Getting Strategic With Segmentation
Questions That Must Be Answered Before Building A Segmentation Strategy
Why do I need a segmentation strategy in the first place?
The best analogy I can think of is that of a ship. Imagine if the captain yelled “Cast off,” but the crew didn’t know the plan. How would they know which way to steer? How to trim the sails? Or even how to stay out of the way? A strong crew works most effectively when they are well trained, have clear instructions, and know where they are going. If any of those elements are missing, then that’s a recipe for a shipwreck.
Your company may not need to know how to trim the sails, but they do need a segmentation strategy to turn your business into a success. Market segmentation has become a common practice amongst marketers and businesses who want to understand the behavior of their customers to better position themselves for their services or products. While it sounds easy enough to do, in theory, many companies have had problems when performing their segmentation, you can easily get caught up in the details
Answering the following questions will help you build a segmentation strategy most suitable for your business.
How Big Is Your Market
“Everyone is going to buy this product!” This overambitious misjudgment is a common fallacy called the Entrepreneur’s bias. This thought process could prove to be a huge mistake for a company. Entrepreneur needs to make sure that they aren’t leading their company with blind optimism.
The most essential step in launching an idea into the market is reasonably and thoughtfully estimating its potential market size. This becomes even more significant in the case of companies that seek third-party financing such as Venture Capital (VC). Most VCs and angel investors would like to know that they are investing in a market with large potential size.
Your market is divided into two categories:
- The addressable market is the total revenue opportunity for your product or service.
- The available market is the part of the addressable market for which you can realistically compete.
Once you have mastered the difference between these two, you can offer a product strategized to tackle the customer sweet spot.
So how do you determine your market size?
To calculate the market size, you’ll either refer to the data on the number of potential customers or the number of transactions each year.
For example: For a company selling toothbrushes, virtually everyone can be counted as their market. If people are listening to their dentists and purchasing new toothbrushes more frequently, that number is even larger.
Keep in mind the following points while collecting your data:
- Create projections going out three years.
- Account for organic growth or decline in the following years.
- Your rollout to different geographic locations over time.
Once you have collected the data, you need to determine the Total Addressable Market (TAM).
No startup should expect to gain 100% of the market shares. If you have no idea what a reasonable amount of market share would be, try to find out about the market volume of your local competitors. Then estimate you’ll be doing a fraction of that after you gain traction.
There are three distinct ways to calculate TAM:
- Top-down, using reports and research.
- Bottoms-up, using early selling efforts data
- Value theory, using conjecture about buyer willingness to pay
The most important aspect is to be realistic about your projections. You need to stay objective and impartial about not just your product or service, but also about Customer needs and wants. Otherwise, you might find yourself doing business in a market too small to stay afloat.
What Industry Trends Are Unfolding In Your Market?
It is necessary to keep up with the latest trends in technology, marketing, sales, and customer services. All these trends might not affect your business but all major trends do influence the customers’ expectations. Hence, it is essential to be up to date.
The most significant trends that will impact small businesses in 2021 are given below.
- Businesses that are green and socially responsible shall be preferred by customers
Ever heard of the term Corporate Social Responsibility?
Today, many businesses make it their mission not just to do well, but to do good. Corporate social responsibility (CSR) refers to this growing practice of for-profit organizations aligning with relevant causes and social good programs.
Social responsibility, besides making the world a better place, also benefits companies in their recruiting and Customer appeal. The Nielsen Global Survey of Corporate Social Responsibility found that more than half of people surveyed “are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact” and two-thirds would rather work for such a company.
2. Good reviews by customers
Customer reviews are crucial all the time. Prospective customers trust reviews by the existing customers. Hence it helps to gently remind your customers to give reviews. In order to get good customer reviews, make sure you focus on your customer service and address the issues faced by the existing customers.
3. Traditional businesses are learning to profit from e-commerce.
E-commerce business is a strategy to sell products online through web rooms at special prices and discounts. In today’s world, with the wide use of smartphones and laptops, e-commerce is no longer an option but has become a necessity.
Traditional businesses are learning to profit from the e-commerce revolution. Online retailers like Amazon help traditional businesses to expand their operations without the need for more physical space.
The investment in an e-commerce business is much less compared to a traditional offline business. The risk factor is also reduced, promising better profits.
