Market segmentation can be a complicated and expensive endeavor. It can also be straightforward and inexpensive. Regardless of the approach taken, target market segmentation is essential to effective brand management and to achieve competitive advantage.
A range of tools is available to help market researchers conduct market segmentation. Basic to all of these tools is a focus on what consumers want or need and how a product or service meets that preference or need. It is imperative that the product or service be differentiated from competitors' products or services. As part of this understanding of the differentiation, the market researcher needs to articulate why and how consumers will perceive this differentiation when they are considering a purchase.
Know Where You Want to Go With SMART Goals
In business planning, there are SMART goals. In market segmentation, there is the MIDAS touch. The two acronyms represent similar conditions and criteria.
SMART goals are characterized by the following:
- Specific: A specific goal is clear, unambiguous, and efficiently answers the questions: What, Who, Why, Where, and Which
- Measurable: A goal that is measurable (and measured) is more likely to be attained and also provides information about progress toward meeting that goal. A measurable goal answers the questions: How much? How many? When will we know the goal has been met?
- Attainable: A goal that is attainable must be realistic and placed somewhere on a continuum between too easy and too difficult. The importance of this criterion is that it can help a goal to be realized as people strive to answer the question: How can this goal be obtained?
- Relevant: A relevant goal helps to propel people forward since it is aligned with other goals and objectives, and because attaining the goal means something to the people who are engaged in the effort to meet the goal. A relevant goal will answer the questions: Is this a worthwhile goal? Is this goal a good fit for the team, for the resources available, and for the strategic plan?
- Timely: A timely goal that will be set to a schedule that conveys a sense of urgency (if this is appropriate) and helps to establish the dominance or importance of the goal so that progress does not get eroded by the day-to-day issues or work demands. A timely goal will help to answer the questions: Is this the right time to pursue this goal? Can this goal be accomplished in the articulated timeframe?
Criteria for Market Segmentation
MIDAS touch criteria for market segmentation are as follows:
- Measurable: Groups of consumers must be defined by quantifiable characteristics which relate to key performance indicators (KPI) such as size, market share, and share value.
- Identifiable: A distinct persona must be generated for each segment, and every customer must clearly be associated with only one profile.
- Definable: Each persona must be easy to talk about with others since it is based on a previously agreed-upon description and definition derived from data which has been collected and analyzed.
- Actionable: Ease of persona identification simplifies the generation of actionable insights about the segment, and the ability to test implemented strategies on a segment-by-segment basis.
- Substantial: A market segment must be feasible to target based on fiscal, resource, and practical considerations, such as the stability or growth of the segment and the likelihood of its durability over time.
The importance of criteria such as these is that assist the market researcher and the team to evaluate existing market segmentation, if it exists, and to ensure that the market segmentation plan can be efficaciously implemented. If the conditions are not as described or the criteria are not met, then the marketing team will struggle with activation of the segmentation plan.
The Operational Word in Target Market Segmentation Is "Target"
Further, a poorly articulated market segmentation plan will not enable the marketing team to fit their actions to the consumers represented by market segments. In other words, the marketers will not be able to target their market effectively. Unless a market segmentation process is conducted well and implemented appropriately, the customer centricity of a brand will be negatively impacted. Put simply, a marketing team can steer on a tangent far from their target market an devise a marketing campaign that is focused on customers who don't truly have an interest in the brand.
Determining the best target market for business begins with an analysis of potential and existing consumers of a product or service. Competitive advantage can be gained through deep customer knowledge and the insights that result from target market segmentation.