmentation approach involves an understanding of a consumer’s lifestyle, interests, and opinions.

Benefits Sought

This approach segments consumers on the basis of specific benefits they are seeking from the product, such as convenience, status, or value, and so on.


Segmenting the market based on their relationship with the product or the firm. Examples include heavy or light users, brand loyal brand switchers, and so on.


You don’t need to stick to just one – in fact, most brands use a combination – so experiment with each one and find what works best.


Assess Your Customer Segments


With your responses from your research highlight which customer segments are most relevant to your brand. While constructing your strategy, make sure you evaluate your segments to be strong and not weak. Strong segments result in far greater ROIs. Here is a table of the summary that gives your a glimpse into




Relevant Segmentation

Serving Relevant Segmented Customers.

Uniquely Segmented Customers

Each Of Your Segments Must Be Different And Unique.

Measurable Segmentation

Design Your Segment For Potential Earnings

Substantial Segmentation

Be Focused But Have A Significant Collection Of Customers.

Accessible & Actionable Segment

The Market Segment Must Have The Ability To Purchase

Responsive & Stable Segment

Your Segment can be nurtured over time and multiple impressions.


Evaluate And Test Your Market Segments


The selection of a target market is a very important decision for any business as it requires effort and commitment to implement an appropriate and targeted marketing mix.


Target market selection is a key part of marketing strategy and typically involves significant analysis, discussion and review throughout the firm. As a quick introduction, some of the factors that businesses would consider are as follows:




Segment size

What is the size of the segment (mainly in terms of volume/unit and revenue sales)? And is this substantial enough for the firm to consider entering?

Segment growth rate

At what rate is the segment growing (or perhaps declining)? What is its future outlook?

Profit margins

Is this a high-profit margin segment or one that is price competitive?


How dominant are the established competitors? What degree of competitive rivalry exists? Are there significant indirect competitors (or close substitute products)?

Distribution channels

How easy would it be to gain access to the appropriate distribution channels? What level of new investment would be required in this regard?

Role of brand

Would the firm be required to create a new brand, or could an existing brand be leveraged into the new target market, or is the brand relatively unimportant?


How well does the proposed target market fit with the firm’s strategic direction and growth goals?


Does the firm have the capability, in terms of financial and marketing resources, to successfully compete in this segment?


Once you have interpreted your responses, test your findings on your target market, using conversion tracking to see how effective it is. And keep testing. If uptake is disappointing, relook at your segments or your research methods.