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TYPES OF MARKET SEGMENTATION cvr

How To Segment The Market For A New Product In 5 Steps

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Marketing to the wrong audience is a wasted effort for you and your team. Investing company revenue in various marketing efforts but not seeing any return can harm the company’s morale. 

You may be making excellent strategies, sending attractive email campaigns, and advertising on all the right media but still failing to see any profit. 

What is the problem? If you have to guess, you are not segmenting your audience right. 

In this article, we will break down how you can create targeted segments to increase the likelihood of a successful marketing strategy.

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What is Market Segmentation?

Market segmentation is a marketing term that refers to segmenting, or grouping, prospective buyers into different segments based on shared characteristics. It involves segmenting a heterogeneous market into a number of smaller homogeneous markets based on different customer characteristics that play a role in determining their wants and purchasing decisions.

By segmenting markets, you can understand them and tailor marketing strategies, products, and services that cater to their needs, preferences, and pain points. This increases the chance of business success and drives loyalty.

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What is the importance of market segmentation for a new product?

Strategy plays a vital part in the successful development, launch, and marketing of a product. 

Here are a few important reasons you should segment the market for a new product. 

1. Understand customers’ needs: 

It can help you gain a deeper and more comprehensive understanding of your customers’ behaviors, motivators, preferences, and needs. The insights can help your organization design and develop products that cater to those needs and save you from wasting resources. This will lead to efficient product development and boost customer satisfaction and loyalty. 

2. Targeted marketing communication:

Segmenting the market allows you to gain knowledge of what issues customers are trying to resolve and what their needs are. This can help you in tailoring your marketing efforts and communication to appeal to specific customer segments. 

3. Efficient use of resources: 

Market segmentation can not only help you understand your audience but also help you leverage the resources efficiently. You can optimize your product development, marketing budgets, and distribution strategies based on the knowledge you extract from the customer segments. 

4. Competitive advantages:

Through effective segmentation, you can learn where you stand in the competitive marketplace and use the knowledge to identify market opportunities. It can help you uncover the gaps and position your brand more effectively against your competitors. 

Now let’s look at the process of market segmentation.

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How to Segment the Market for a New Product

How to Segment the Market for New Product2

Segmentation is especially important while introducing a new product in the market. Proper segmentation ensures that new products are exposed to the right customer as soon as they are introduced into the market.

Use these five steps to segment a market for a new product effectively:

  • Define your market. 
  • Create market segments. 
  • Construct segment profiles. 
  • Evaluate segments. 
  • Select your target markets. 

Let’s explore these 5 steps. 

Define your market

The first step in segmenting markets is identifying the market you are interested in. You must clearly outline the different characteristics of your target market. It is important that this market isn’t defined too broadly but instead focuses on specific characteristics.

Create market segments

Once you’ve clearly defined your market, you can begin to segment this market into different groups based on shared characteristics. While doing so, the four different kinds of market segmentation discussed above should be considered. Depending on the type of product you want to introduce into the market, you can pick a segmentation type.

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Construct segment profiles

Create a profile of your segment that describes the market segments accurately. This profile should include descriptions of the geographic spread, demographic distribution, psychographic description, segment size, segment growth rate, consumer needs, usage level, and additional relevant details on consumer behavior.

Evaluate segments

The fourth step involves evaluating segment profiles. You must evaluate the attractiveness of each market segment before you can select the one that is most appropriate for you to target. 

Different structural and financial factors will play a role in determining the attractiveness of a market segment. This includes profit margins, type of distribution channels, segment size, and growth rate, and competitors.

Select your target market(s)

Once you’ve properly evaluated the different segments, you can select the segment that you want to target. This is the most important step in the whole process, as the segment you select will shape all your marketing strategies and your product positioning going forth.

Leverage online survey tools that enable you to conduct market research, uncover characteristics among customers, and identify trends. Create tailored customer profiles to understand requirements, pain points, and preferences. 

[Related read: Why is Market Segmentation Important?]

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What are the Different Types of Market Segmentation?

How to Segment the Market for New Product1

There are four main types of market segmentation, and they are

  • Behavioral segmentation,
  • Geographical segmentation,
  • Psychographic segmentation,
  • Demographic segmentation.

Let’s look at these 4 common segmentation types. 

1. Behavioral Segmentation

This type of market segmentation divides consumers into different groups based on specific behavioral patterns that they share when making purchasing decisions. Behavioral segmentation involves categorizing consumers by usage, occasion, loyalty, and benefit.

2. Geographical Segmentation

Geographical segmentation involves segmenting consumers based on their geographical boundaries. Customers can be segmented by country, state, city, area, or region. As potential customers may have varying habits, wants, and interests influenced by their geographic region, this form of segmentation allows these segments to be targeted more effectively.

3. Psychographic Segmentation

In psychographic segmentation, consumers are grouped based on psychological characteristics such as social class, lifestyle, and personality. The insight can help you create a unique customer profile enabling you to tailor marketing messages and offerings. It can enable you to adapt your product or develop features that align with each psychographic segment. 

4. Demographic Segmentation

Demographic segmentation is the most straightforward way of segmenting customers. This technique segments customers based on demographic characteristics such as age, gender, income, education, religion, etc.

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Conclusion;

Customers need to change as time goes by. Having a flexible process to create market segments can help you prepare for any change in customer preference or behavior. 

You can follow the 5 steps to create market segments to ensure you deliver the right message to the right audience. Segmenting markets allows for better targeting and positioning of products which results in an increase in market share and improves profitability. Businesses can make informed decisions, optimize product development and marketing efforts, and drive business success.

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