4. Mobile Marketing
Marketing of products through mobile will surely grow in the years to come. Businesses can take advantage of the popularity of mobile phones in a number of ways:
- By creating an app for your business. The app will help in sending promotions, offers, latest news to everyone who has the app.
- Use SMS and email to stay in touch with your customers. With permission from customers, texts with your latest offers can also be sent.
- Online mobile payments platforms such as Google Wallet are appreciated by customers.
5. Sharing stories on social media.
To connect with your audience in a spontaneous and authentic manner, share stories on Facebook and Instagram. Live Streaming on YouTube, Facebook and Instagram is a very powerful tactic for more visibility.
The good news is that engagement doesn’t have to be a mystery. It can be achieved. You just have to know how to tell your story. When you tell your brand narrative on social media in a way that resonates with the right customers, they will use your products and services leading to more followers, clicks, tweets, and likes.
What Are The Needs Of Your Market? How Are They Changing?
Marketing strategies target customers who are segmented into groups. For segmentation, surveys play an important role in collecting the information required.
Segmentation in groups is of the following six types:
- Geography (Country, City)
- Demography (Age, Gender, Occupation)
- Lifestyle (interests, activities, preferences, and opinions)
- Behavior (attitude, loyalty, usage, knowledge)
- Benefit (benefit derived by the customers from your products)
Using surveys is the best way to segment the target market. A survey also can help you segment customers based on the attributes they desire from the product.
Read more about how to segment your market here.
Customer needs and interests are constantly changing. Therefore, small businesses must keep up with the type of products and services the customers want.
For example: A company may introduce a new drink with two flavors: strawberry and blueberry. However, in order to increase market share, they may need to add other flavors that the consumers want. They could also increase the popularity of the product by giving away free samples with their other products that are in demand.
Consumer tastes change with respect to the product features, styles, sizes, dimensions, and services. Conducting market research surveys is a good way to keep track of your customers’ needs and wants.
What Should Be Your Go-to-market Strategy For Each Product/Solution?
When you're launching a new product, the last thing you want is to waste time and resources bringing it to the market where or when it’s unnecessary. So the first step would be to craft a well-thought-out plan. Without proper planning, it’s impossible to know if you’re chasing the wrong audience, you’re too early or too late to the market, or the market is already too saturated with similar solutions.
What is a go-to-market strategy?
A Go-To-Market (GTM) strategy is the way in which a company brings a product into the market. It includes a business plan outlining the target audience, a marketing plan, and a sales strategy.
How can I create one for my company?
The creation of a successful GMT strategy must include the following:
- Identifying buyer personas and creating a value matrix.
What are your customers’ specific needs and interests? What is the typical background of your ideal buyer? These questions are answered by creating buyer personas which are basically a representation of your ideal customers based on data and research. Next, a value matrix should be created which provides the purpose of your product and the customer needs that each of its features fulfill.
- Defining the marketing strategy
You need to have a deep understanding of the market, your competitors and the customers. While defining a market strategy for your business, make sure you answer the following questions:
- What is my target audience?
- Why does my product matter to them?
- Who is my biggest competition?
- What is my USP?
- What resources give me an edge over my competition?
- How can I use these resources to optimize the outcome?
- Understanding the buyers’ journey
It is very important for you to understand how a buyer goes from step 1 i.e. “Do I really need this?”, to actually buying your product. You need to convince the buyer that they need the product and that you are the best source of that product.
- Selecting a sales strategy
This step consists of creating a plan that will introduce the product or service to the market. Some elements to include in the sales strategy include:
- Training support: How to train the sales team so they have enough knowledge to confidently sell the product or service.
- Tools and resources: This includes anything needed by the sales team to identify, engage with and sell to customers as well as manage these relationships and demonstrate the product or service.
- Client acquisition: Identify the best approach for finding customers.
How Do Your Competitors Go To Market?
It is often said that a marketer’s job is never done. This is especially true when it comes to keeping track of your competitors. This usually becomes costly for a small business in terms of time as well as money. Given below are a few places you can start:
Set Up Alerts
Get updates on your competitors’ activity via Google Alerts. All you have to do is type their domain and select the activities you want to be notified of. These activities could be blogs, videos, posts, images, or discussions. Pay attention to their titles and meta descriptions and the tone they use.
