Your customers consist of all different kinds of people who have unique needs, wants and demands. Not all of your prospects value the same things when seeking a product, so it’s important to segment your market to better appeal to them.

What Is a Target Segment Strategy?

Market segmentation involves grouping together people within your market who share similar characteristics. This enables your business to target them with products and messaging to which they can easily relate. A target segment strategy involves conducting research in your market to define the segmentation parameters, evaluating the potential for each segment and developing product positioning that appeals to the selected segments.

One of the ways to develop the target segment strategy is to use the STP method. This includes:

  1. Segmenting the market: Businesses categorize their market by several different characteristics, such as demographics or geography.

  2. Targeting the customers with the most potential: After conducting research on each segment, the business determines which segment has the most potential for success.

  3. Positioning the offering: The business creates messaging for its offering based on the segment it is targeting.

Segmenting the Market

The first step, segmentation, is critical because this is how businesses divide their consumer market into groups that share certain qualities. The four ways to segment the market include:

  • Demographic
  • Geographic
  • Behavioral
  • Psychographic

Using Demographic Segmentation

Demographic segmentation is one of the most common ways to target your ideal customer. Demographic characteristics include:

  • Age
  • Gender
  • Race
  • Ethnicity
  • Nationality
  • Sexual orientation
  • Family status
  • Income
  • Occupation

If a business sells graphic T-shirts, it may segment its market by age and gender to better appeal to its customers. Its shirts for females may have a different shape and sizing chart than the shirts for males. Plus, the graphics put on the shirts may be categorized by the age group it is targeting. What a millennial would wear on a graphic T-shirt will likely differ from what someone from Generation Z would prefer.

Using Geographic Segmentation

Geographic segmentation is related to where the customer is located. However, it’s not only based on the actual physical location. Geographic segmentation also includes:

  • Climate
  • Size of the region in terms of population
  • Population density

In today’s global economy, geographic segmentation is becoming a little more difficult since consumers travel frequently, and they are more familiar with different regions and climates. However, in some cases, geographic segmentation makes the most sense.

For example, if a small business makes hand-knit thermal socks and gloves, it’s unlikely that it will have success in warmer climates because there is not a high need for those products. Instead, it can segment its market by climate to target those who live in colder climates with subzero temperatures.

Using Behavioral Segmentation

The way people behave affects the way they make decisions. This kind of market segmentation involves looking at:

  • How often a person plans on using the product
  • How loyal a person is to a particular brand
  • How ready a person is to make a purchase
  • Whether a person has already purchased the product before

For established businesses, segmenting based on behavior has many benefits, especially if they focus on brand loyalty. Some customers will like a particular aspect of a brand and continue to purchase its products. This kind of brand loyalty should be nurtured and rewarded. Creating campaigns to target loyal customers can help businesses to establish brand ambassadors that are highly trusted by the market.

Using Psychographic Segmentation

Lifestyle is the key element on which businesses focus when segmenting based on psychographic characteristics. This kind of segmentation focuses on:

  • Customer attitudes
  • Interests, hobbies and activities
  • Opinions on social and political issues
  • Personal values
  • Professional ethics

A target market segment example for psychographic segmentation is focusing on a group of people who share the same hobby. If a company sells athletic wear, for example, it may want to target consumers who play basketball. The way it targets this market segment may include showing images of professional NBA basketball players in ad campaigns or playing a specific kind of music in its stores. The idea is to focus on the lifestyle with which your segment identifies.

Knowing Whether or Not to Target a Segment

For any given business, there may be dozens of market segments. However, the key is to understand which segments have the potential to earn the company revenue. All segments are not made equal, so businesses need to carefully research and understand the segments they want to target.

There are a number of criteria that businesses can use to evaluate the types of target markets they are considering:

  • Uniqueness: The segment needs to have identifiable characteristics that make it different from other segments. Those aspects need to affect the way the segment responds to marketing messages.

  • Size: The size of the segment is critical. If the group of people the business is targeting is too small, it will not be able to sell enough products to grow its business. The segment size needs to be large enough to justify a campaign specifically for them.

  • Accessibility: It’s important that the market segment be available and reachable, otherwise there is no point in targeting them. If a target segment is located in an area with a limited internet connection, for example, it makes it difficult for the business to target them through online marketing.

When researching market segments, businesses should keep these criteria in mind. The goal is to determine the return on investment for the segment. If they are not unique enough or are too small or too inaccessible, then the company may put itself in a risky position by targeting that segment.

Applying Segmentation to the Marketing Mix

Once a business has determined which market segments it will target, it’s time to apply segmentation to the elements of the marketing mix. The marketing mix is the foundational marketing strategy on which businesses build their product plans. When targeting your marketing segment, it’s critical to review all four elements of the marketing mix to determine how best to target the specific group of people the business wants to reach.

  • Product: This is what the customers require to solve the problem they are currently experiencing. When targeting a market segment, businesses may choose to create a unique product based on the needs of that segment. For example, if a bakery is looking to target customers who have celiac disease, it may begin by creating a line of gluten-free products specifically designed for that market segment.

  • Price: This is the amount of money that the customer is willing to spend on the product. Before pricing a product, businesses need to consider any established price points in the market for competitor products. If a business is targeting high-end consumers with substantial incomes, it may start off by pricing its products higher than its competitors to create an illusion of exclusivity.

  • Place: This is where the consumer will purchase the product. It’s important to consider where the market segment will be looking for the product. If a business is targeting eco-conscious consumers, it may want to avoid having a brick-and-mortar store. Instead, the company may want to focus on its online store, which promotes environmentally conscious living without the large footprint of a physical building.

  • Promotion: This is the messaging and medium businesses use to communicate with their market segment. It includes advertising, personal selling, direct mail, sales promotions and public relations. When targeting seniors, for example, a business may choose to advertise in newspapers and seniors’ magazines instead of on social media.

Each element of the marketing mix needs to work together when you are developing a new product or campaign to reach a target market segment.