Research your market to know how many potential customers you have, what their needs are, and how to reach them. Then divide them into segments based on their common characteristics. Segmentation divides a market into workable groups or divisions. Divide a market by age, income, product needs, geography, buying patterns, eating patterns, family makeup, or other classifications. Good marketing plans rarely address the full range of possible target markets. They almost always select segments of the market. The selection allows a marketing plan to focus more effectively, to define specific messages, and to send those messages through specific channels.
The segment focus leads to a series of related strategic decisions. Defining the target market quickly leads to a series of important questions, such as: What product or service offerings are most appropriate to the needs of the target segment? What prices are appropriate? Few companies have the power to address all possible market segments. It is a better use of marketing resources to focus on key segments. Market segmentation is critical to marketing. A good segmentation analysis can be the creative foundation of an excellent plan. For example, consider how many different ways you can divide personal computer users. Does it help to focus on home offices vs. home education? Classroom education vs. home education? Multimedia video development vs. arcade game users? Personal productivity vs. data management? Consumer vs. business to business? Home vs. education vs. small business vs. medium business?
You can segment a market several different ways: demographic, geographic, psychographic, ethnic, or a combination. How do you decide which segmentation to use? Look at your customers and look at your business. Think about what factors will give you the most marketing power. The goal is guiding decisions, gaining insight into which media, which messages, and how to market. Divide your customers up in a way that makes it easy to develop marketing strategy and implementation.