Follow them on social media
Follow your competitors as well as the key leaders on social media to get a sense of what they are doing.
For example: As a restaurant owner, you may want to follow the names of restaurants you compete with as well as the chefs and restaurateurs to get a full picture of their activity.
Sign up for their newsletters and emails
A good way to receive emails from competitors is by signing up for a free trial or making a small purchase. This gives you the perspective of a customer and also helps you keep track of what you’re up against. Take note of the language they use, their tone, and also the offers and discounts they provide. This will help you strategize a plan for your company accordingly.
Assess their SEO performance
Analyzing your competitor's SEO will help you understand how they draw people to their site through informative, relevant content.
You can emulate their approach by targeting many of the same keywords that they target. You should also fill in the gaps by covering territory where they're weak or have no presence. Identifying those areas will be a key part of your competitor analysis. Here's what to look for:
- Their most useful organic content i.e. what gets them the most clicks.
- Their existing rankings i.e. the areas they have a strong presence in?
- Their past rankings i.e. their growth, decline, and other important changes.
- Their backlink profile i.e pages that link to them and help them rank.
Track their ads
Use sites like WhatRunsWhere and Adbeat to see the display ads your competitors are running on other websites.
Take note of your competitor’s most trusted keywords. Your competitor might experiment with other terms, but you can easily see where they invest their time and money. Make sure you review the ad copy that they run with their top keywords. It reveals their most dominant messaging. This will help you understand their strategy better.
Check their website regularly
Explore their website to find out what they’re doing right and what they may be doing wrong. This also keeps you up to date with all their product launches, their offers and discounts, special promotions, and positioning.
Another important note to make is their hiring section. You can find out valuable information about the company and their areas of growth by looking at the positions they need to fill.
SWOT Analysis is a technique used to identify the strengths, weaknesses, opportunities and threats of your company.
Why should I conduct a SWOT analysis for a small business?
If you’re a marketer or small business owner, you might be wondering if SWOT analyses are practical or even feasible for your business. There is definitely a resource overhead involved in the creation of a SWOT analysis, but there are many benefits in doing so, even for the smallest of companies. Conducting a SWOT analysis allows you to identify what your company is good at, where it could improve, the opportunities for your business and the threats you need to deal with.
What Are Your Competitive Strengths And Weaknesses?
It is comparatively easier to determine your company’s strengths and weaknesses as compared to the opportunities and threats. This is because the former are internal factors while the latter are external factors that require more effort and rely more on statistical data.
In order to determine your strengths as an organization, you could begin with the following questions:
- What do your customers love about your products?
- What does your company do better than your competitors?
- What are your best brand attributes?
- What’s your unique selling proposition (USP)?
- What resources give you an edge over your competitors?
Answer these questions and identify the strengths of your company.
We can use the same principle to determine your company’s weaknesses:
- What do your customers dislike about your products?
- What problems or complaints are repetitive?
- Why do your customers cancel or churn?
- What could your company do better?
- What brand attributes require improvement?
- What are the biggest obstacles/challenges in your current sales funnel?
- What resources do your competitors have that you do not?
What Are Your Opportunities And Threats In The Market?
In order to identify opportunities and threats, you may be required to conduct an in-depth analysis about what your competitors are up to. You also need to examine the wider economic or business trends that could have an impact on your company. Some possible questions you could ask to identify potential opportunities might include:
- How can we improve our sales or customer service or customer onboarding processes?
- What kind of messaging best suits our customers?
- How can we improve on engaging our most vocal brand advocates?
- Are the departmental resources allocated effectively?
- Is there budget, tools, or other resources that we’re not leveraging to full capacity?
- Which of the advertising channels exceeded our expectations and why?
For identifying the threats to your company you can begin by asking the questions above. However, it’s often quite easy to come up with a list of potential threats facing your business or project without posing questions beforehand. This could include “branded” threats such as emerging or established competitors, broader threats such as changing regulatory environments and market volatility, or even internal threats such as high staff turnover that could threaten or derail current growth.
You may also notice that the quality standards or specifications of your product are changing and you need to reflect those changes in your product if you want to stay in the lead. Evolving technology is a constant threat. But it is also an opportunity!
- Getting Strategic With Segmentation
- Questions That Must Be Answered Before Building A Segmentation Strategy
- SWOT Analysis