Market segmentation Process is important for any firm. However, the steps in market segmentation are equally important to determine the ultimate target market which you should settle on.
Determine the need of Segmentation
What are the needs of the customers and how can you group customers based on their needs? You have to think of this in terms of consumption by customers or what would each of your customer like to have.
Identifying the segment
Once you know the need of the customers, you need to identify that “who” will be the customers to choose your product over other offerings. Quite simply, you have to decide which type of segmentation you are going to use in this case. Is it going to be geographic, demographic, psychographic or what? The 1st step gives you a mass of crowd, and in the 2nd step, you have to differentiate the people from within that crowd.
Which segment is most attractive
Now, we approach the targeting phase in the steps of market segmentation. Out of the various segments you have identified via demography, geography or psychography, you have to choose which is the most attractive segment for you. This is a tough question to answer because one of them will be left out.
If you are using psychographic segmentation, then you need to target the psychology of consumers which takes time. So you will not be able to expand faster. But if your product is basic, then you can use demographic segmentation as the base, and expand much faster in surrounding regions. So this step involves deciding on ALL the different types of segmentation that you can use.
Attractiveness of the firm also depends on the competition available in the segment. If the competition is too much in a given segment, then it does not make sense to take that segment into consideration. In fact, that segment is not attractive at all.
Evaluate the segment
Here you have different types of segmentation being analysed for their attractiveness. Which segment do you think will give you the maximum crowd has been decided in the 3rd step. But which of those segments is most profitable is a decision to be taken in the 4th step. This is also one more targeting step in the process of segmentation.
Positioning the segment
Once you have identified the most profitable segments via the steps of market segmentation, then you need to position your product in the mind of the consumers. I would not dive deep into positioning here as you can read this quick guide to positioning. The basic concept is that the firm needs to place a value on its products.