Only a percentage of the general population will buy your products or use your services, so the more accurately you can focus on them, the less your efforts will be wasted. It is a good idea not to aim too widely with your targets, to avoid spreading your resources too thinly. Show
This guide aims to explain the basics of how to sort your customers into groups. It can help you understand what your customers really want and what you can offer them. It also explains how grouping your customers into market segments is a good foundation for winning and keeping profitable customers.
Benefits of segmentationSegmenting your customers into groups according to their needs has a number of advantages. It can help you to:
See our guides on how to target the right people in an organisation and how to know your customers' needs. Customer managementBecause your individual customers have differing needs, it will be easier to give them what they want if you divide them into groups sharing similar needs, and treat each group differently. You can then:
Companies usually either target a large segment with many people in it or focus on a niche segment, which will have fewer people in it, but who they can serve well. Many will try to meet the needs of several segments, but primarily they are aiming for a manageable number of segments with a good number of customers. How you segment your customers will depend on whether you are marketing your products and services to:
B2B If you are segmenting business markets, you could divide the market by:
B2C If you are segmenting consumer markets, you could group customers by:
Below is an example of how a computer manufacturer might segment customers to optimise its products and marketing mix, and so command a higher price.
For more advice, see our guides on how to know your customers' needs and identify and sell more to your most valuable customers. Approaches to segmentationTo segment your customers, you will need to use variables, such as:
Some businesses use vertical segmentation - selecting particular industries or professions to whom their product or service is likely to appeal. You can also use horizontal segmentation, such as selecting only one job title across a range of organisations. Market research To find out about their customers, many businesses conduct market research. There are two main types:
The main ways of carrying out original research are by:
Once you have carried out your research, you can then adapt your marketing to reach customers and deliver the products and services they want. Once you have identified the segments, you can profile customers within them. For example:
Niche marketsSegmenting your customers can help you to identify a niche market - a specific, well-defined area of your market that may be overlooked by competitors. How to find a niche market It is a good idea to look more closely at your markets, in order to:
How to exploit a niche market To maximise sales to any niche markets you might have identified you should:
Remember that going into niche markets can be a risky business:
For more advice, see our guides on how to create your marketing strategy and how to know your customers' needs. Original document, Segment your customers, © Crown copyright 2009 Our information is provided free of charge and is intended to be helpful to a large range of UK-based (gov.uk/business) and Québec-based (infoentrepreneurs.org) businesses. Because of its general nature the information cannot be taken as comprehensive and should never be used as a substitute for legal or professional advice. We cannot guarantee that the information applies to the individual circumstances of your business. Despite our best efforts it is possible that some information may be out of date. As a result:
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