Segmenting a market refers to targeting a product to a specific target customer or industry, such as selling footwear to women or accounting software to hospitals. Market segmentation helps new companies develop a niche, or existing companies expand or diversify. Any marketing segmentation plan begins with detailed marketplace research.
List the specific consumers or industries you want to research as targets for your product or service. Target consumers by demographics such as sex, age, income or parental status. Target industries by listing and ranking those most likely to use your product or service, or those that are already using similar products and services.
Research the purchasing habits of your target customers by identifying the needs they are trying to solve or benefits they are seeking from products and services like yours. List the companies currently selling to these consumers or businesses, the prices in the marketplace and where consumers are purchasing these products or services. Gather trade association research that provides information on marketplace sales history, trends and projections.
Determine which segments of the marketplace might provide you with the most profitability. Compare them by evaluating your ability to create or modify your product or service to meet each market segment. Include a review of your cost of production, distribution channels you would use and pricing strategies. For example, if you are an apparel maker, you might consider making children’s clothing, or clothing for boys or girls only. You would investigate the logistics of all three scenarios. Make your determination as to which market segment you should pursue based on your marketplace research and evaluation of your internal capabilities.
Write a recommendation report starting with an executive summary that identifies the market segment you recommend entering and how your product and ability to deliver it to that market segment make it your best chance for success. Include a description of your target customers, why you think they are likely to want your product, and your projected sales and profits. Exclude detailed research findings and support in the executive summary, keeping it to half a page or less. Provide support in the rest of your document.
Create a report that includes the following sections: product description, benefits, target customers, competition, separate brand, pricing, promotional and distribution strategies, and budget projections. List the market segments you do not recommend your company enter and discuss why you don’t believe they are right for your company. Include a recommendation section that reiterates information from your executive summary, including steps for following your recommendations.