Purpose & Benefits of Segmentation

Segmenting a market means positioning your product or service to a specific group of potential buyers who have one or more characteristics in common. Doing this reduces the chance that customers outside your market segment will buy from you but increases the chances you’ll see more sales for a variety of reasons. Understanding the purposes and benefits of market segmentation will help you develop the right product or service features and communications plans to maximize your sales and profits.

You can create a market segmentation plan by a marketplace or type of customer. A publishing consultant might target a marketplace by positioning himself as a specialist at working with trade magazines or nonprofit member newsletters. A personal trainer might specialize in working with women or high school athletes. Demographics used to segment markets include age, sex, race, income and education level, parental status, industry or profession.

The purpose of market segmentation is to generate higher sales volumes by making a specific group of people believe you are the best one to satisfy a need they have. Trying to sell to everyone does not allow you to advertise a unique selling benefit, making it more difficult to compete with other businesses that do. Market segmentation also allows you to develop products at a lower cost, because you can narrow down your features to only those a specific group of people want, rather than trying to provide multiple products to multiple groups. A common example of market segmentation providing economies of scale is a restaurant that offers only Italian dishes, rather than an international menu that requires buying, stocking and preparing many different types of foods.

Segmentation helps you manage your marketing messages better by allowing you to provide a unique selling benefit and communicate that to the group that’s looking for it. For example, a website company that specializes in developing e-commerce sites can position itself as an expert in that area, reinforcing its brand of providing the best e-commerce consulting and services. If businesses saw that company advertising blog creation, social media campaigns and general corporate websites, its brand would not be as effective at attracting companies looking to add e-commerce capabilities to their websites.

Targeting one group of potential customers lets you take less of a shotgun approach to advertising, promotions, social media and public relations. The more narrow your target audience, the fewer advertising and promotion channels you might need to use, letting you repeat your message more often in places you know your target customer will see it. As part of the marketing mix, distribution plays a key role in your sales plans. Segmenting a market might allow you to use fewer distribution channels if your target audience buys in similar ways and at similar locations, helping you reduce your sales costs.